Bank of England may put limit on mortgage ratios

PaulF81

If I had bought a house at the same price to earnings multiple as my parents did back in 1996, I would have been mortgage free on my property over a year ago.

The fact that people arent able to buy their first house until 36 on average flies in the face of your above post. Its not lending thats the problem, its price,something that is currently being resolved by long term stagnant prices.

Labour blew it. If they had limited total lending back in 2004, we could have avoided much of the crises we face now. Instead, they did what the bankers did, but worse. Saw short term gain for medium term control of power to push their virulent socialist agenda.

If you want to find the true origins of the financial crisis, you may want to look at the socialist inclusion agendas forced on fannie and freddie in the states during Clintons term in power. NINJA was not a construct of the bankers, it was constructed by the state to ensure the underclass felt included.

http://www.businessweek.com/the_thread/hotproperty/archives/2008/02/clintons_drive.html

the_flying_pig

PaulF81 wrote: »

...History rhymes, it never repeats...

that strikes me an exceptionally elegant & wise statement.

hmm i just googled it - it's not your own [unless you're Mark Twain].

still, I do like it.

CLAPTON

PaulF81 wrote: »

If you want to find the true origins of the financial crisis, you may want to look at the socialist inclusion agendas forced on fannie and freddie in the states during Clintons term in power.

exactly my point
little or nothing to do with the UK mortgage market

RenovationMan

shortchanged wrote: »

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.

Wouldn't affordability alone give you this without having to add in a salary multiple?

You seem to have ignored my request for a link to your 'always' salary multiples. I wonder why?

shortchanged_2

RenovationMan wrote: »

Wouldn't affordability alone give you this without having to add in a salary multiple?

You seem to have ignored my request for a link to your 'always' salary multiples. I wonder why?

http://www.fsa.gov.uk/pubs/speeches/at_12may09.pdf

Have a quick look at this document RenoMan.

Page 12 is quite interesting.

RenovationMan

shortchanged wrote: »

http://www.fsa.gov.uk/pubs/speeches/at_12may09.pdf

Have a quick look at this document RenoMan.

Page 12 is quite interesting.

What do you think that graph is telling you?

shortchanged_2

I think it's pretty obvious from the data in that FSA report that the housing market was functioning during the boom years by equity release from people who already had property (so therefore didn't necessarily need a much bigger loan to income mortgage) and the FTB's who were mainly the ones who were skewing the loan to income figures as they needed bigger and bigger mortgages to be able to get on the ladder, in many cases 6+ times income mortgages or 100%+ mortgages.

So while the overall average figure of the income to loan mortages might not show a massive incline, it's because it was mainly the people at the bottom of the chain that were skewing this figure and not people who were already homeowners.

Now what is this showing. We now have a stagnant housing market due to the fact that FTB's are pretty non existant because banks are not lending the amounts of money many of them need in order to access the market.

This then has a follow on effect that the next people up the ladder are unable to move on etc etc.

So house prices need to come down in order for the chain to start functioning again.

Emy1501

Lenders have been using affordability calculators for a few years now. hey start off at 4-5x joint as max and then deduct things like childcare fees, loans, credit card repayments etc. Some will deduct an amount based on how man kids you have. lenders will also often ask for up to 6-12 months banks statements to check affordability. I know at least one person who was turned down for a mortgage because they were in overdraft on a few of their bank statements which were checked.

As for type of borrowing FSA research has already shown that Self cert combined with LTV about 75% had a much higher default rate when the credit crunch hit. Also we know that most of people claiming SMI are are of or close to retirement age so lending to these sort of people is not a good idea.

No evidence thoough that 100% mortgages are a problem if leant to the right person.

julieq

150K house. 25% deposit is £37K. Takes a while to save.

20% house price drop. 130K house. 25% deposit is £32.5K. Still takes a while to save (and chances are that mortgage lending would have collapsed anyway had that happened).

Therefore the problem for first time buyers ISN'T absolute prices. It's the LTV ratios. You'd have to push prices through the floor to allow them to save up quarter of the purchase price of a house.

This is another of those "beware of what you wish for" things. High LTV doesn't do much to prices, evidently, and it doesn't protect lenders much. But it does exclude first time buyers, and in the meantime FTB properties are traded between investors for yield. If you want prices to reduce or moderate, build more houses. Forget about interest rates, forget about "props", they are not addressing the fundamental supply/demand issues.

System

julieq wrote: »

150K house. 25% deposit is £37K. Takes a while to save.

20% house price drop. 130K house. 25% deposit is £32.5K. Still takes a while to save (and chances are that mortgage lending would have collapsed anyway had that happened).

Therefore the problem for first time buyers ISN'T absolute prices. It's the LTV ratios. You'd have to push prices through the floor to allow them to save up quarter of the purchase price of a house.

I've tried to make this point loads of times, but that was a much better worded version.