Banks continue to find new and innovative ways to ration mortgages

HAMISH_MCTAVISH

So as many will know, I've been banging on about this issue for some time now, as mortgage rationing is the single biggest cause of the decline of homeownership in the UK.

Owner occupation levels are down to figures last seen in the 1980's, and we are storing up vast problems for the future by creating a socially disenfranchised Generation Rent.

Now some posters on here seem to mistakenly believe that the current absurd lending restrictions are historically normal, which is of course wrong.

The current lending restrictions are designed for one thing alone, to reduce the pool of borrowers to match the pool of available funding.

Until now this has been done by abandoning historically normal, prudent, and sensible lending criteria such as requiring a 5% to 10% deposit, an average credit rating and a decent employment history, and replacing it with unusually tight criteria such as requiring 25% deposits, long term flawless credit ratings, etc.

But the banks now have a problem...

Since the rules changed in early 2008, large numbers of people have been quietly saving up the required deposit levels and according to the estimate of at least one MPC member, the number of those with deposits will now start to increase rapidly.

Furthermore, the biggest generation of people in history, bigger even than the boomers, is about to start reaching FTB age. From late 2012 onwards the numbers will grow steadily every year, until peaking in the mid 2020's. and then starting to decline again. Indeed, it will be sometime around 2035 before there are as few FTB's competing for mortgage lending and houses as there are today.

So the banks, in the absence of more funding, must now find new and innovative ways to restrict mortgage lending.... And it seems those ever-creative little rascals have found a beauty this time.

Families who take foreign holidays, splash out on subscriptions or buy expensive presents to mark birthdays or Christmas face being turned down for a mortgage.

The new rules from one of the biggest banks will penalise any applicant deemed to be extravagant.

Santander – which is the nation’s second largest lender of mortgages – is the first to introduce the intrusive guidelines. But last night experts said they feared other banks and building societies will follow suit.

Yes folks that's right, the banksters, desperate to avoid facing the political consequences of raising deposit levels still further to perhaps 40% or higher, have now introduced criteria so vague, so open to interpretation and so absurd, even Priced Out are up in arms about it.

Matt Griffith, a spokesman for Priced Out campaign group for affordable homes, said: ‘This is ridiculous – no one fails to repay their home loan because they buy gifts for their grandma.

‘Banks are constricting lending to first-time buyers while concentrating on the richer pickings of equity-rich homeowners and investors.

As banks scrabble to preserve cash, it seems like we are on the verge of another mortgage crunch.

Of course, such checks are patently absurd and verging on downright intrusive.

David Hollingworth of mortgage broker London & Country said: ‘When people take out a mortgage, it’s the regular spending commitments which indicate how well they’ll be able to manage their money.

‘People change their habits when they buy a house. They don’t go out as much, and they spend less on birthdays and holidays because they have a mortgage to pay.’

Indeed.


Read more: http://www.dailymail.co.uk/news/article-2106173/Want-mortgage-Tell-spend-presents-Bank-delves-deeper-personal-lives-penalise-extravagance.html#ixzz1nNy3kgmu

Graham_Devon

HAMISH_MCTAVISH wrote: »

Until now this has been done by abandoning historically normal, prudent, and sensible lending criteria such as requiring a 5% to 10% deposit, an average credit rating and a decent employment history, and replacing it with unusually tight criteria such as requiring 25% deposits, long term flawless credit ratings, etc.

That single paragraph undermines your whole post.

Pricedout are not backing up what you have stated. They are stating lending is being favoured towards BTL and such.

Is this that different to having to go in and face an interview with your bank manager if you wanted a mortgage? You talk about sensible norms, but appear to ignore that under those sensible norms this is what people had to go through.

You've recently started another thread congratulating a poster standing up for corporate giants, and then go on to moan about corporate giants and the small man. Which is it?

HAMISH_MCTAVISH

Graham_Devon wrote: »

That single paragraph undermines your whole post.

Pricedout are not backing up what you have stated. They are stating lending is being favoured towards BTL and such.

"BTL and such" are the people with large deposits and flawless credit ratings.

It's exactly what I'm saying.

Graham_Devon

HAMISH_MCTAVISH wrote: »

"BTL and such" are the people with large deposits and flawless credit ratings.

It's exactly what I'm saying.

I didn't read that in your OP, sorry.

I read stuff including:
- It's absurd!
- The rascals!
- Desperate banksters!
- Checks are downright obtrusive!
- Absurd restrictions!

I didn't see anything suggesting you were complaining that money was going to money.

Even the Daily Mail commenters have a better grip on the article than yourself. Even they are suggesting just as little as 15 years ago people were havign to walk into the banks and have their itemised statements gone through in front of them.

Emy1501

I know at least 5 people who have taken out 90% mortgages over the past few months. Someone else I know only had a 5% deposit and therefore took out a loan for the other 5% and got a 90% mortgage no problems.

last time I looked you could get 5 year fixed on 90% at less than 5% which is lower than when I bought in the mid 90's. Back then yes you could get 95% mortgages easily but the max the average lender would lend was 3.5x. Now it common to get 4-5x without any problem.

Its not hard to get a mortgage these days as long as you have a 10% deposit.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Even the Daily Mail commenters have a better grip on the article than yourself. Even they are suggesting just as little as 15 years ago people were havign to walk into the banks and have their itemised statements gone through in front of them.

Gosh, I wonder why......

Oh wait, no I don't.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=175652

:rotfl:

Graham_Devon

Emy1501 wrote: »

I know at least 5 people who have taken out 90% mortgages over the past few months. Someone else I know only had a 5% deposit and therefore took out a loan for the other 5% and got a 90% mortgage no problems.

last time I looked you could get 5 year fixed on 90% at less than 5% which is lower than when I bought in the mid 90's. Back then yes you could get 95% mortgages easily but the max the average lender would lend was 3.5x. Now it common to get 4-5x without any problem.

Its not hard to get a mortgage these days as long as you have a 10% deposit.

And thats exactly what Hamish will tell you on any thread regarding babyboomers!

chewmylegoff

I don't really see anything wrong or indeed novel in taking all of a persons expenditure into account, when deciding whether to lend an enormous amount of money to them.

nearlynew

I liked this bit from the article....

David Hollingworth of mortgage broker London & Country said:

‘People change their habits when they buy a house. They don’t go out as much, and they spend less on birthdays and holidays because they have a mortgage to pay.’

... just as I thought - high house prices are bad for the economy.

abaxas

A business selling what it wants to sell. Who would have thought it!

I demand Hamish sells me his house for 2p. It's my right to be able to buy anything I want at the price I want.

Generali

Economists call this crowding out (although that's not the only problem).

There are a finite number of quids available for banks to lend. They can lend them to individuals, businesses or the Government.

Banks are most likely to get the money back from the Government because the Government can always just print the money to repay them so banks like lending to Governments. If the Government runs a large deficit as the current UK Government does, then banks will lend to the Government ahead of lending for mortgages, especially to high-risk FTBs who make up the majority of defaulters.

That leaves less money left to lend to individuals and businesses.

However, you then have a politically inspired stick stirring the market being Project Merlin. The Government insists that certain banks must lend more to smaller companies.

That means the third leg of the stool must be the one that is cut short; mortgages. Look at net lending over the past couple of years to each of those 3 sectors and make your own mind up about whether I'm right or wrong. The data are freely available.