Tumbling mortgage demand

Wookster

You can smell hamish's desperation

shortchanged_2

HAMISH_MCTAVISH wrote: »

He's getting rather good at that.

I've lost count of the number of questions he's ignored in this thread alone.

:rotfl::rotfl:That's a good one coming from you Hamish.

Itismehonest

Let's all be honest. There are many things to blame for where the market finds itself.
It isn't just, as some would have us believe, the fault of boomers who have either bought houses & watched prices rise & are now being greedy. For many generations a home was the first thing a young couple strived to attain. Everything else was put on hold. They scrimped, saved, stopped going out as regularly - if at all. They started with small houses or, more likely in certain areas, flats. They often didn't start a family until they had a home - there weren't the benefit perks there are now.
Times have changed & people expect more. The FTB now often has 2 or more children, run 2 cars etc. The first home they are looking for is no longer the 1st home of 30-40 years ago. They have by-passed the first rung of the ladder & hope to get straight onto the second which has always been a hard thing to do.

Savers have been taking the brunt of low interest rates for years now. If those savers have no incomes the savings eventually reduce &, for many, their property possibly becomes their only investment. They will sit on that property & the chain will grind to a halt.

There's no point trying to apportion blame to any one section of society. The world has changed. What we need is to find a method of making the market move in a way that helps the entire chain but nobody seems to be able to come up with one.

shortchanged_2

Itismehonest wrote: »

Let's all be honest. There are many things to blame for where the market finds itself.
It isn't just, as some would have us believe, the fault of boomers who have either bought houses & watched prices rise & are now being greedy. For many generations a home was the first thing a young couple strived to attain. Everything else was put on hold. They scrimped, saved, stopped going out as regularly - if at all. They started with small houses or, more likely in certain areas, flats. They often didn't start a family until they had a home - there weren't the benefit perks there are now.
Times have changed & people expect more. The FTB now often has 2 or more children, run 2 cars etc. The first home they are looking for is no longer the 1st home of 30-40 years ago. They have by-passed the first rung of the ladder & hope to get straight onto the second which has always been a hard thing to do.

Savers have been taking the brunt of low interest rates for years now. If those savers have no incomes the savings eventually reduce &, for many, their property possibly becomes their only investment. They will sit on that property & the chain will grind to a halt.

There's no point trying to apportion blame to any one section of society. The world has changed. What we need is to find a method of making the market move in a way that helps the entire chain but nobody seems to be able to come up with one.

I think what you say here is spot on.

I do think however that the blame lies with the banks and government in the previous decade because they got carried away with lending which caused the house prices to rocket.

Put it this way if in the previous decade banks had kept a tighter lid on lending there is no way house prices would be where they are now.

The problem is now how does this problem get resolved.

There are two main trains of thought. To either relax lending again or for house prices to reduce.

I personally believe house prices need to return to a level from which point there can then be controlled, sustainable growth without the need for massive mortgages.

RenovationMan

HAMISH_MCTAVISH wrote: »

You just gave an example where there was a shortfall in buying the average house, without including any equity from previous houses.

Sorry, you seem to be arguing for a ladder in one post, and against it in the next.

Which is it?

shortchanged argued with me that a repayment mortgage was safer than an IO mortgage when someone had lost their jobs.

>>> I pointed out that with an IO mortgage a persons emergency savings go much further because they are paying out less on the mortgage each month than on a repayment.

>>> shortchanged retorted that a repayment is safer because it can be converted into an IO mortgage whereas an IO mortgage was already an IO mortgage and cannot be converted to anything.

I don't think two facts entered his head:

1. That it's not guaranteed that your lender will allow you to go IO on a repayment mortgage. Yet the sooner you get onto IO when you are in difficulties, the longer you can ek out your emergency money.

2. (and most importantly) A repayment mortgage that is converted to an IO mortgages is an IO mortgage and cannot therefore be 'safer' than an IO mortgage.

Oh, how I laughed. :rotfl::rotfl::rotfl::rotfl:

Graham_Devon

HAMISH_MCTAVISH wrote: »

Perhaps you'd care to explain the economic mechanism through which you think long term mortgage rates from here will average above 4.5%.

Particularly when even the BOE admit the neutrality point for base rates moving through the next cycle will likely be 2.5% or so versus the 6% it was in the last cycle.

I know this question wasn't directed at myself, however....

What a stupid question. The answer is there is no economic mechanism. You are not asking a financially literate question. You are asking one which you know you will have the upper hand in whatever the answer....presumably as you are having trouble with the original argument.

The simple fact is, mortgage rates are going up even though the BOE is holding interest rates steady.

For someone who keeps banging on and on about historial lending, only for you to argue that things may not pan out the same as history when it comes to the cost of the lending....it's farcical.

Would you bet a lot of money the average mortgage rate will not pass 4.5% for the next 25 years? Of course you wouldn't. So why do you insist on having these inane superiority smoke and mirror arguments? It's obvious this is a superiority thing, hence the stupid questions with no answer, and then boasting he's getting trounced.

macaque_2

HAMISH_MCTAVISH wrote: »

Wrong again macaque....

Lets objectively look at the risk.

In 2010-11 just 2% of all households had members who had at some time in the past given up a home due to mortgage difficulties.
.
Around 40% of those who had given up a home had sold the home in order to avoid getting into possible arrears with the mortgage.

A further 21% had got into arrears and sold the home in order to avoid court action by their lender.

In only 39% of cases, or just 0.78% of total houses, had the mortgage lender taken over the property.

So in the last 3 property cycles combined, just 0.78% of households have been repossessed.

You have a strange definition of "high risk"....

My definition of "high risk" is immaterial. The current lending terms on property reflects market sentiment. Although the price bubble of the last decade has not (yet anyway) translated into high numbers of reposessions, the cost of preventing this outcome has done severe damage to the economy and the government is in no position to cope with another bail out.

I don't understand why you, as a self confessed free market buff, can object so strongly when the free market does what free markets always do. It clearly perceives risks that you either can't see or you refuse to see. Whether you are right or wrong however, is irrelevant; market sentiment has more clout than your strongly held views.

Itismehonest

shortchanged wrote: »

I think what you say here is spot on.

I do think however that the blame lies with the banks and government in the previous decade because they got carried away with lending which caused the house prices to rocket.

Put it this way if in the previous decade banks had kept a tighter lid on lending there is no way house prices would be where they are now.

The problem is now how does this problem get resolved.

There are two main trains of thought. To either relax lending again or for house prices to reduce.

I personally believe house prices need to return to a level from which point there can then be controlled, sustainable growth without the need for massive mortgages.

I tend to agree that much of the problem is due to recent lending stupidity but you have to look further than purely a large drop in house prices for the answer.

I think you would find it hard to explain to someone who has never been stupid with their money that they should, in addition to being stung by low interest rates (which have helped those who overstretched themselves but hurt those without mortgages) that they should also see an extremely large drop in the value of their home. That home may be their only form of possible future income at a time when the elderly already have to sell properties to cover the cost of care etc.
Incidentally, I'm talking, say, £500K+ properties outside London. Properties which the normal wage has never bought.

shortchanged_2

RenovationMan wrote: »

shortchanged argued with me that a repayment mortgage was safer than an IO mortgage when someone had lost their jobs.

>>> I pointed out that with an IO mortgage a persons emergency savings go much further because they are paying out less on the mortgage each month than on a repayment.

>>> shortchanged retorted that a repayment is safer because it can be converted into an IO mortgage whereas an IO mortgage was already an IO mortgage and cannot be converted to anything.

I don't think two facts entered his head:

1. That it's not guaranteed that your lender will allow you to go IO on a repayment mortgage. Yet the sooner you get onto IO when you are in difficulties, the longer you can ek out your emergency money.

2. (and most importantly) A repayment mortgage that is converted to an IO mortgages is an IO mortgage and cannot therefore be 'safer' than an IO mortgage.

Oh, how I laughed. :rotfl::rotfl::rotfl::rotfl:

God you're a plonker sometimes.

The argument I was basing this on was affordability.

I was arguing against the fact that many IO mortgages were given out in the boom years because that was the main way people could 'afford' to buy therefore they were already maxed out with little or no breathing space with no spare capacity for a repayment vehicle etc. Hence the reason now we are seeing all these IO mortgage ticking timebomb articles floating around.

RenovationMan

shortchanged wrote: »

God you're a plonker sometimes.

The argument I was basing this on was affordability.

I was arguing against the fact that many IO mortgages were given out in the boom years because that was the main way people could 'afford' to buy therefore they were already maxed out with little or no breathing space with no spare capacity for a repayment vehicle etc. Hence the reason now we are seeing all these IO mortgage ticking timebomb articles floating around.

Nah, that's what you've changed it to because even mild mannered board members, such as purch were laughing at your absurdity. I must admit it was amazingly funny.

We were discussing 2 identical mortgages, one repayment and one IO and the fact that the IO mortgage would be much more secure during financial difficulties than repayments.

However, I'm happy that you seem to have mulled it over and have come around to the right sort of thinking.