Mortgage Rationing

nick1977

I have a limited understanding of the whole property market situation, but the way I see it is that the issues with prices seem to be very different in different parts of the country.
If you take some areas in Wales, NE England, Scotland etc, you will find a wealth of oversupply, where multiples of similar properties are sitting on Estate Agents books for months at a time not doing anything. Despite national statistics that show otherwise, there would appear to be ample supply in these areas even if mortgages were to become more widely available with higher LTVs.
The contrast is the areas like the one we live in (Rickmansworth) where, particularly for the average family home, there is still quite an active market. My belief (as I said not an educated opinion as such, just my opinion!) is that if mortgage rationing is lessened, then it is areas like this where the prices could go up quite significantly. There appears to be a significant number of people (I know a few myself) who are wanting to get on the ladder, but due to the prices of rent shooting up they cannot even begin to save for a deposit. The demand for 3 bed rental homes is so strong, that any under £1,200pcm that do come on get snapped up straight away.

So, what I guess I'm trying to say is, I think it's likely we're heading to an increased gap in the cost of property depending on the region, and possibly also the type of property.

What does everyone think?

Nick

shortchanged_2

StevieJ wrote: »

Not in this country it wasn't.

I meant it within the context of the housing market not the whole economy.

Graham_Devon

julieq wrote: »

As Graham's builder chum said the other day, affordability is not the issue.

Wow. Thats quite some editing of the comment you have decided to undertake!

shortchanged_2

julieq wrote: »

No-one here is squealing for more lending. What I am pointing out is that mortgage rationing is mostly hurting people who want to buy houses on a mortgage, and I've explained why it's happening, which is in effect (i) in your list. More lending would allow more houses to be built which would ease the supply and demand issues.

The thing is surely lower house prices are better for a significant majority of people.

It's basic maths at the end of the day.

Say a house is valued at £200,000. To purchase the said house with a 10% deposit would take a £20,000 deposit and a £180,000 mortgage.

If the same house is valued at £150,000 it would take £15,000 for a 10% deposit and a mortgage of £135,000 for the rest.

Why can't some people see that example 2 has got to be better for most (apart from those who bought at the peak and those who have over MEWed) as it will mean people will have more disposable income to spend on other things, instead of having to service a rather large debt. And continued strict lending will help with this because most people have to move at some time and as it is the housing market is barely functioning.

Graham_Devon

shortchanged wrote: »

The thing is surely lower house prices are better for a significant majority of people.

It's basic maths at the end of the day.

Say a house is valued at £200,000. To purchase the said house with a 10% deposit would take a £20,000 deposit and a £180,000 mortgage.

If the same house is valued at £150,000 it would take £15,000 for a 10% deposit and a mortgage of £135,000 for the rest.

Why can't some people see that example 2 has got to be better for most (apart from those who bought at the peak and those who have over MEWed) as it will mean people will have more disposable income to spend on other things, instead of having to service a rather large debt. And continued strict lending will help with this because most people have to move at some time and as it is the housing market is barely functioning.

The simple reason (to some) is this:

If house prices fall, lending contracts. Therefore people will have to save a deposit longer and rent for longer.

They also equate affordability to whether a person can meet the mortgage payment each month...and thats usually worked out on a mythical mortgage which does not exist.

My mum is one of the hardest people to try and explain how a house price fall is good, in any respect. However, even she doesn't relate affordability to the way some people describe it, and even she can see the lower the price you pay when you first enter the housing market, the better.

Thrugelmir

StevieJ wrote: »

As far as I was aware the Halifax achilles heal was Corporate debt and NRAM was being over attached to short term borrowing which dried up, not directly related to the sub-prime crisis but surely indirectly related, certainly not due to UK mortagage failures.

In its most basic form and in a simplistic answer. NR required Lehmans Bros to fraudently sell its securitised paper. Lehmans packaging 125% Together Mortgages as AAA Grade debt. So indirectly the UK was involved in the sub prime scandal that has yet to unfold fully.

UK mortgage failures is a red herring. Only affects profitabilty. The key issue is cash i.e. funding.

nearlynew

Even people able to satisfy a lender's criteria and get mortgages are not being able to buy the house they want because the bank won't lend enough money because prices are still too high.


And just for the record, anyone who thinks the last boom would have happened purely because of fundamentals like "supply and demand" and not because of loose lending is an idiot and not worth arguing with..

Thrugelmir

nearlynew wrote: »

Even people able to satisfy a lender's criteria and get mortgages are not being able to buy the house they want because the bank won't lend enough money because prices are still too high.

So easy to see that a bank such as LloydsHBOS under a board level strategic policy, could be contributing to and engineering a slow reduction in house prices. By very slowly tightening the amount they lend (in a number of ways). The progressively lower amount of available finance will ultimately lead to reduction in house prices.

Prices can't remain high indefinately. As has been said often before. All house owners eventually will succumb to one of the 3 D's. Death, Divorce or Distress. At which point the property will be realised for its market worth.

zappahey

nearlynew wrote: »

And just for the record, anyone who thinks the last boom would have happened purely because of fundamentals like "supply and demand" and not because of loose lending is an idiot and not worth arguing with..

I see you still don't understand supply and demand.