We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Can anyone explain....
Comments
-
ARRRGGGHHHHH!!!!!! Please, please, please can you read my posts.
There seems to have been a very significant problem around the world (not just the UK) with dodgy lending over the past decade. So yes, there has been an issue with excessive lending in the UK mortgage market. And no, we're not on the 'same path' as before.
Let me try and break it down for you, as you really seem to be struggling.
Imagine a slide scale from 1 to 100. At one end, 1, there is very, very safe lending where every single borrower has to be in safe employment, all have at least 10% deposit, all only borrow up to 3.5x income and has a full, standard repayment mortgage. At the other end, 100, we have completely lax lending to every single person, so not one person being lent money is checked for their income, they're all on IO, they all borrow massive mutiples and there is no regulation whatsoever.
Okay, so we now have a scale. Clearly, the UK mortgage market has never been at 1 on the scale, nor has it been 100 on the scale.
I'm going to make up random numbers now, but let's give a number to the last few decades:
1950s - 20
1960s - 22
1970s - 19
1980s - 24
1990s - 27
2000s - 32
2010s - 21
You see what I'm saying? It's a sliding scale, not one extreme situation or another extreme situation. Just to say, one more time: there has been some dodgy lending in the UK and that's been a major issue. However, the majority lending has, and remains, to be done in a sensible way, to sensible people who repay their capital with no issues.
Does this finally make sense? You understand that someone, such as myself, can have an opinion that most of the mortgage market is sensible but still hold another opinion that dodgy lending is still a major issue? I know on this forum you need to be one extreme opinion or another (i.e. "Everything is f*cked!!" or "Everything is absoutely tickety boo!!") but the real world isn't like that.
Calm down.
So, if I accept what you say then the significant growth in house prices was fuelled by growth in earnings and not lending?0 -
The FSA stated that in 2007 almost half of all mortgages were defined as 'subprime'..
Source?
Never seen the FSA state that 50% of mortgages were subprime.
In fact, seen the opposite, that only a few percent were sub prime.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
..why banks used the restrict lending to multiples of income?
What was it 3.5x single and 2.5x joint?
Why did they used to do that?
Spread of risk against default.
Default is not necessarily repossession. Any default costs banks money. As mortgage lending is extremely low margin and low profitabilty.
As the capital balance on a mortgage balance reduces the profitability reduces. Hence the increase in the cost of product fees to add an additional source of revenue for lenders.
Wasn't that many years ago that Building Societies dominated the UK mortgage lending market. BS don't leverage up ( as the banks have progressively done since the early 70's). Another reason for the historic cap on lending multiples.
Now that banks are deleveraging their balance sheets will they be more interested in more profitable lending than mortgages in the future?0 -
HAMISH_MCTAVISH wrote: »Source?
Never seen the FSA state that 50% of mortgages were subprime.
In fact, seen the opposite, that only a few percent were sub prime.
Cleaver posted a link stating at least 30%.
Remember IO mortgages are subprime.0 -
Calm down.
So, if I accept what you say then the significant growth in house prices was fuelled by growth in earnings and not lending?
Significant growth in house prices was down to a massive range of factors. Two of these factors would have been an increase in earnings and increased levels, and types, of lending.
I could list around two dozen other reasons, and I'm sure other posters could add many more. HPI wasn't down to one single factor and neither was it due to one major factor over others.0 -
Remember IO mortgages are subprime.
Again though, it goes back your definition of subprime, or what irresponsible is.
An extreme example, but if I earn £70k a year and buy a £150k house on interest only and decide to invest my capital in shares and funds with a view to paying off my mortgage capital in 25 years then I wouldn't class that as 'subprime'. It's risky, but you'd argue that someone with that level of salary could afford the mortgage one way or another.
My example is extreme, and I'm not for one minute saying that most people with IO mortgages are rich and have loads of money stashed elsewhere. I'm just saying that I don't necessarily equate subprime with IO.0 -
Imagine a slide scale from 1 to 100. At one end, 1, there is very, very safe lending where every single borrower has to be in safe employment, all have at least 10% deposit, all only borrow up to 3.5x income and has a full, standard repayment mortgage. At the other end, 100, we have completely lax lending to every single person, so not one person being lent money is checked for their income, they're all on IO, they all borrow massive mutiples and there is no regulation whatsoever.
Okay, so we now have a scale. Clearly, the UK mortgage market has never been at 1 on the scale, nor has it been 100 on the scale.
I'm going to make up random numbers now, but let's give a number to the last few decades:
1950s - 20
1960s - 22
1970s - 19
1980s - 24
1990s - 27
2000s - 32
2010s - 21
On your "Cleaver scale" the 2000s are at 32?
Are you real?
For most of the decade it was at 100.
Not everyone, but a significant number of people to drive prices up."The problem with quotes on the internet is that you never know whether they are genuine or not" -
Albert Einstein0 -
On your "Cleaver scale" the 2000s are at 32?
Are you real?
No. Which is why I put "I'm going to make up random numbers now..." just before writing the numbers.For most of the decade it was at 100.
No it wasn't. The majority of people throughout the 2000s were still getting standard mortgages, at up to 3.5x multiples and were repaying capital.
But there is no 'scale' as such, I was just really trying to simplify my point for a poster than just couldn't seem to understand what I was trying to say.Not everyone, but a significant number of people to drive prices up.
I'd agree that increased lending, both in terms of volume and type, was one of a significant numebr of factors that drove up proces over the past ten or so years.0 -
Cleaver posted a link stating at least 30%.
Remember IO mortgages are subprime.
Absolute nonsense.
The real figure is more like 2.5%.U.K. nonconforming -- or subprime -- residential mortgages represent about 2.5% of the overall market, according to Standard & Poor's. While that's roughly the same proportion of the market that U.S. subprime loans represent, the British figure is artificially inflated because the nonconforming category in the U.K. includes mortgages that in the States would be labeled "Alt-A," a step up in quality.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352K Banking & Borrowing
- 253.5K Reduce Debt & Boost Income
- 454.2K Spending & Discounts
- 245K Work, Benefits & Business
- 600.6K Mortgages, Homes & Bills
- 177.4K Life & Family
- 258.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards