The Myth of Risky Mortgage Lending

jjlandlord

ILW wrote: »

Just because you live in an owner occupied house does not mean you own it.

If you live in an owner occupied house you most likely belong to the household of the owner. Obviously enough by 'population' I meant 'households'.

You should not compare the number of homes to the number of the total population.
We don't each live in separate properties, do we? Otherwise I should get separate properties for wife and each of my children.

Graham_Devon

The_White_Horse wrote: »

because if you have confidence that your house will only go up in value, you may (a) borrow against it and spend that on improvements or consumer goods or (b) decide to buy another house (either trading up or a second home) - which you wouldn't if you thought prices would fall.

Exactly.

More borrowing. At a time when borrowing and debt is causing massive western problems.

We've seen where more debt has got the eurozone. We've seen where more debt got us in the first place, regardless of who's to blame.

All Hamish is suggesting is that if house price rose, the homeowner could get themselves into more debt to buy consumer goods etc.

It's a load of nonsense. May work for some short period of time, but it's MUCH better for people to buy products and services out of income. Reason? It's sustainable. You are not relying on spending tommorows money today.

I can state quite comportably that most raytional people wouldn't suggest more borrowing to overcome the problems excessive borrowing has bought us, is a good idea.

antrobus

HAMISH_MCTAVISH wrote: »

UK mortgage lending was for the most part responsible, prudent,

For the most part it was. It was the bits that weren't that were the problem, and the fact that much of it was being funded by the 'oh look we don't need any capital' model that went past its sell by date sometime in 2007.

HAMISH_MCTAVISH wrote: »

So much for the "irresponsible lending" myth.

I'm sure that the shareholders of Northern Rock Plc and the Bradford and Bingley plc might take a different view,

ultrawomble

jjlandlord wrote: »

Most people in this country are actually property owners. So increase in house prices does not hurt their income.
On the other hand, a fall in house prices hurts their confidence (hence spending) and can put them in actual financial problems should they fall into negative equity.

If they own their house they can't fall into negative equity. If they own a mortgage they can.

antrobus

Graham_Devon wrote: »

I can state quite comfortably that most rational people wouldn't suggest more borrowing to overcome the problems excessive borrowing has bought us, is a good idea.

I was going to say that you obviously don't know many people who are in the Labour Party. But then I did see that you qualified your statement with the word 'rational', so that's all right then.

jjlandlord

ultrawomble wrote: »

If they own their house they can't fall into negative equity. If they own a mortgage they can.

I believe that statistics of "property ownership" are based on who's on the titles, irrespective of the presence of a mortgage.

Is there a point to play pedantic on the semantics?

Graham_Devon

jjlandlord wrote: »

I believe that statistics of "property ownership" are based on who's on the titles, irrespective of the presence of a mortgage.

Is there a point to play pedantic on the semantics?

It's not really semantics.

The issue with what you are talking about is it causes the "babyboomer" situation.

I.e. where a certain population hold the majority of wealth.

ultrawomble

jjlandlord wrote: »

I believe that statistics of "property ownership" are based on who's on the titles, irrespective of the presence of a mortgage.

Is there a point to play pedantic on the semantics?

Yes, because this thread is about about risky lending. Property owners won't fear house price falls because they don't have a debt. People with a debt such a mortgage may well fear negative equity.

Graham_Devon

ultrawomble wrote: »

Yes, because this thread is about about risky lending. Property owners won't fear house price falls because they don't have a debt. People with a debt such a mortgage may well fear negative equity.

And fear it rather more if they have MEW'ed the equity, as suggested by Hamish & Co.

Funnily enough, after exhausting the "It was the US, not us" line, he's dissapeared.

the_flying_pig

HAMISH_MCTAVISH wrote: »

False.

House prices were inflated due to a supply shortage. 70% of lending was withdrawn, yet here we are with prices just 10% below peak.




False.

The level of debt is being sustained just fine, despite a recession, increases in unemployment, etc, arrears and repossession rates remain extremely low. And when rates rise, it will be because the wider economy is recovering and employment is growing, which is not the set of conditions you need for a hpc.



False.

Money is not "tied up" in fixed assets. And all housing wealth is recycled to future generations, and always will be unless we find a way to abolish "death".



False.

The economy can not flourish until house prices rise. Rising prices create a "wealth effect", boosting consumer confidence and spending in the wider economy. Triggering economic activity in industries ranging from construction to retail and reducing costs of borrowing. Falling prices do the reverse.

awful, awful, post.

i personally have in the past wasted plenty of time debating all of the points you make it. i've even obtained a couple of [mostly tacit, e.g. through silence in response to probing questions] admissions from you that some of your points have been made in a misleading or disingenous way, or only reflect part of the story.

much more importantly i've read dozens of other posters do exactly the same.

but then you trot out all the same old lines again and again. it's quite depressing really.