BTL versus home buyers

undetterred

geoffky wrote: »

3% wow,, savers who live off interest such as me will be laughing all the way to the bank with that.

You need to be more adventurous,the days of sitting on your a rse and getting a good return are gone.

Rightly so.

Graham_Devon

HAMISH_MCTAVISH wrote: »

According to the FSA and as reported by Shelter, had the lending standards of the MMR been in place between 2005 and 2007, then it would have led to just 17,000 fewer repossessions from 2007 until now.

But as we have seen, those MMR lending standards (pretty much what we've seen since 2007) come at the cost of a million fewer people being given mortgages.

So the way to prevent 17K repossessions is to prevent a million people from buying.

Genius.... Why didn't someone think of that before?

Talking of repo's to suggest the market is somewhat healtheir than it is is rather silly and naive.

The FSA (for all they are worth) are concerned...but thankfully that's as far as they will go.

Forbearance now accounts for 63pc of all troubled home loans, according to the FSA. As many as 300,000 borrowers have switched roughly £60bn of mortgage debt from repayment to interest-only since the financial crisis struck in late 2007, according to FSA data revealed in The Daily Telegraph.

That's a LOT of held off repo's Hamish. I doubt even you could argue any different.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8560336/UK-banks-may-have-masked-risks-with-forbearance.html

Paul Diggle, property economist at Capital Economics, recently tried to quantify how important a role forbearance has played in propping up the housing market.


He estimated that without lenders’ leniency, arrears and repossessions could be double the current rate.
He also suggests that had banks been less forgiving, the proportion of mortgages three months or more in arrears would probably be around 5% - matching the 1990s peak.


The Bank of England estimates that 11.8% of borrowers have benefited from some form of forbearance.

11% of mortgage borrowes benefitting from some form of forebearance is huge Hamish.

nearlynew

Those 300,000 people switching from a repayment mortgage to an IO mortgage must be those really savvy, financially astute ones that I've read about on here..

HAMISH_MCTAVISH

Graham_Devon wrote: »

11% of mortgage borrowes benefitting from some form of forebearance is huge Hamish.

Unsurprisingly, you left off the all-important next line in your quote.......

Of these, roughly a third thought they’d be in arrears if they hadn’t reached an agreement with their lender.

So only a third of the 11.8% who received forbearance would be in arrears if they hadn't had help. And only a small fraction of that 3.9% would ever have been repossessed.

Pobby

OK, would agree that perhaps £45k was bit under priced but certainly little more would have bagged you a terraced house say off of the Oxford Road. For the poster that lived in Reading, some one I know around that period paid £45k for a property in Tidmarsh Street.

To Hamish, I hear your supply and demand argument, yet you seem to ignore other elements. We had reckless lending, a massive surge in house prices. In some areas knocking on nearly 400%. That would not fit into your figures of the rising population. I would suggest that you include little wage inflation, a huge loss in jobs, to my mind adjusted inflation figures.

We are now getting into the rental market where prices are excluding many of low paid workers. So what are they to do? Well housing benefit will support but that is from the pockets of the tax payer which is far from perfect.

Your thoughts on home building is being held back from the lack of lending.
The housing market is only one area effected from the bad practises of the last decade and more. If you are thick and own a house, you think HPI is fantastic . My home is worth xyz more than I bought it. I am rich. If you are even thicker you then re mortgage to buy cars, holidays and 500 foot TVs.
What is occurring is there is little return from savings, the stock markets. Our pensions are severely cut due to the huge drop in annuities.
Now Hamish we don`t agree I certainly see you as a bright bloke. Would like your reply on the bigger picture.

LydiaJ

nearlynew wrote: »

Those 300,000 people switching from a repayment mortgage to an IO mortgage must be those really savvy, financially astute ones that I've read about on here..

I'm sure some of them are financially savvvy people taking advantage of low interest rates to get a better return on their money than they would be getting by paying off their mortgage capital. I'm also sure that some of the others have got into difficulties, and others again have reasons that are nothing to do with the economy or the market or getting into difficulties, but just to do with the circumstances of their own lives.

For example, friends of mine switched to IO when the wife went part time after they had kids. They're planning to stay IO until the youngest is at school, and then she'll increase her hours and they'll switch back to repayment.

IveSeenTheLight

macaque wrote: »

The real truth is that the lenders/government are now prepared to do anything to avert another bank meltdown even if this means locking the fox in the hen house. We are still a democracy though (I think) and the hens ultimately have more votes.

Strange analogy there.

You think your in a better situation as a hen locked in a hen houe with a fox due to larger numbers?

Many would think that this represents a feast rather than a coup d'!tat of the fox

macaque_2

HAMISH_MCTAVISH wrote: »

So only a third of the 11.8% who received forbearance would be in arrears if they hadn't had help. And only a small fraction of that 3.9% would ever have been repossessed.

Forebearance implies switching to interest only repayments or even less. Therefore all of the 11.8% face reposession at some point unless their financial circumstances change for the better. According to Paul Diggle, the rate of repossessions would be double their current level without the bail outs.

Paul Diggle, property economist at Capital Economics, recently tried to quantify how important a role forbearance has played in propping up the housing market. He estimated that without lenders’ leniency, arrears and repossessions could be double the current rate.

http://www.mortgagestrategy.co.uk/analysis/threat-of-reducing-lender-forbearance-needs-to-be-tackled/1049116.article

A bigger risk for the housing market however are the 'won't pays' rather than the 'can't pays'. For someone with £50k of negative equity, default and repossession may well be the lesser of two evils. If people start walking away from their debts, the market will be flooded with property for sale and prices will plunge.

The only way lenders can mitigate the risk of a fast and severe crash is by forebearance plus ensuring that new loans have plenty of water under the keel. It surprises me therefore that you of all people (with your interest in high property prices) should be complaining about tougher lending conditions when these offer you the only hope of avoiding a very cold shower.

Emy1501

HAMISH_MCTAVISH wrote: »

I don't think either of us have ever suggested that 2007 mortgage lending standards are either sustainable or to be desired.

Nobody wants to see the return of 125% mortgages, liar loans, etc.

What rational people do want to see is the return of historically normal, prudent, and sensible lending standards, where a 5% deposit, a stable job, and a decent credit score were enough to get a mortgage.

Not the situation of today where less than 2% of mortgages issued are for LTV's of 90% or greater.

Well Juliq seems to believe there was nothing wrong with pre 2007 lending levels and I suspect a fair chunk of you 1m FTB's who would have been locked out of the market would have bought with 100%+ mortgaes IO mortgages and Self Cert etc. I also wonder how many of these people are stuck in negative equity now as I know a few who are.

The reality is unemployement is rising. Euro problems have not been sorted, the Uk economy is struggling and the housing market is struggling. Its not really realistic to expect lenders to lend 95% mortgages in the mainstream in the current climate and thats why few are. In th future things will probably change but not in the near future.

IveSeenTheLight

Emy1501 wrote: »

The reality is unemployement is rising.

In a discussion regarding home ownership, when unemployment comes up I often wonder what the impact is.

So as you make your argument that unemployment rising levels will affect home ownership, could you answer the following questions: -

1. How much has unemployment risen in 2012?
2. How many of them are homeowners? (I realise this is not likely to be answered with an actual stat, but it makes you consider how many are homeowners. It is quite possible that the majority of those made unemployed could be lower earner non homeowners)
3. What is the percentage of unemployed homeowners in the overall stat of homeowners?