Home Equity increases by 2.7% in 2011

shortchanged_2

RenovationMan wrote: »

Well, we are where we are with house prices. If it's true that people could only buy a house with an IO mortgage (I'm not convinced because the banks have the same lending criteria regardless of whether the mortgage is IO or repayment)

But they were lax during the boom years and many a sneaky broker was getting IO deals for people that today would look ridiculous and they were basing the affordability on the monthly payments of that IO mortgage NOT on its repayment alternative. Yes RenoMan I know you will say where's my evidence for this and all I can say is I've seen it first hand and I'm sure they're not the only cases in the whole of the UK.

DervProf

RenovationMan wrote: »

Fair enough. I took on board your moan to Jonny Bravo and engaged you in sensible debate but you just so can't stop yourself can you? Oh well, I'm vindicated again....

I can't stop myself ? :wall:

You did engage me, then proceeded (which did raise a knowing smile - hence the :rotfl: Nice one.) to tell me exactly what you`ve stated many times on this forum about your farmhouse etc. There was nothing malicious or sarcastic in my response, the "nice one" was acknowledgement that I know exactly what you were trying to do (provoke me into an attack on you). You then tell me that I can't help myself. I might return the same accusation back at you.

I'm sure that any forum member that has witnessed our previous encounters would realise that my response was a friendly jesture, followed by a sensible continuation of the discussion. Your response to this is not to further the converstion, to agree or disagree with me, but to try and make out that I'm the villain, and that you have somehow been vindicted.

I`ve tried, I really have. Like I mentioend to JB, I have recently tried to engage with you "on topic" and without getting involved in confrontation, but you seem to not want to play ball. You know full well my opinion on your repeated publishing of your situation. If you were truly serious about engaging in proper debate/discussion, you wouldn't have told me, yet again, what I already know. I assume it was an attempt to provoke a response, which you got, in the form of what I thought would be taken in good humour.

The thing is, I have openly acknowledged, several times, that I respect your financial decisions, jealousy is not on the menu. I have recently revealed a little more about my own financial situation, I don't see the need to remind you of that again, and I certainly don't think I need reminding again of yours, unless it is an attempt by you to derail the discussion.

I think I will continue to try and debate with you, as I think we might have interesting "arguments" on some of the things we disagree on. I also think that we aren't too far apart in some areas, and we might get some agreement.

RenovationMan

shortchanged wrote: »

But they were lax during the boom years and many a sneaky broker was getting IO deals for people that today would look ridiculous and they were basing the affordability on the monthly payments of that IO mortgage NOT on its repayment alternative. Yes RenoMan I know you will say where's my evidence for this and all I can say is I've seen it first hand and I'm sure they're not the only cases in the whole of the UK.

As I said, I think we'll have to agree to disagree about that. I realise that there were people prepared to overstretch themselves in order to get onto the housing ladder, but I'm just not sure that it was so significant in this country that we need to rein in everyone just because a few people lost control of their finances.

In an ideal world, the likes of Northen Rock and IceSave would have been allowed to go under and savers would have had to rely on the bank insurance policies that were in place at the time to get their money back. This would have put the issue of reckless lending onto individual banks and the people who decided to deposit their money there and not onto the tax payer.

The risk should be held by the lender, the borrower and the depositor (if they have more than the amount deposited than the insured level) and no one else.

shortchanged_2

RenovationMan wrote: »

As I said, I think we'll have to agree to disagree about that. I realise that there were people prepared to overstretch themselves in order to get onto the housing ladder, but I'm just not sure that it was so significant in this country that we need to rein in everyone just because a few people lost control of their finances.

But the problem is that their actions did have further consequences for the rest of the economy in that it helped fuel the spiralling HPI which as we know now has become a real problem for many while of course some really benefitted.

DervProf

RenovationMan wrote: »

In an ideal world, the likes of Northen Rock and IceSave would have been allowed to go under and savers would have had to rely on the bank insurance policies that were in place at the time to get their money back.

In an ideal world, NR and IceSave wouldn't have gone under.

I agree that the next best thing would have been to allow them to go under, but the taxpayer stepped in and created a certain degree of moral hazard. Factor in the sharp fall in interest rates, and the moral hazard has increased. There is not much doubt in my mind that the large increase in personal debt in the UK was starting to leave more and more consumers at risk from financial problems. For many, the cut in rates will have prevented them being in serious financial dificulty, which is both a blessing and a curse IMO.

The price that many are now paying is restricted lending by the banks, and yet we still get complaints about this. I didn't hear many complaints when NR were "dishing the dosh". The deposit requirements that we now have would have been a lot more acceptable 10 years ago, and had those restrictions been in place, it's arguable that things wouldn't be so bad for FTB's today.

RenovationMan

shortchanged wrote: »

But the problem is that their actions did have further consequences for the rest of the economy in that it helped fuel the spiralling HPI which as we know now has become a real problem for many while of course some really benefitted.

Again, we'll have to agree to disagree about just how much impact lax lending had on the house price boom. In my experience, the main part of the boom happened before NR et al stated offering 120% mortgages and they offered them as a consequence of the boom to allow people to get onto the housing ladder. I bought my second house in 2002 when we had already seen a huge jump in house prices, IIRC I had similar hoops to jump through for the mortgage lender in 2002 as I did when I bought my first house in 1995.

Kennyboy66

RenovationMan wrote: »

Again, we'll have to agree to disagree about just how much impact lax lending had on the house price boom. In my experience, the main part of the boom happened before NR et al stated offering 120% mortgages and they offered them as a consequence of the boom to allow people to get onto the housing ladder. I bought my second house in 2002 when we had already seen a huge jump in house prices, IIRC I had similar hoops to jump through for the mortgage lender in 2002 as I did when I bought my first house in 1995.

"inflation is always and everywhere a monetary phenomenon"

Milton Freidman.

If you expand the money supply and increase the amount of credit available, it will always manifest itself in higher prices somewhere - in the UK (and other places) this meant higher asset prices (including property) while the central banks were only concerned with consumer price inflation (which was being depressed by Chinese exports).

This is just basic economics.

RenovationMan

An interesting an accurate article from May 2007:

From The Sunday Times, May 27 2007

End of the house price boom is in sight
David Smith



"Many factors have led to house prices rising, more than trebling in fact, since May 1997. They include rising employment, rising numbers of households, limited new housing supply and the emergence of buy-to-let. As people’s confidence in conventional pensions has declined, so their belief in property has increased.
It is also the case, both in Britain and globally, that the fall in long-term real interest rates – the gap between inflation and interest rates on government bonds – has helped support property.

Much the most important factor, however, has been the short-term interest rate set by the Bank. Here, there is a coherent story about the various phases of the current house-price boom.

The first phase was from the mid1990s to 2000-1. The sharp fall in prices at the end of the 1980s and early 1990s had pushed them to very low levels in relation to rents, other assets and incomes. This, combined with the realisation that lower interest rates were here to stay, produced a strong rise.

By 2000-1, though house prices were still below their long-term trend, the boom had begun to fade. Then, in response to the bursting of the dotcom bubble, September 11 and the start of the Iraq war – all global events – the Bank cut rates, taking them all the way down to 3.5% during 2003. These cuts produced the boom’s second phase, from late 2001 to mid2004.

Then, however, the Bank switched into tightening mode, raising Bank rate five times between November 2003 and August 2004. The results of this on the housing market were significant, producing the famous 2004-5 pause in prices. I’m often characterised as a cockeyed optimist, but I expected that pause to continue.
Why did it not do so? Either the fact that the Bank stopped hiking, or its single rate cut in August 2005, or both, stimulated the market, giving us today’s phase of the boom. The Bank almost brought the housing market down to earth but did not quite follow through, a bit like the allies and their failure to get Saddam Hussein in the first Gulf war. "

DervProf

RenovationMan wrote: »

An interesting an accurate article from May 2007:

From The Sunday Times, May 27 2007

End of the house price boom is in sight
David Smith

Interesting indeed.

The article seems to suggest that house prices can be controlled by interest rate levels, and that the BoE almost brought house prices under control.

So while there is a shortage of property at the moment in the UK, as I suspected, the BoE do have a large say in the direction of prices, and therefore pressure on the banks to lend to support those prices.

I`ve often thought that there are times when lending rates for business investment (apart from property investment) could do with being detached from mortgage rates. That would leave the BoE with an easier task of balancing the behaviour of the property market and the wider economy.

Graham_Devon

DervProf wrote: »

Interesting indeed.

The article seems to suggest that house prices can be controlled by interest rate levels, and that the BoE almost brought house prices under control.

So while there is a shortage of property at the moment in the UK, as I suspected, the BoE do have a large say in the direction of prices, and therefore pressure on the banks to lend to support those prices.

I`ve often thought that there are times when lending rates for business investment (apart from property investment) could do with being detached from mortgage rates. That would leave the BoE with an easier task of balancing the behaviour of the property market and the wider economy.

To be fair, it's what we have been saying for ages.

Add in all the other stimulus and we are where we are, like a rabbit in the headlights.