FTB's "Missing Deal Of A Lifetime"

julieq

Normal lending. Ok, replace the term normal with conventional if you like. What has tended to be the pattern of lending when circumstances were less unusual (banking crisis due to unknown default rate on securitised loans and continuing fall out).

And the idea that self cert mortgages changed anything is nonsense. The average loan to value throughout the boom was just north of 3x. Self cert reduced bureaucracy in many cases, but did not inflate multiples. Multiples were inflated by mortgage companies offering high multiples to good risks, not by self cert loans. Overwhelmingly people do not lie about their circumstances on official forms and expect details to be verified. Yes, there are some cases where that is not true, but it's not a factor in rising prices. There is still enough demand in the system to push prices up even without FTBs being able to get into the market at all (because the limiting factor is size of deposit).

chucky

Graham_Devon wrote: »

As I have already stated, your figures include those who have been out of the market for 6 months.

They mean nothing in the context we are speaking of. You do seem to have a terrible problem with something called "Context".

If you REALLY want to discuss this properly, than I am quite happy to do so....and I will bring the difference in starter homes now, and in 1990 into the mix.

you're trying to confuse or even link two different things.

FTB's are the same age as they were 20 years ago. fact

the size of homes (they have got smaller) and the availablity of what FTB homes should be has changed.

there has been an increase in supply of flats which have now become the extra rung in the housing market pushing up the prices of the traditional FTB homes. so what has happened is that people have to be older to buy that traditional type of property now as they have the extra rung in the ladder now.

this is a better way to make your point.

julieq

Graham_Devon wrote: »

Strange world though isn't it. Without savers, the whole system would break down.

But if we ignore that, then you are probably correct.

Look up the "thrift paradox" Graham dear. Without investors the whole system would break down. At worst savers are useless parasites. At best they're a source of funds for investors.

You're so keen on the "where does the money come from?" question as I recall. So where do you think the money for savings returns above inflation come from?

DervProf

chucky wrote: »

and that's how it should be - Willy from Walsall on £12k a year he shouldn't be able to get a self-cert to get his 10x income mortgage

Yes, IMO, he should be able to POSSIBLY buy himself a starter home or flat. If he can`t, because prices are too high, I can live with that. However, here comes the punch line..........


If he`s been priced out of a market that is run honestly, then fine, but from what I`ve seen, read and heard, it would appear that the market has had all sorts of stimulus applied to increase prices beyond the levels that can be afforded by people on modest incomes.

http://www.independent.co.uk/news/business/news/mortgage-fraud-cases-soar-to-a-22year-high-2047169.html

I suppose Willy from Walsall could always go the self-cert and/or interest only route, but there is talk of these financial products being banned by the FSA. And there was me wondering what the purpose of the FSA has been over the past decade. We heard nothing from them until after the event, and I believe the organisation is in the process of being closed down. That`s a worry, without the FSA, what`s to stop the banks getting into trouble ?

DervProf

julieq wrote: »

Normal lending. Ok, replace the term normal with conventional if you like. What has tended to be the pattern of lending when circumstances were less unusual (banking crisis due to unknown default rate on securitised loans and continuing fall out).

And the idea that self cert mortgages changed anything is nonsense. The average loan to value throughout the boom was just north of 3x. Self cert reduced bureaucracy in many cases, but did not inflate multiples. Multiples were inflated by mortgage companies offering high multiples to good risks, not by self cert loans. Overwhelmingly people do not lie about their circumstances on official forms and expect details to be verified. Yes, there are some cases where that is not true, but it's not a factor in rising prices. There is still enough demand in the system to push prices up even without FTBs being able to get into the market at all (because the limiting factor is size of deposit).

I find your claims suprising. However, I can accept them if you show me proof.

There is quite a lot of circumstantial evidence to suggest that "bending the truth" was quite a common occurence when applying for mortgages. I might suggest that even a few fraudulent mortgage applications can lead to market distortion.

Orpheo

julieq wrote: »

Look up the "thrift paradox" Graham dear. Without investors the whole system would break down. At worst savers are useless parasites. At best they're a source of funds for investors.

You're so keen on the "where does the money come from?" question as I recall. So where do you think the money for savings returns above inflation come from?

What's with the "Graham dear" Why is it necessary to undermine someone's position by infantilising them? Whether I agree with them or not, your posts are generally thoughful and well put, this ruins it.

But let us not assume that the Paradox of Thrift is fact rather than opinion. Economics is not science, in fact it is one of the few "disciplines" where one can still claim to be right even when one is wrong.

FTBFun

I had a 15% deposit as a recent FTBer. The 25% deposit claim is a bit fantastical imo.

chucky

DervProf wrote: »

Yes, IMO, he should be able to POSSIBLY buy himself a starter home or flat. If he can`t, because prices are too high, I can live with that. However, here comes the punch line..........


If he`s been priced out of a market that is run honestly, then fine, but from what I`ve seen, read and heard, it would appear that the market has had all sorts of stimulus applied to increase prices beyond the levels that can be afforded by people on modest incomes.

http://www.independent.co.uk/news/business/news/mortgage-fraud-cases-soar-to-a-22year-high-2047169.html

I suppose Willy from Walsall could always go the self-cert and/or interest only route, but there is talk of these financial products being banned by the FSA. And there was me wondering what the purpose of the FSA has been over the past decade. We heard nothing from them until after the event, and I believe the organisation is in the process of being closed down. That`s a worry, without the FSA, what`s to stop the banks getting into trouble ?

you've made a rubbish point there Derv - really have to say it... sorry.

from your link.

The accountancy firm's figures show there were 21 cases of mortgage fraud in the first half of 2010 with a value of £96m, compared to just 18 worth £24m during the same period last year. In fact, the figure for the whole of 2009 was just £77m.

it's only 21 cases up from 18 - a massive increase

your point is still valid though - it will never be know but the number of self-certs was large and even the number of mortgages approved that applicants artificially inflated their income to get the mortgage amount required was probably high too...

in saying all of this the average salary multiple of borrowers has and is up and around the 3.5 x income level.

julieq

DervProf wrote: »

If he`s been priced out of a market that is run honestly, then fine, but from what I`ve seen, read and heard, it would appear that the market has had all sorts of stimulus applied to increase prices beyond the levels that can be afforded by people on modest incomes.

Classic punter reply: "it's all a fix". :rotfl:

There may well be an all time high number of mortgage frauds, but that doesn't mean there is a significant number of mortgage frauds in the market as a whole. And clearly prices have risen back to pretty much pre crash levels DESPITE removal of fraud and a lot of ability to actually obtain mortgages.

I mean come on, 21 cases in six months as against 18 previously. A DROP IN THE OCEAN. Don't get fooled by journalistic hyperbole. Not enough to shift the market by a fraction of a fraction of a percent. It's a laughable contention.

The average priced house is available to a couple with average incomes. And that is all you need to stoke demand. Like or not, that is what drives the market.

julieq

Orpheo wrote: »

What's with the "Graham dear" Why is it necessary to undermine someone's position by infantilising them? Whether I agree with them or not, your posts are generally thoughful and well put, this ruins it.

But let us not assume that the Paradox of Thrift is fact rather than opinion. Economics is not science, in fact I is one of the few "disciplines" where one can still claim to be right even when one is wrong.

Remove word "dear" and answer the point about savings then.

If you look at Graham's response it was sarcastic and patronising: "apart from getting it all wrong you're right" sort of thing.

So he gets both barrels back. Sorry.

Actually the thrift paradox is well documented as a source (for example) of trouble in Japan. It's not in dispute anywhere I'm aware of, but as I said if the saved funds are available for investment they will tend to get out into the economy and make money for other people. Saved funds just earning interest are parasitic.