Bank of England warns of tougher curbs on mortgage lending

Generali

ILW wrote: »

If the BoE either did not see it coming, or decided to just let it happen, it does make you wonder what they actually do all day to justify their salaries.

It was the job of the FSA to do that. For example, they warned Northern Rock several times that their business model was unsustainable. Unfortunately they then chose to do absolutely nothing about it.

ILW

Thrugelmir wrote: »

In the 1970's the average home had 13 electrical appliances in total.

Add up how many items you have today in yours......

Times have changed.

It does seem that the much lauded and praised increase in our standard of living seems to come down to having a few more Chinese made gadgets in our homes. Does make you wonder whether it is worth the amount of collective personal debt we now find ourselves in.

RenovationMan

neverdespairgirl wrote: »

it doesn't seem like any other investment, to me.

If I have shares, premium bonds, building society accounts, all the rest of it, I don't have to run the company / bank / NS & I.

It's more akin to running a business than passive investment.

It depends how you arrange your investments. With shares, you could decide to actively trade them rather than leave them with a fund manager or leave them in the same share for years. Day trading shares can be a full time occupation. If you leave them with a fund manager then your simply paying someone to do the work and manage your portfolio.

Premium bonds and building society accounts arent investments, they're savings.

With Property, if you have a BTL you turn it into a passive investment by making it fully managed. A country house near me has been converted into rental apartments by the owner and he doesnt do a thing, the estate agency do everything even down to arrangeing for repairs (I know this because I know the owner and I know a builder who did some work there).

If you invest in your own home, as I have, then its an investment you get to enjoy every single day with as much maintenance as you wish to do (ie. DIY or getting tradesmen in).

Emy1501

RenovationMan wrote: »

We'll see if any of these plans actually make it off the drawing board. It's all politics at the moment which means we'll hear a lot of noise and very little action. I think the more extreme lending models such as 100% - 120% mortgages will be legislated against, but 90% mortgages have been available for decades and remain available for decades to come.

A move towards affordabilty rather than a pure mathematical calculation based on salary (i.e. 3.5 x salary) would be much safer for all concerned. There is no logic in allowing someone with huge debts, a spendthrift lifestyle (lot of monthly outgoings on mobile phone contracts, Sky tv contracts, car finance) to have a 3.5 x salary mortgage even though he will struggle to meet the monthy repayments while preventing someone who is completely debt free and has a frugal lifestyle from having 4 x salary who would easily meet the monthly repayments.

Already off the drawing board. FSA guidelines mean lenders have to lend based on affordability and on the basis of treating customers fairly. Lender now have to take into account monthly loan repayments which have more than 6 months to run and also lenders will take into account 3% of any credit card balance on a monthly basis. Also many lenders will take into childcare plus any other monthly commitments which may effect affordability. Many lenders will ask for at least 3 months bank statements and somone I know was asked for 12 months bank statement.

Also lenders now do not take into account yearly bonuses and will only take into account 50-60% of regular overtime and monthly commission etc.

Above has only really come into effect over last 6 months in reality but I have read stories of people being told their borrowing was 60K less than it was a few months before because of the new changes. I have even read a story where a lender asked for a bank statement between exchange and completition and then refused the loan as the borrower had gone £20 over their overdraft limit.

In my opinion the above is now the reason why its getting harder for people to get a mortgage than even 6 months ago.

ERICS_MUM

RenovationMan wrote: »

The problem was that they didnt make enough of an effort to check the income and outgoings of people before lending them money. The concept of using affordability is sound, it was just put into practice badly by certain banks. Using a set calculation, such as 3.5x salary, is simply allowing banks to be lazy and not check people's finances other than a cursory glance at 3 payslips.

The problem was people who borrowed did not make enough of an effort to check their own income and outgoings before borrowing money. Borrowers need self-discipline, don't blame the banks.

ERICS_MUM

Damaged wrote: »

more warning from the BOE about the same thing over and over again.
Just mortgage adivsors telling us to fix mortgages now because they are really low, yet the following month the banks lower them.

I'm not sure why people bother reading this garbage anymore

The price of money will fluctuate just as a pint of milk does. You wouldn't wait until next month to buy your milk just in case the price fell.

Fixing the mortgage rate is not just about getting it cheap, it allows you to lock-in your future costs so that at any point you are able to calculate your indebtedness and whether you can still afford it.

ERICS_MUM

ILW wrote: »

It does seem that the much lauded and praised increase in our standard of living seems to come down to having a few more Chinese made gadgets in our homes. Does make you wonder whether it is worth the amount of collective personal debt we now find ourselves in.

Exactly. There seems to be such a frenzy to keep buying the latest gadget and the latest version of existing gadgets. The things we used to consider "once in a lifetime" purchases which were expected to last for years (e.g. washing machines, vacuums, fridges) are now changed regularly for the next model/colour/style. How many such things are discarded even though they are still in working condition ?

More importantly, how much of this spending is on credit.

ILW

ERICS_MUM wrote: »

Exactly. There seems to be such a frenzy to keep buying the latest gadget and the latest version of existing gadgets. The things we used to consider "once in a lifetime" purchases which were expected to last for years (e.g. washing machines, vacuums, fridges) are now changed regularly for the next model/colour/style. How many such things are discarded even though they are still in working condition ?

More importantly, how much of this spending is on credit.

It would be fine if the stuff was actually made in this country, thereby keeping up employnent, reducing benefits etc. Trouble is we just seem to run up the debt here and send all the profit abroad.

StevieJ

neverdespairgirl wrote: »

St. Augustine of Hippo, born in Africa about 4th century AD. Major early Church figure. He wrote it in his book Confessions, which is in Latin. I can't remember the Latin version, but he wrote:

As a youth I prayed, "Give me chastity and continence, but not yet".

And was used by the deputy governor of the BOE (in early 2009) to describe the then (and now) economic dilemma otherwise known as 'the paradox of thrift'.

However if everyone tries to increase saving and cut borrowing immediately we could prolong the downturn painfully. If everyone plans for the worst, we are more likely to get it. That is why economists sometimes sound a bit like St Augustine who famously noted in his confessions “Make me chaste and continent, but not yet”.

http://www.bankofengland.co.uk/publications/speeches/2009/speech371.pdf

StevieJ

Thrugelmir wrote: »

In the 1970's the average home had 13 electrical appliances in total.

Add up how many items you have today in yours......

Times have changed.

In 1981 a normal VHS video recorder cost around £450 :eek: today you can buy a DVD player for £30, I don't think they could afford more than 13 items