Mortgage plan will force house prices down, CML warns

Graham_Devon

Just read this comment on a newspaper article, which pretty much sums up my thoughts on this topic (and others based on those "recomending" the comment...

I used to be a gambling man but weighing up all the options getting a mortgage has to be a desperate or insane gamble with nothing it seems in my favour except a very clean credit history. Bottom line is I have no confidence in this countries future stability.

States exactly what people have been saying. People simply don't want to take a mortgage given the option in unstable times.

Fewer people may be able to buy now. Seems many more simply don't want to.

Really2

Perhaps it is worth pointing out saying you could buy but you wont is not proof you can buy when prices are lower.
You have no idea if you could get a mortgage for starters.

Unless the point is now when prices are lower lots of people think they can buy but don't, they wait until prices are higher.:)

Still surprised no one has been able to prove it is true.
The whole of this thread and their has not been one stat brought forward to prove more people CAN buy when prices have fallen.

Graham_Devon

Really2 wrote: »

The whole of this thread and their has not been one stat brought forward to prove more people CAN buy when prices have fallen.

More people took on credit cards when they became easier to get.

More people bought PC's when the price came down.

More people buy ford fiestas then ferrari's as the price of the fiesta is less.

More people bought TV's when prices of TV's came down instead of renting them.

More people bought DVD players when the prices came down.

More people went abroad when the price of flying came down.

Fewer people drove around unnecesarily when the price of fuel was over $140 a barrel.

Why do we need stats to prove the obvious? The stats can't prove anything anyway as said over and over again, you cannot force people to buy when they are holding back due to uncertainty.

Emy1501

Really2 wrote: »

So would you not expect transaction to be higher than the previous peak before they past the top of the previous peak if that was true?

The previous peak would be the height of unaffordability in that time frame so if it (lower prices) did enable more to buy how come it resulted in lower transactions?

It cant be argued it enables more to buy if less people buy before the previous peak is surpassed?

Shockingly more people purchased after the previous peak was surpassed than when prices were lower.

I am not saying this as pro HPI, I am just saying their is no argument to support it enables more to buy.
It is an idea based on price alone and ignores so much and just simply is not supported by any fact
The truth is many are still locked out until the previous peak is surpassed.

I don't know. Interesting data would be how many tried and failed to get a mortgage at the peak of any cycle and how many people tried and failed as the market took off again ie say 1989-1990 and 1996-1997.

Also regarding affordability. At peak 2006-2007 45% of loans were self cert. In 2008 Default rates of self cert were 14.5% and defaults on 90%+ loans were 5%. Clearly these types of loans were unaffordable and not sustainable and this factor has to be taken into account.

Really2

May I point out shelter is an essential of life. (food, warmth, shelter)

Have people stopped buying food as it has gone up in price.
Do people eat more when it is cheaper?

Do people leave the radiators on in summer when energy is cheaper.

I do hope no one try's to make out houses should get cheaper based on things like technology items getting cheaper when they get cheaper to produce due to technical advancement.

Really2

Emy1501 wrote: »

Also regarding affordability. At peak 2006-2007 45% of loans were self cert. In 2008 Default rates of self cert were 14.5% and defaults on 90%+ loans were 5%. Clearly these types of loans were unaffordable and not sustainable and this factor has to be taken into account.

Not in the 1989 - 1996 data they don't

wherediditallgothen

Really2 wrote: »

May I point out shelter is an essential of life. (food, warmth, shelter)

Have people stopped buying food as it has gone up in price.
Do people eat more when it is cheaper?

Do people leave the radiators on in summer when energy is cheaper.

I do hope no one try's to make out houses should get cheaper based on things like technology items getting cheaper when they get cheaper to produce due to technical advancement.

People do switch to cheaper food though. A scout around the forum will tell you about 'dropping a brand'.

Really2

wherediditallgothen wrote: »

People do switch to cheaper food though. A scout around the forum will tell you about 'dropping a brand'.

True, but they don't buy more when it is cheaper.

But your example is a good one, when housing is unaffordable people do other things, they rent.
It depends on how you view housing, if renting was cheaper for me I would do it no problem.
There should be no need to feel people have to buy.

Graham_Devon

Really2 wrote: »

May I point out shelter is an essential of life. (food, warmth, shelter)

Have people stopped buying food as it has gone up in price.

No, but they do change how they shop. Switch brands, switch shops.

Staple food is affordable to most, as we have a benefits system.

People will go without the best cut of meat if they can't afford it one week. But that doesn't mean they will simply stop eating.

Do people eat more when it is cheaper?

Categorically yes. It's why we have an obesity issue, and poorer countries in general, don't. It's also why BOGOF offers work so bloody well, and why the shelves were out of Nescafe today as it's on a half price offer in the local shop.

Do people leave the radiators on in summer when energy is cheaper.

That would be pure wastage.

People may turn the thermostat up a notch in the winter though if energy is cheaper.

I do hope no one try's to make out houses should get cheaper based on things like technology items getting cheaper when they get cheaper to produce due to technical advancement.

That would be terrible. Especially when such a song and dance has been made about said people being on ignore

Emy1501

Really2 wrote: »

May I point out shelter is an essential of life. (food, warmth, shelter)

Have people stopped buying food as it has gone up in price.
Do people eat more when it is cheaper?

Do people leave the radiators on in summer when energy is cheaper.

I do hope no one try's to make out houses should get cheaper based on things like technology items getting cheaper when they get cheaper to produce due to technical advancement.

No for me house prices will get cheaper due to affordability. We know that peoples ability to get large loans at peak were in part due to self cert loans and lenders not doing affordability checks.

Now lenders have to check affordability etc and people are now unable to remortgage without good reason it will be difficult for prices to rise. Whether we see falls in nominal or real terms depends on inflation etc. but the days of large prices are over for the future in my opinion.