Mortgage plan will force house prices down, CML warns

Really2

des_cartes wrote: »

What is your position on house prices? High=good or Low = good?

House prices find a level were supply meets demand.
The subject is far bigger than good/bad bla bla bla.

Prices are where they are because of the prices people are prepared to pay for them and because the supply is constricted enough to keep them there.

Transactions never got above the 1989 peak even though prices were below that for 9 years in nominal terms and 12 years in real terms

That is because ownership levels are high and we are not building enough to cope with our inflating population.
So the view cheaper prices mean more can buy is rubbish as more could clearly buy pre bust 1989.

The only way of getting prices down and an end to these cycles is building more houses.

And what happens to house building when prices fall?

shortchanged_2

Really2 wrote: »

The only way of getting prices down and an end to these cycles is building more houses.

And stricter lending criteria.

And as I have stated before the removal of interest only mortgages.

Generali

Really2 wrote: »

There is a Difference between anecdotal and statistics.

More people buy in a rising market than a stagnant or falling one.

So the fact is a rising market enables more to buy, partly because of lending partly due to being a sheep?

I think the cart is going before the horse. Perhaps more people wishing to buy makes prices rise. Rising prices means more people are prepared to sell.



*Clearly the same number of sales as purchases need to take place in a market. If there are more buyers than sellers, who are the buyers buying from?

des_cartes

Really2 wrote: »

House prices find a level were supply meets demand.
The subject is far bigger than good/bad bla bla bla.

Prices are where they are because of the prices people are prepared to pay for them and because the supply is constricted enough to keep them there.

Transactions never got above the 1989 peak even though prices were below that for 9 years in nominal terms and 12 years in real terms

That is because ownership levels are high and we are not building enough to cope with our inflating population.
So the view cheaper prices mean more can buy is rubbish as more could clearly buy pre bust 1989.

The only way of getting prices down and an end to these cycles is building more houses.

And what happens to house building when prices fall?

Prices are where they are because of what people are prepared to pay for them?

Or because of the amount of credit available to them. Prices could easily be kept down through credit restrictions. Agree/disagree?

Really2

Generali wrote: »

I think the cart is going before the horse. Perhaps more people wishing to buy makes prices rise. Rising prices means more people are prepared to sell.



*Clearly the same number of sales as purchases need to take place in a market. If there are more buyers than sellers, who are the buyers buying from?

True, so in times of rising prices more are prepared to sell which would enable more to buy. (I class buy as a transaction, not as a wish to transact)

Really2

des_cartes wrote: »

Prices are where they are because of what people are prepared to pay for them?

Or because of the amount of credit available to them. Prices could easily be kept down through credit restrictions. Agree/disagree?

Disagree, explain 2009.

Such ideology ignores supply and demand.

des_cartes

Really2 wrote: »

Disagree, explain 2009.

Such ideology ignores supply and demand.

I would agree that one of the factors in the rise in prices in 2009 was supply/demand of houses to buy. In the same way that supply demand of houses can push prices up though, supply/demand for credit can be used to increase the price of credit and increased cost of credit would reduce prices. Regarding credit, are you suggesting credit availability for housing should not be looked at as a factor to prevent further booms and busts? If so then you are swimming against the tide. The fact that mpc decisions on interest rates ignored hpi prior to 2007 is now seen as a major factor in allowing house prices and lending to get out of control. Why should interest rate setting to head off inflation include pretty much everything else people buy but not houses? Having no credit restrictions on mortgage lending might sound fine in theory but in reality when things go wrong it is everyone else who finishes up bailing out those who lent and borrowed too much. October 20th might convince you that some credit controls might not be such a bad idea.

neverdespairgirl

Really2 wrote: »

Less people purchased

guess what I'm going to say?

Thrugelmir

des_cartes wrote: »

The fact that mpc decisions on interest rates ignored hpi prior to 2007 is now seen as a major factor in allowing house prices and lending to get out of control.

Lenders are now known to have been lending at loss making margins to attract new business in that period. Base rate in itself was an ineffectual tool in controling the availability of credit.

What will hurt the lenders, the banks in particular, is the new tax on wholesale funding. As this will make their mortgage products less competetive in the marketplace. Compared to lenders who attract funding through the traditional retail routes.

des_cartes

Thrugelmir wrote: »

Lenders are now known to have been lending at loss making margins to attract new business in that period. Base rate in itself was an ineffectual tool in controling the availability of credit.

What will hurt the lenders, the banks in particular, is the new tax on wholesale funding. As this will make their mortgage products less competetive in the marketplace. Compared to lenders who attract funding through the traditional retail routes.

Good. It has always seemed a bit wierd to me that banks are allowed to lend £10 for every £1 they have deposited. If you or I were to do it we'd probably be locked up.