Tumbling mortgage demand

shortchanged_2

OK Hamish, I have one question for you.

What constitutes a recovery in the housing market to you?

Is it just an increase in house prices regardless or is it an increase in transactions even if that is a result of a drop in house prices?

Itismehonest

I think the situation is more complicated & varies from area to area.

Having checked the various sites for what has sold in a large area locally over the last year or so, it is pretty obvious that the vast majority of sales have been of properties for either FTB or BTL.
Larger properties & those in areas where there is less call for rental/FTB (eg rural) have not been moving even with, in some cases, large price drops. It isn't all about the price.

There must be many people, like me, who are watching this & have decided there is little point in putting a property on the market while this carries on.
There's no point having properties sit on the net unsold for years. So, the supply of good properties is falling.
It's the uncertainty of the market which is most damaging. Whether prices rise or fall becomes almost secondary.
Lenders are actively trying not to lend. Nobody sensible wants to see a return to the ridiculous loans of recent years but lenders have swung in completely the opposite direction & are making it hard for those who can afford to borrow.
People who can are just sitting it out waiting to see what happens.

shortchanged_2

Itismehonest wrote: »

Nobody sensible wants to see a return to the ridiculous loans of recent years

But this is still part of the problem in that you would need the return of the ridiculous loans to be able to afford the current levels. However as I have stated I believe this is not the answer, Hamish and some others believe it to be the answer.

HAMISH_MCTAVISH

shortchanged wrote: »

But this is still part of the problem in that you would need the return of the ridiculous loans to be able to afford the current levels.

Nonsense.

Just get back to historically normal, prudent and sensible lending standards.

Where a 5% deposit, decent credit score and a stable work history are enough to get a mortgage at non-punitive margins above base.

FTBFun

shortchanged wrote: »

Looks like there is only one solution to this problem. A fall in house prices.

Or a fall in owner occupancy levels as instead property is purchased by investors and let out to people formally able to purchase property. I'd say that's not an unrealistic outcome.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Nonsense.

Just get back to historically normal, prudent and sensible lending standards.

Where a 5% deposit, decent credit score and a stable work history are enough to get a mortgage at non-punitive margins above base.

You don't want historially prudent, normal and sensible lending though, do you?

You want the historial prudent lending applied, but given wings. You don't want to see people having to sit down and go through their income with the bank manager. You don't want to see return to single salary lending multiples. You don't want to see a return to pople having to bank with their lenders for a while before getting the go ahead.

All you want to see is increased multiples, lower deposits, but on double incomes and no amount of investigation.

You are kidding yourself if you think this is historially prudent, yet you just keep saying it over and over again.

nearlynew

McTittish is a debt junkie.

All he wants is to be able to borrow more money.

It really is that simple.

He doesn't care what that entails or understand the implications.

shortchanged_2

Hamish.

Average UK house price £160,000.

Average UK household income £40,000

Let's just say for arguments sake we look at a 10% deposit of £16,000.

That leaves a mortgage of £144,000

3 times a joint income of £40,000 = £120,000.

Do you see the problem here. There is a £24,000 shortfall.

Now that can be resolved 3 ways.

1) An additional £24,000 towards a deposit
2) An increase in the amount that is lent by the bank
3) A reduction in the house price to £132,000.

Itismehonest

The lenders seem to have been targeting particular sections of the market at the expense of the rest. FTB (before the end of the SD holiday - not sure if this is still the case - & BTL). While there is sense in trying to get people on to the bottom of the property ladder it becomes pointless if those wanting to move upward are unable to do so.

A friend recently sold their top of the chain property by having to buy the property at the bottom of the chain (a 2nd rung type of property) just to allow the whole chain to move.

We'd happily downsize &, when we were briefly on the market last year, had several instances of people who would be cash buyers from the SE unable to sell their own properties because the chain just stops at properties 1 or 2 transactions below theirs due to mortgage issues.

If the top rung can't downsize then it becomes as much as a problem for the overall market as those unable to get on the bottom rung. It just doesn't get the news coverage like the FTB problem.
Even building new starter homes won't solve the chain problem.
Something is needed to help unblock the whole chain.

robmatic

shortchanged wrote: »

Hamish.

Average UK house price £160,000.

Average UK household income £40,000

Let's just say for arguments sake we look at a 10% deposit of £16,000.

That leaves a mortgage of £144,000

3 times a joint income of £40,000 = £120,000.

Do you see the problem here. There is a £24,000 shortfall.

Now that can be resolved 3 ways.

1) An additional £24,000 towards a deposit
2) An increase in the amount that is lent by the bank
3) A reduction in the house price to £132,000.

Why does the mortgage *have* to be 3 times joint income?