A window opens for new mortgage deals: Stricter lending on hold

Rinoa

ILW wrote: »

How many fo those could afford to pay if it wasn't for artificially low interest rates and various government rescue schemes?

They could afford their mortgages in 2007 when base rates were 5%. Why wouldn't they be able to do so again?

The main reasons why people are unable to afford their mortgage is unemploymnet and/or an inability to handle their finances responsibly, neither of which will be prevented by the FSA's proposals.

Rinoa

PasturesNew wrote: »

That's an easy one to answer. People with stretch themselves silly for a mortgage, they won't do that for rent. You can get out of renting quickly if things change, you can't do that if you own it.

So you have people renting smaller places, that cost less, without the up front fees - and able to get their rent covered immediately if they're laid off and being able to downsize or change locations as things change.

If rents are too high, you can rent 2 miles up the road where it's a bit cheaper, but if you're buying you don't want to be 2 miles up the road, so you stretch yourself to afford what you want.

I don't think I made myself clear above .... I know what I am trying to say, I am just not able to put that into words, so I give up.

People have always stretched themselves when buying, especially for the first time. This isn't necessarily a bad thing. It makes people budget and cut out frivolous spending on flash cars and £2000 tellys.

If 50% of people can't buy property they'll have to rent instead, all the FSA proposals will do is encourage more BTL. Are you happy with that?

Graham_Devon

Rinoa wrote: »

They could afford their mortgages in 2007 when base rates were 5%. Why wouldn't they be able to do so again?

The main reasons why people are unable to afford their mortgage is unemploymnet and/or an inability to handle their finances responsibly, neither of which will be prevented by the FSA's proposals.

On the other hand, why is it then that interest rates can't possibly rise without bringing the housing market down if all was fine and dandy in 2007 at those rates, and it wasn't a problem?

Rinoa

Graham_Devon wrote: »

On the other hand, why is it then that interest rates can't possibly rise without bringing the housing market down....

You're just repeating HPC style propaganda with nothing to substantiate it.

Borrowers coped welll enough when base rates were 5.75% 3 years ago ~ they'll cope again if they ever go back to that level.

ukcarper

Graham_Devon wrote: »

All those 2.5% in arrears.

All those "would be in arrears" if it wasn't for extended SMI policies.

The wilsons. They couldn't afford to pay, but were too big to go under, so on a very preferencial rate as the lender had no real option but to change their terms mid term otherwise the lender would have gone down with them.

And many many more of the "Zombie" households, if it wasn't for such low base rates.

Let's not pretend there isn't a problem just because all of the above is propping people up.

You can only claim SMI once you have lost your job so it does nothing for people who have over stretched and are still employed. If you lose your job most people will not be able to pay their mortgage irrespective if they have over stretched or not.

Graham_Devon

Rinoa wrote: »

You're just repeating HPC style propaganda with nothing to substantiate it.

Borrowers coped welll enough when base rates were 5.75% 3 years ago ~ they'll cope again if they ever go back to that level.

I'm asking you a question. Not making statements.

You seem to be suggesting that a rate rise back to 5% would have little impact on people and they would cope.

Do you truly believe this?

Cleaver

Graham_Devon wrote: »

You seem to be suggesting that a rate rise back to 5% would have little impact on people and they would cope.

Do you truly believe this?

Maybe I'm a bit dumb, but most people would be okay wouldn't they? Most people have the same income now as they did pre-2007, most people still have their jobs and most people were paying their mortgages beforehand.

Pretty much every single person I know with a mortgage that has gone down in terms of payments has been merrily overpaying for a couple of years now. Maybe that's because we're in our twenties and have quite large mortgages though and want to get rid as much debt as possible.

Graham_Devon

Cleaver wrote: »

Maybe I'm a bit dumb, but most people would be okay wouldn't they? Most people have the same income now as they did pre-2007, most people still have their jobs and most people were paying their mortgages beforehand.

Pretty much every single person I know with a mortgage that has gone down in terms of payments has been merrily overpaying for a couple of years now. Maybe that's because we're in our twenties and have quite large mortgages though and want to get rid as much debt as possible.

If so, why does nearly every economist suggest interest rates are the only think holding the market back from falling?

I'd hardly class it as dumb, I'm just trying to explore the reasons as to why the same people who claim interest rates won't rise for ages so it's all ok, claim that rates at 5% would be all ok.

Loanranger

Mortgages will nearly halve under the mortgage market review, according to the Council of Mortgage lenders.

Looks like the house price crash brigade have already missed the boat to buy.

http://www.mortgagemarketreview.co.uk/news/2010/Nov/mortgages-will-nearly-halve-under-the-fsas-mortgage-market-review-say-the-cml-9424298

Cleaver

Graham_Devon wrote: »

If so, why does nearly every economist suggest interest rates are the only think holding the market back from falling?

Dunno really.

Graham_Devon wrote: »

I'd hardly class it as dumb, I'm just trying to explore the reasons as to why the same people who claim interest rates won't rise for ages so it's all ok, claim that rates at 5% would be all ok.

I guess I'm just being a bit simplistic and basing it on the 20 or 30 people I know with mortgages. They have all kept their jobs (two people were made redundant but found other stuff), were paying their mortgage a few years ago with no probs and I guess would be okay paying it back if rates went back to what they were a few years ago. Wouldn't they? And aren't most people in the same boat?

I'm not trying to argue for the sake of it, I know a a minority of people have lost their jobs, had to take lower paid options or are finding things difficult. And if rates went back to 5% quite suddenly (unlikely, but let's say they did) I know that house prices would probably fall. I don't see why people wouldn't pay their mortgage though, especially if they had one in 2007 or before.