FSA advisers urge delay to mortgage reform and more 'flexible' lending

chucky

DervProf wrote: »

£1,182.54 interest for the first month.

Average interest per month is around £500.00.

no it should have read repayment not interest.

chewmylegoff

chucky wrote: »

that's way too simplistic.

the ticket price of a property on it's own isn't the only factor to look at, the effective price is.

you need to include the mortgage side and also the affordability side.

a £200k mortgage at 5% over 25 years is £1,182.54 interest per month.

a £200k mortgage at 5% over 15 years is £1,605.70 interest per month.

the ticket price is just one factor, not your defining factor to see if people can buy and/or have the ability to buy.

how many people do you think add up the total cost of the property over 25 years when they are considering buying.

you might, but i shouldn't think that the majority of people do. my impression is that most people address this by saying [deposit + mortgage borrowing = maximum price (including stamp duty and other costs)].

mortgage borrowing in the above equation factors in affordability, because if you cannot afford to pay a £200k mortgage, no one is going to lend you the money.

this is all just semantics anyway.

at the moment, there is a general issue with the housing market whereby there aren't many transactions because people cannot borrow enough money to buy the houses that they want at the prices which sellers are prepared to accept.

you can say "this means that if they could borrow more, they would pay the price, so it's not all about price", but that is irrelevant because they cannot, at the current time, borrow more.

it is all about the price - the price at which both parties are prepared to and capable of doing business at.

chewmylegoff

Really2 wrote: »

Also how am I spinning it you are saying it is all about the price then go on about lack of mortgages available to suit the demand, that's spin as they are two compleatly seperate subjects are they not?

no, they are absolutely intertwined, because in order to pay for something you have to be able to pay for it, regardless of whether you are also willing to pay for it.

The bold bit are you saying cost price and are affordability are the same thing? So they were never overpriced at the height of the boom then???
You guys have a funny way of looking at things.

well, is anything ever overpriced? if someone is willing and able to buy it at that price, then that is the price. i'm not sure what "you guys" is, but i am not a housing squirrel, housing spider-pig, or housing duck-bill platypus.

DervProf

chucky wrote: »

the ticket price is just one factor, not your defining factor to see if people can buy and/or have the ability to buy.

True.

Council tax, insurance costs, maintenance costs, energy bills etc can make a big difference to the cost of buying/owning a property. The other factor is that a simple look at how much the first month's mortages payment will be is not a very good indication of afforadability (well it is on day one, but what about 12 months, 2 years and 5 years in the future). It's a good idea to consider any initial discount rate you might get on the mortgage, and where interest rates are likely to be in a few years time.

chucky

chewmylegoff wrote: »

it is all about the price - the price at which both parties are prepared to and capable of doing business at.

you miss the point, it's obviously more affordable to service a mortgage over 25 years paying £1,182.54 a month than it is over 15 years paying £1,605.70 a month for the same price of the property. and if you want we look at 40 years and monthly repayments become £971.30 so more people are able to buy at the same price.

so it is not "all about the price", as i said a very simplistic way of looking at it.

chewmylegoff

chucky wrote: »

you miss the point, it's obviously more affordable to service a mortgage over 25 years paying £1,182.54 a month than it is over 15 years paying £1,605.70 a month for the same price of the property. and if you want we look at 40 years and monthly repayments become £971.30 so more people are able to buy at the same price.

so it is not "all about the price", as i said a very simplistic way of looking at it.

you can only borrow what someone is willing to lend you, regardless of the format of the repayment terms. if someone will lend you £200k over 40 years, for instance, and you are willing to accept that mortgage offer, then that is the mortgage finance you have available to you in the equation [deposit + mortgage finance = price].

Really2

chewmylegoff wrote: »

you can say "this means that if they could borrow more, they would pay the price, so it's not all about price", but that is irrelevant because they cannot, at the current time, borrow more.

it is all about the price - the price at which both parties are prepared to and capable of doing business at.

They cant get 30-40 year mortgages either but it's a debate?

You are completely ignoring demand in your simplistic view. The debate was never about the current time, it is obvious house prices are where they are because of the current situation.

But you can't ignore possible changes in possible supply, demand, affordability and what that would do to the market.

If it was all about price you are currently saying houses are at their correct value at the moment (I would agree with that) but I really don't think many on here would.

Really2

chewmylegoff wrote: »

well, is anything ever overpriced? if someone is willing and able to buy it at that price, then that is the price.

So some people should get used to the prospect of never owning then?

As the point where people are willing to sell and where people are willing to buy is being met?

PS Sorry, I thought you were shortchanged so I am crossing some of your point with his/hers.

chucky

chewmylegoff wrote: »

you can only borrow what someone is willing to lend you, regardless of the format of the repayment terms. if someone will lend you £200k over 40 years, for instance, and you are willing to accept that mortgage offer, then that is the mortgage finance you have available to you in the equation [deposit + mortgage finance = price].

but that's the whole point, it's just not all about price and price alone.

it's the finance + ability to get together a deposit + the price you are paying + the ability to repay monthly payments defines if you can buy or not.

*there are probably other factors there that the Devonian Institute of Economics will have a little froth about.

Graham_Devon

Wow. So chucky, you can pick me up on the misuse of an "&" sign. I pick you up on an obvious error and all hell breaks loose with abuse ahoy. Ooops. Didn't realise the nerve was so raw. I may have to prod it again