Banks will only lend to well-off homeowners. That’s bad news for first-time buyers

chucky

interesting article - if you agree with the sentiment or not.

will future property owners be even older than they are now?

For, despite quantitative easing and other official attempts to boost the supply of finance, lenders seem persuaded that homebuying should be reserved for those of mature years who have spare savings and piles of equity in their existing homes.

By now, mortgages were supposed to be more widely available, with the benefits of low interest rates being shared around. Instead there are signs that the purse strings are quietly being tightened, with one in ten housing transactions collapsing because even creditworthy applicants are being turned down for loans. Nationwide’s best deals are reserved for those with a deposit of 40 per cent of a property’s value. HSBC may be more receptive to borrowers than many of its rivals. But its typical customer is putting up a deposit of 50 per cent. No wonder that the Bank of Mum and Dad is a key source of funds for 80 per cent of the few first-time buyers who are around.

Today’s twentysomethings can look forward to decades of renting in those buy-to-let flats, or living with mum and dad. There is already plenty of evidence for the mid-lifer ascendancy: about 40 per cent of homes are now bought outright, without a mortgage, for example. The prices of properties in the upper bracket are improving more swiftly than those at the lower end of the market, as the cash-rich return to their erstwhile pastime of gazumping in London and the South East.

Banks should see a deposit of 15 per cent as an adequate cushion against another collapse in prices — which not even the arch-miserabilists think is a possibility.

http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article6801131.ece

System

chucky wrote: »

arch-miserabilists

Oh that's nice.

HAMISH_MCTAVISH

Joeskeppi wrote: »

Oh that's nice.

So appropriate a description.

And great article too.

themanbearpig

Not really much of a market without fresh money from FTBers. Those with lots of equity can't keep selling their houses to others with lots of equity, for more and more money each year. Someone has to be at the bottom of the pyramid to fund the gains higher up.

JonnyBravo

themanbearpig wrote: »

Not really much of a market without fresh money from FTBers. Those with lots of equity can't keep selling their houses to others with lots of equity, for more and more money each year. Someone has to be at the bottom of the pyramid to fund the gains higher up.

You are quite right in the main, but renters are replacing them to some degree. ie its not like there's no money coming in, the money from rent is the "new money" but this is clearly being outstripped by the rate of equity increase (or at least it was) hence the need for a correction in house prices.

the_ash_and_the_oak

for sure a knock on effect if ftb age continues to rise as it has (and for decreasing quality - 1bed flats replacing small terraces as starter homes). for those that have the homes they wish to stay in long term, not really a problem. for those hoping to trade up at some point in the next few years, may have to stay where they are a little longer than might have hoped.

although the term 'pyramid' scheme is used far too sensationally, the housing market does actually work that way, and always has - and there isn't necessarily even a problem with that (a debt-based money system also works this way in effect). one of the problems with the bubble imo was that it sped up this process too fast, cheap credit allowing too many people to enter at the bottom too quickly.

Snakeeyes21

Good. I say make everybody have atleast a 50% deposit.
then we wouldnt have got in to this whole mess.
this has happened because of the young greedy sh*ts who couldnt afford to blow their noses let alone get a mortgage who were getting 110% of the value of their home, boosted by the government acting like home ownership is the holy grail.
its madness, starting off in your first home in negative equity.
did people really think house prices would continure to rise? what short memories people have.
i for one am glad people are loosing their homes or unable to get a mortgages.
if you couldnt afford the payments when interest rates are the lowest they have been then you clearly couldnt afford a home and should step aside for those that can.
As for all the twentysomethings having to rent (whats wrong with renting) for decades, mabe thats because they couldnt afford to buy in the first place

mbga9pgf

So I suppose as a FTB with a 40% deposit then, I wont struggle?Unlike all those FTBs that bought from 2005-2007 now mired in either negative equity or next to no equity?

bo_drinker

The banks have clearly !!!!!! their nest elsewhere and only want "safer" business. All well and good for a short while, what happens when the safe customers are sorted out ?? They took huge risks and lost out to the cost of the tax payer for a long time. Now they are required to take a small risk the goal posts have moved.
The banks that will take the business the others don't want will be the winners in the future whoever they are and where ever they come from

ruggedtoast

The stumbling block - which has been neatly ignored by this article - is that it assumes that a commensurate increase in buy to let properties will have no effect on rental incomes. These have already fallen substantially in real terms due to the amount of supply out there.

Interest rates are going up - dont worry about that. It may not be this year, or even next year, but they are going up.

You cant have it all ways, unless property is sitting empty its either on the rental market adding to supply there, or on the sale market adding to supply there.

I certainly sympathise with people who've lost a lot of their pensions and hope to make it back up with renting property, but unless theyre happy to accept a very low yield over the life of their investment, its not going to be that realistic for most.

Especially as many retirees are being forced to sell up at the end of their lives to pay for their last few years of care.

ruggedtoast

lol - a friend of mine's granny MEWed her house into oblivion going on holidays and splashing her cash about - then gave two fingers to the bank and moved in with her daughter.

Some other relatives just "lost" £30k on a house they bought for their mother. She could only live in it for a while before she needed home care and then go into a nursing home.

Its either a private nursing home they pay for or a State run one which will take possession of her house anyway. They;'ve been quoted £500 a week believe it or not.

The family are going to try and hold onto the house and rent it out - in a local market which is already flooded with rentals.

Thats the fault line in this model of investment - the elderly dont have time to sit around waiting for someone to pay what their house is "worth". If you have to go into a home you have to go.