Mortgage plan will force house prices down, CML warns

Thrugelmir

Blacklight wrote: »

The fact is Carol that when prices start going up again, banks will start to reduce the amount they need as a deposit. Meaning that many more will be able to buy when the market picks up.

More likely people will have regained the savings habit and saved a bigger deposit.

Higher prices can only be supported by higher equity, not increased borrowing.

Really2

Thrugelmir wrote: »

Higher prices can only be supported by higher equity, not increased borrowing.

Would that not correspond with more people buying when prices are rising then.

Banks lower LTV expectations as HPI increases equity.
So more can buy when prices rise?

shortchanged_2

Really2 wrote: »

Would professing ignorance not be retorting with insults instead of backing up your claims?

I asked if you could explain why from 1992-1996 a time of stable nominal low house prices less people purchased? you are saying such times are when more can buy.
The data points to more can buy and do buy when prices are rising.

What happened in the last housing boom was that the banks fuelled irresponsible lending which in turn continued to feed a hyper inflated housing market.

With their riduculous 125% mortgages and 5 times earnings mortgages. Also with weak, lending criteria people were able to manipulate the system to get bigger mortgages than they could really afford. Mortgages were all too easy to obtain. Result house prices rose and rose.

Also the banks need to get rid of interest only mortgages as these help fuel an overpriced housing market by lulling people into a false sense of security by thinking they can afford to fund a house purchase when in reality they can't.

Really2

shortchanged wrote: »

What happened in the last housing boom was that the banks fuelled irresponsible lending which in turn continued to feed a hyper inflated housing market.

With their riduculous 125% mortgages and 5 times earnings mortgages. Also with weak, lending criteria people were able to manipulate the system to get bigger mortgages than they could really afford. Mortgages were all too easy to obtain. Result house prices rose and rose.

Also the banks need to get rid of interest only mortgages as these help fuel an overpriced housing market by lulling people into a false sense of security by thinking they can afford to fund a house purchase when in reality they can't.

I kind of new that, but that is not 1992-1996 is it? Why where house sales not higher in stagnation?
(125% was really 2005 on)

shortchanged_2

Really2 wrote: »

I kind of new that, but that is not 1992-1996 is it? Why where house sales not higher in stagnation?
(125% was really 2005 on)

Maybe lending criteria was stricter then?

And there were not so many property ladder/ make a fortune in propery development TV programmes on back then.
That Sarah Beeny has a lot to answer for.:D

Really2

shortchanged wrote: »

Maybe lending criteria was stricter then?

My thought exactly, but some on here will tell you otherwise.;)

Thrugelmir

Really2 wrote: »

Would that not correspond with more people buying when prices are rising then.

Banks lower LTV expectations as HPI increases equity.
So more can buy when prices rise?

Banks created HPI between 2003 -2007. As the mortgage market growth became funded by wholesale rather retail deposits. As we know now the wholesale money markets can't support that level of funding. As the continued ongoing Treasury lending support schemes for HBOS, NR and B&B show. The BOE identified this wholesale lending gap as a concern back in May 2008.

So what the banks used to do, is no longer. Different game rules in play.

Really2

Thrugelmir wrote: »

Banks created HPI between 2003 -2007. As the mortgage market growth became funded by wholesale rather retail deposits. As we know now the wholesale money markets can't support that level of funding. As the continued ongoing Treasury lending support schemes for HBOS, NR and B&B show. The BOE identified this wholesale lending gap as a concern back in May 2008.

So what the banks used to do, is no longer. Different game rules in play.

That still leaves 1996 to 2003 to look at. More purchased as prices rose than when they were stagnant.

To me this is not a pro HPI debate, it is just pointing out how factually wrong it is that people think more people can buy when prices have fallen and stagnated.
More people can buy when prices raise and I find that fully understandable on a personal level and on a banks level.

Emy1501

Really2 wrote: »

That still leaves 1996 to 2003 to look at. More purchased as prices rose than when they were stagnant.

To me this is not a pro HPI debate, it is just pointing out how factually wrong it is that people think more people can buy when prices have fallen and stagnated.
More people can buy when prices raise and I find that fully understandable on a personal level and on a banks level.

Before 96 people did not want to buy a house rather than they could not get a mortgage. I bought in Early 96 and most people I knew though I was mad. Lots of people had been burnt in the crash etc. Getting a mortgage was easy then. 95% plus 5% cash back.

As with everything its about following the crowd. For what ever reason prices started rising in 96 and then everyone wanted to join the crowd. I suspect those who bought in 98-99 could have bought in 94-95 but chose not to.

Thrugelmir

Really2 wrote: »

That still leaves 1996 to 2003 to look at. More purchased as prices rose than when they were stagnant.

To me this is not a pro HPI debate, it is just pointing out how factually wrong it is that people think more people can buy when prices have fallen and stagnated.
More people can buy when prices raise and I find that fully understandable on a personal level and on a banks level.

Its easy to move up the property ladder in a falling market. As the differential between the rungs on the ladder narrows. I would say the majority of times I have moved house (intentionally) in my life where at these points in time.

Once the market has fallen significantly. Then the people buying lower priced property (1st rung ) for the first time. Create the impetus for the market.

Property transactions are more about chains than individual transactions. Hence why letting out rather than selling appears to be the new fad.