One Million FTB-s prevented from buying

Rochdale_Pioneers

DervProf wrote: »

That is true. The easy option would be to set rates lower and go back to small/no deposits. If you then run the course of events that follow in your mind, you will probably see problems in the not too distant future.

In my opinion, and I said it at the time, the brakes should have been gently applied back in 2004(ish).

And I'm not arguing that we go back to ever-increasing prices. But we do need a viable housing market and construction industry, and at the moment its been completely squashed.

Whats going to be really interesting is as and when interest rates start to increment upwards. Banks are making an absolute fortune at the moment charging 500 basis pints and more above the BoE rate. they'll need to reduce that large profit margin once rates start to rise or they will squash economic growth never mind housing.

ILW

Rochdale_Pioneers wrote: »

And I'm not arguing that we go back to ever-increasing prices. But we do need a viable housing market and construction industry, and at the moment its been completely squashed.

Whats going to be really interesting is as and when interest rates start to increment upwards. Banks are making an absolute fortune at the moment charging 500 basis pints and more above the BoE rate. they'll need to reduce that large profit margin once rates start to rise or they will squash economic growth never mind housing.

Not that straightforward, banks are also now paying 4% on many savings accounts. So the margins are not as large as you suggest.

dwsjarcmcd

ILW wrote: »

Not that straightforward, banks are also now paying 4% on many savings accounts. So the margins are not as large as you suggest.

While that's true, the vast majority of banks and buildings societies retail deposits are held in very poorly paying savings accounts, particularly their branch based accounts.

Thrugelmir

Rochdale_Pioneers wrote: »

Banks are making an absolute fortune at the moment charging 500 basis pints and more above the BoE rate.

Which lenders and products are you referring to?

Thrugelmir

dwsjarcmcd wrote: »

While that's true, the vast majority of banks and buildings societies retail deposits are held in very poorly paying savings accounts, particularly their branch based accounts.

You do the thousands of people who visit the MSE forum for advice a disservice.

As banks offer increasingly higher rates of interest to attract retail deposits then the cost of borrowing will increase likewise. Seems fair.

Rochdale_Pioneers

Thrugelmir wrote: »

Which lenders and products are you referring to?

My 5 year fixed with Halifuxd deal is up so we had a cursory look around. We're going to pay less moving onto their fixed deal, but the gap between variable rate and BoE rate is something like 4%, compared to the <1% it was back in 2006. Similarly a fixed deal now would be a couple of percent more expensive than back then with a lower LTV threshold. Other lenders appear to be in the same place.

I understand why they are all now charging many whole percentages above base rate vs the <1% they used to. But that large gap is going to have to narrow unless they're going to such large amounts of money out of the economy. A lot of people struggled with mortgages when base rates went up towards 5% and thats when lenders charged around 0.85% on top. Imagine the fun if they keep charging 4.5% and more on top....

Conrad

Jimmy_31 wrote: »

If house prices came down then lots more people would be able to get a mortgage without the banks moving the goal posts.

Falling prices leads to lenders having more bad debt on thier balance sheets, and them having to hold larger capital reserves contributing to tightening of capital and insurance markets meaning it would be even harder to borrow.

Thrugelmir

Rochdale_Pioneers wrote: »

I understand why they are all now charging many whole percentages above base rate vs the <1% they used to.

Historically mortgages rates were around 2% -2.5% above base. With increased FSA levies (in part to recoup the Icelandic bailout) another .25% can be added.

The days of all the mainstream lenders offering sub 2% rates are gone fore ever.

Inter bank lending on 5 year rates has been around 2.9% - 3.0% for the past month. Hence why 5 year rates appear expensive currently.

Bank base is at emergency levels for good reason. Repaying debt in the current climate therefore has to be way forward.

dwsjarcmcd

Thrugelmir wrote: »

You do the thousands of people who visit the MSE forum for advice a disservice.

As banks offer increasingly higher rates of interest to attract retail deposits then the cost of borrowing will increase likewise. Seems fair.

It's not the people who visit here I'm talking about, they are a tiny fraction of the whole savings population. What would be fair is if the billions held in obselete accounts paid a decent rate of interest.