Large Deposit Requirements Exclude a Generation of FTB's

nembot

Ridiculous House Prices Exclude a Generation of FTB's

Not for much longer apparently

MoneyMiser

davilown wrote: »

Fair call, but many FTBs like myself want the home of our dreams now, we can save the deposits and don't want the stepping stones.

Thats fine, so as long as you have a decent deposit and the wage to afford that dream home then that is not a problem. But to get a decent IR, your going to need at least a 25% deposit.

But for those FTB's who have no chance of raising a 25% deposit and an average wage then a steping stone is definately required.

Remember it was these types of buyers who got us into this mess when they were being offered ridiculous salary multiples and borrowing more than they could afford just to get into their dream home from the off.

MM

Graham_Devon

IveSeenTheLight wrote: »

One thing is clear, you don't want to answer the simple question.
Probably because you don't like the answer.

The simple thing is we've explained time and time again that if you want property to be more affordable to more people then you need more supply of properties and access to credit.

You can't comprehend that though, it's just one way only which is unlikely to come to fruition.

I can handle prices lowering, but long term that not likely.
If you do get the short term drops you wish for, were simply saying that the way the lenders work, they'll restrict the credit supply and make even less options for those that would like to buy.

I'm not quite sure what to say.

You say I can't comprehend what you are saying, but have agreed with you probably 3 or 4 times now, even in my last post, stating:

Sure, the negative with falling prices is less, and tighter, mortgage deals. I think we all know that and no one is arguing that with you. But the benefits, at the end, far outweigh the negatives.

What sort of answer do you want me to give?

You may have explained you need more property for lower prices again and again. But prices are lowering now, without more property. Therefore, I don't take too much notice of what you are saying.

Percy1983

MoneyMiser wrote: »

Thats fine, so as long as you have a decent deposit and the wage to afford that dream home then that is not a problem. But to get a decent IR, your going to need at least a 25% deposit.

But for those FTB's who have no chance of raising a 25% deposit and an average wage then a steping stone is definately required.

Remember it was these types of buyers who got us into this mess when they were being offered ridiculous salary multiples and borrowing more than they could afford just to get into their dream home from the off.

MM

I don't see this, I am aiming for 10-15% deposit and I am well aware it won't be the greatest deal, but as I pay it my equity will be paid and better rates will come.

Compare this to the cost of buying and then moving, I would rather lose a bit more in interest for a few years.

DervProf

Graham_Devon wrote: »

What I find weird, is that the outlook has always been "well some people will never be able to afford homes, thats the way it is" along with "only 30% need to be able to afford for prices to rise".

Now, all of a sudden, yourself, and others who have been saying these things seem to have dumped the "some people will never be able to afford homes" line as a response to the problems with rising prices, and instead, have become a champion of the FTB.

Trouble is, the majority of FTB's don't want your championing. They want lower prices. The polls have been done, it's all over the comments in news articles.

Exactly.

The debt junkies that got the economy into the mess it is today, want their "fix" back again. You couldn`t make it up. They had a massive debt party, but don`t like the hangover, so want "a hair of the dog".

Making a mistake is forgiveable (if you weren`t warned about it), but making the same mistake again ?

IveSeenTheLight

Graham_Devon wrote: »

What sort of answer do you want me to give?

It would be nice if you answered the simple question with a simple answer.
I am trying to keep this very simple so its clear.

You said that as prices fall, credit gets tighter and tougher to get a mortgage. Agreed.
You then believe that once they have fallen it gets better for FTBers

I then asked, when did mortgage product become easier to access.

So I ask again, when are better mortgage product made available to the market?
The simple answer I'm looking for is one of three
a) When prices fall
b) When prices are at the trough of the correction
c) When prices rise.

We have seen that the better mortgage products are only released after the lenders have seen sustained house price rises.

des_cartes

IveSeenTheLight wrote: »

It would be nice if you answered the simple question with a simple answer.
I am trying to keep this very simple so its clear.

You said that as prices fall, credit gets tighter and tougher to get a mortgage. Agreed.
You then believe that once they have fallen it gets better for FTBers

I then asked, when did mortgage product become easier to access.

So I ask again, when are better mortgage product made available to the market?
The simple answer I'm looking for is one of three
a) When prices fall
b) When prices are at the trough of the correction
c) When prices rise.

We have seen that the better mortgage products are only released after the lenders have seen sustained house price rises.

Mortgage finance will become easier to obtain once prices are at the trough of the correction. Only then will lenders be confident enough to lend at more relaxed levels in line with prospects of future house price growth. Atm there is no prospect of house price growth hence restrictions in lending.

Graham_Devon

IveSeenTheLight wrote: »

So I ask again, when are better mortgage product made available to the market?
The simple answer I'm looking for is one of three
a) When prices fall
b) When prices are at the trough of the correction
c) When prices rise.

We have seen that the better mortgage products are only released after the lenders have seen sustained house price rises.

It's not a simple answer though.

We haven't seen the better mortgage products only released on the back of sustained rises. What we have seen is better rates, but with bigger fee's in many cases.

We've had QE totally skew any "normal" outcome.

We've had various stimulus products protecting the banks and borrowers at the expense of the taxpayer, totally skewing the outcome.

Take all the stimulus applied away, and the whole landscape of mortgage lending would be different right now.

Therefore the answer can't be as simple as "house prices rose, mortgages got better, therefore that's what happens all the time", because that ignores so much of the other stuff going on.

I can't give you the simple answer you want, and you wish to ignore the stimulus part, so we are not going to get anywhere.

IveSeenTheLight

Graham_Devon wrote: »

It's not a simple answer though.

We haven't seen the better mortgage products only released on the back of sustained rises. What we have seen is better rates, but with bigger fee's in many cases.

We've had QE totally skew any "normal" outcome.

We've had various stimulus products protecting the banks and borrowers at the expense of the taxpayer, totally skewing the outcome.

Take all the stimulus applied away, and the whole landscape of mortgage lending would be different right now.

Therefore the answer can't be as simple as "house prices rose, mortgages got better, therefore that's what happens all the time", because that ignores so much of the other stuff going on.

I can't give you the simple answer you want, and you wish to ignore the stimulus part, so we are not going to get anywhere.

All worthwhile considerations, I'm glad you can start to consider the impact of things, but your doing so only on one side of the equation.

Why then do you believe that the lenders will openly provide better products and deals if and when prices lower when their balance sheets would reflect such a poor position?

They will want their books to balance better before they release the better products.

IveSeenTheLight

des_cartes wrote: »

Mortgage finance will become easier to obtain once prices are at the trough of the correction. Only then will lenders be confident enough to lend at more relaxed levels in line with prospects of future house price growth. Atm there is no prospect of house price growth hence restrictions in lending.

It's so the inverse Des.

Lates take another simple example.

A lender has accounts which show on average they have lent £80k on a property worth £100k.
They have 20% risk cover on the properties.

Property prices drop 20% (some in here think in excess of 50% will happen :rotfl:) so the lenders book show lent capital at £80k with no risk cover.

They will want to re-balance the books, hence why we saw the higher LTV products removed before only leaving lower LTV products

Property prices could theoretically be lower, but the lenders would want higher deposits to redress their balance and risks.

These are the pitfalls of a falling (or fallen) market to the lenders.
These pitfalls are not there in a stagnating or rising market.