Mortgage Rationing = Two Tier Society

dopester

Thrugelmir wrote: »

Rather than the new generation of borrowers subsiding those who borrowed pre crash, which merely effects a wealth transfer.

Or is that against your morals and self interest?

It's a rapidly diminishing pool of borrowers to support inflated values. There aren't enough fresh borrowers who can qualify to borrow + ever growing mortgage revulsion to buy at these values with so much uncertainty for future employment pay and security.

Those individuals who are still able to qualify for good mortgage deals with substantial deposits, and with an expected secure employment outlook... bandying around their low-interest rate deals, are simply massively overpaying in my opinion on a 2-3 year period when values are likely to cascade significantly. Imo.

Hamish's two-tier society is a red alert that there is going to be serious market repricing to come. One section of the market blocked off from borrowing, or not willing to borrow - where some people expect those with assets which have seen massive HPI will be able to extend their borrowings to buy up even further property. Doubt it. All the warning signals of a massive crash.

Where Hamish, or the article, sees more BOMAD taking advantage of equity release to help kids on to ladder - I see them risking a lot to overpay, when more of them should be focused on securing their own futures. Paying down their own mortgages or being content in homes owned outright, instead of leveraging their positions further.

I suspect we're already at a level where some formerly 'wealthy' BOMAD are regretting equity releasing to help their kids on to the ladder. Even really wealthy BOMAD with their homes owned outright, hundreds of K in the bank, aren't able to prevent asset price falls in a sufficient number of other people begin to struggle. They can't mop up everything at prices which put a support under the market at these levels.

Graham_Devon

HAMISH_MCTAVISH wrote: »

And back on subject, for every 200K borrowed, these new "permanently higher" mortgage rates from the article will cost todays buyer an extra £54,313 versus the pre-crash buyers, assuming a typical margin differential of 2%.

You'd need an absolutely HUGE crash just to make up for the mortgage rate differential, let alone come out ahead.

Again, you make the mistake of using interest rates staying static over the course of a mortgage.

IveSeenTheLight

Graham_Devon wrote: »

Again, you make the mistake of using interest rates staying static over the course of a mortgage.

He wasn't.
He was inferring that the difference between mortgage rates and BoE now if maintained (assuming a 2% marginal difference) would cost an additional £54k on a £200k property.

Rates could go up and down, he only assumed that the margin would remain the same.

I otherwise think that the margin will decrease as rates rise.

DervProf

HAMISH_MCTAVISH wrote: »

Nope. I'm on a cheap mortgage deal for life, with less than 1.5 times joint income left on it(Thanks, Merv ) and no other debt at all.

Plus of course, I already have all the houses I'll ever need.

Sounds like we are in a similar situation, except I have 0.1 x income left on my mortgage, but I don`t celebrate rising house prices for those who have yet to buy a property, or simply want to trade up.

silvercar

Thrugelmir wrote: »

So why not ask those all on low cost life time trackers (1.5% and less above base) to give them up? To accept a flat 2% above base instead.

The result would just be more profit to the bank. Why would I want to do that?l

Thrugelmir wrote:

Or is that against your morals and self interest?

This is a money saving site.

Thrugelmir

silvercar wrote: »

The result would just be more profit to the bank. Why would I want to do that?l

No, the bank would be able to reduce rates to other borrowers.

The press happily quotes cost of new lending. Overlooking what the banks currently are subsidising....

Thrugelmir

dopester wrote: »

It's a rapidly diminishing pool of borrowers to support inflated values. There aren't enough fresh borrowers who can qualify to borrow + ever growing mortgage revulsion to buy at these values with so much uncertainty for future employment pay and security.

Possibly the transfer of ownership of property into fewer and fewer hands. As those with property pass it on. Enabling the next generation to acquire more.

treliac

HAMISH_MCTAVISH wrote: »

http://www.guardian.co.uk/money/2010/aug/09/high-cost-borrowing-legacy-credit-crunch

Permanently higher cost of borrowing for the young and the permanent exclusion of those without wealthy families.

Welcome to the world the bears wished for.....:cool:

Would you prefer, then, that the young carry on over extending themselves and that an inevitable number have to suffer the indignity, pain and heartache that goes with being repossessed.

Perhaps, too, the so called baby boomers will start to be celebrated.... as a source of cash for their adult offsprings foray into the world of housebuying.

dopester

Thrugelmir wrote: »

Possibly the transfer of ownership of property into fewer and fewer hands. As those with property pass it on. Enabling the next generation to acquire more.

It is just my take on things, but I don't imagine a positive value scenario if great swathes of property/land resources is held in fewer hands. If anything I see such an imbalance causing further fall in values.

With the claim that equity-releasers continuing to do as many did in the boom, acquiring more property. Despite the article's claim*, there are now some real barriers as well to how much equity release a lender will allow, even for those people who have such appetite for such risk of leveraging themselves.

Well-off parents will be able to access the equity in their homes and use the money to help their offspring put down a deposit on their first home.

And please correct me if I'm wrong:

Demand from buyers is falling just as the number of properties coming onto the market is going up, according to the Royal Institution of Chartered Surveyors.

Why did fc123's landlord sell at auction a few months ago, and surprise fc123 with how little it sold for? Why does NDG's landlord now have an eye on selling up? Shouldn't they be equity releasing to buy more property?

It's not like there isn't an increasing choice of property for the first tier to choose from.
www.rightmove.co.uk

silvercar

Thrugelmir wrote: »

No, the bank would be able to reduce rates to other borrowers.

The press happily quotes cost of new lending. Overlooking what the banks currently are subsidising....

and how would you guarantee they would do that?