Cheapest Houses since 1999

Shupufski

HAMISH_MCTAVISH wrote: »

Sure.

Banks only have enough money to lend to around a third of the people who could afford the monthly payments on a mortgage and would like to buy a house.

Hence they have to raise deposit requirements and credit scoring criteria until the pool of eligible borrowers shrinks to match the pool of available mortgage funding.

It's not rocket science.;)

Ok. Why do they only have "one third" of the money? What has happened to the other two thirds? Why has the Market failed to resolve lending at the "correct level"?

HAMISH_MCTAVISH

Shupufski wrote: »

Ok. Why do they only have "one third" of the money? What has happened to the other two thirds? Why has the Market failed to resolve lending at the "correct level"?

This little thing you may have heard of, called the "credit crunch". Caused by the mis-allocation of risk on American sub-prime mortgages, being bundled and sold as AAA investments.

The wholesale money markets are still effectively shut as a result, hence why mortgage lending is "dysfunctional", to quote the CML.

Again, not exactly rocket science. And absolutely nothing to do with UK lending standards, UK default rates or UK house prices.

Shupufski

HAMISH_MCTAVISH wrote: »

This little thing you may have heard of, called the "credit crunch". Caused by the mis-allocation of risk on American sub-prime mortgages, being bundled and sold as AAA investments.

The wholesale money markets are still effectively shut as a result, hence why mortgage lending is "dysfunctional", to quote the CML.

Again, not exactly rocket science. And absolutely nothing to do with UK lending standards, UK default rates or UK house prices.

So why have no new lenders appeared to take up the slack? The is plenty of cash sloshing about in the world looking for a return.

Going4TheDream

Shupufski wrote: »

So why have no new lenders appeared to take up the slack? The is plenty of cash sloshing about in the world looking for a return.

There are new banks lending, Aldermore bank have been in the news and are offering 100% mortgages (at huge rates) but they have to be backed with a guarantor who is prepared to put up their own property or part of it as assurity, thereby reducing the banks risk, which is a big reason for the crisis in the first place, over exposure to high risk debt. I am not saying this is an option for many or even a good option however, but it answers your point about new lenders, I am sure there may well be other lenders too.

Shupufski

Going4TheDream wrote: »

There are new banks lending, Aldermore bank have been in the news and are offering 100% mortgages (at huge rates) but they have to be backed with a guarantor who is prepared to put up their own property or part of it as assurity, thereby reducing the banks risk, which is a big reason for the crisis in the first place, over exposure to high risk debt. I am not saying this is an option for many or even a good option however, but it answers your point about new lenders, I am sure there may well be other lenders too.

So there is no "mortgage rationing" then?

geneer

Is it me, or was the adoption of short term "affordability" a significant part of what got the world into such an economic mess.

Surely not very sensible to characterise it as a particularly meaningful measure.

Thrugelmir

HAMISH_MCTAVISH wrote: »

Sure.

Banks only have enough money to lend to around a third of the people who could afford the monthly payments on a mortgage and would like to buy a house.

Hence they have to raise deposit requirements and credit scoring criteria until the pool of eligible borrowers shrinks to match the pool of available mortgage funding.

It's not rocket science.;)

You've missed the factor that can be progressively applied. Lower income multiples.

From a lenders view spreading the risk by having more borrowers is better.

Thrugelmir

Shupufski wrote: »

So why have no new lenders appeared to take up the slack? The is plenty of cash sloshing about in the world looking for a return.

Setting up a new bank is very expensive. Requires a large capital base.

Where's this cash you mention?

Thrugelmir

Going4TheDream wrote: »

There are new banks lending, Aldermore bank have been in the news and are offering 100% mortgages

At the 31st December 2010 Aldermore's mortgage exposure was around £300 million. That's .00025% of total outstanding mortgage debt in the UK.

Compared to the £87 billion of mortgage debt that still resides in NRAM.
Some 2 and half years after it was nationalised. This doesn't include the mortgage book of the Northern Rock either.

Or indeed LlloydsHBOS's mortgage book that stands at £390 billion.

Going4TheDream

Shupufski wrote: »

So there is no "mortgage rationing" then?

Is it rationing or exclusion by tougher criteria to meet the lenders requirements? Some seem to say that is that banks do have smaller pots to lend so are being more picky. I suppose it depends which side of the fence you sit on...if you are struggling to raise the big deposit you may see it as exclusion as prior to the change maybe you would have been offered a mortgage. But by being more selective and sticking to higher deposits and stricter salary multiples are banks in fact lending to more people by lending less to each one and therefore it is not rationing?? The bank would lend £380k to 4 x buyers with a 5% deposit on a 100k house, whereas they would lend 5 x buyers with a 25% deposit on a £100k a total £375k.