Bank of England may put limit on mortgage ratios

ruggedtoast

If this happens a great many people will never be able to remortgage even if they can afford the payments, have been steadily paying down a mortgage for years, and have a new bank that wants to lend to them. Basically meaning that they would be completely at the mercy of their current lenders SVR, as their current lenders would be all too aware.

There doesn't seem to be much point in ZIRPing and everything else to protect mortgaged home owners all this time if they are just going to end up and do this.

That said it is just the sort of stupid ill thought out thing this government may well do.

shortchanged_2

The_White_Horse wrote: »

but why these multiples. why not 2? or 8? or any sum. why those?

Because they would help keep a lid on house prices. If people can't lend the money then they can't afford to pay the stupid prices for a house. Simple.

shortchanged_2

RenovationMan wrote: »

In essence, do you really believe that mortgage multiples alone are any sort of proof that someone is a good lending risk and can actually afford to service the loan?

Whilst I think any mortgage offer should be based on an affordability criteria, I still think there should be a limit on lending. And as I stated on my previous post, if nothing else strict earning multiple lendings would help to stabilise the market more and help prevent a boom and bust cycle.

shortchanged_2

ukcarper wrote: »

In 1999 according to both Nationwide and Halifax earning to average house price graphs although not at there lowest prices had only been lower for a few years in the mid 90s and early 60s

In 1999 average house price Land Registry £72k,
Average wage (mean) £17.7k ONS

Any idea what the average household income was back then ukcarper?

the_flying_pig

Conrad wrote: »

Some people, particularly on higher incomes, have a greater level of marginal disposable income, and I've known many borrow 5 times income and manage perfectly well.

Furthermore, people manage thier money differntly, with some spending less on food and holidays as an example, some driving modest cars rather than 4x4's, so any kind of arbitary limit based on lowest common denominator is about as relevant as gas street lighting.

absolutely right that an income multiple cap wuold be unecessary in some cases.

but the downsides of lending criteria that are too loose, well, we all know what they are well enough.

what i can't work out for the life of me though is what the downsides of requirements that were too 'strict' would be?

finally what do we have now if not income multiple caps, albeit not very strict ones? you're a mortgage advisor - have you ever, i literally mean ever, seen lenders take what sorts of holidays & cars borrowers have into account? the focus is income and savings/equity, always. you're not really arguing that these things aren't relevant, just in favour of slackness generally.

ukcarper

shortchanged wrote: »

Any idea what the average household income was back then ukcarper?

No but these are some figures from ASHE 1999
Median Mean
All 14,888 17,702
Male f/t 19,800 23,997
Female f/t 14,598 16,692
Part Time all 5,187 6,437

the_flying_pig

DannyboyMidlands wrote: »

A load of hot air. The BoE wil sit on their hands just like they did throughout the previous bubble.

maybe. policymakers tend to be quite good at targetting yesteryear's economic problems. the noughties credit bubble will be something that every policymaker has at the forefront of their mind for at least the next few decades.

the mid noughties was the first time [AFAIK ever] that the UK's ever had a 'boom' based purely on credit expansion [mostly for residential property]. it'd be very wrong to characterise the UK economy as having pure credit/housing driven bubbles on a regular basis.

Thrugelmir

DannyboyMidlands wrote: »

A load of hot air. The BoE wil sit on their hands just like they did throughout the previous bubble.

The FSA was regulating the lending practices of NR ,HBOS and B&B not the BOE. The recent report was highly critical of the lack of control.

So no surprise that the rules are being tightened.

Thrugelmir

CLAPTON wrote: »

the banking crisis primarily was caused by securitising very bad lending in the US housing market plus very low capital ratios of the banks

Who created mortgage securitisation?

It wasn't a US bank either.

PaulF81

I have suggested this was going to happen for some time now. The bank of england suggested it was their future plan back in 2008, and we can expect a lot more of this sort of regulation to control markets in the future.

Interest rates will be used to target inflation in the stuff it can control, also M3. The BOE will use market controls for things interest rates are too blunt an instrument to control, for example irrational exuberance in the housing market and other markets. I really cant see a problem in this and is purely the logical step of ending the weak tripartate agreement and giving the bank of england control of regulation. Expect talk of currency controls if the eurozone goes pop too!

They are only going to implement these controls when neccessary. rather than salary multiple, When the next housing boom occurs, I can see them limiting the maximum lending per annum, or maximum ratio of residential investments to mortgage investments once they split the banks activities.