Hometrak: +0.2% MOM. Supply exceeding demand

HAMISH_MCTAVISH

Graham_Devon wrote: »

Therefore mortgages are ALWAYS rationed. Always have been, always will be.

You just admitted mortgages are rationed.

And of course, they're severely rationed now due to the mortgage drought, versus hardly rationed at all previously as there were enough to go around.

HAMISH_MCTAVISH

Generali wrote: »

Aren't you both arguing the same point, i.e. that mortgages are rationed?

Probably.

But I'm a bit :beer: tonight and he's a bit :mad: all the time, so we're probably both beyond caring.

chucky

Generali wrote: »

Aren't you both arguing the same point, i.e. that mortgages are rationed?

It's a circular argument that's being skewed by some people because it's Hamish making a point.

Lenders have limited funds compared to previous times, less people will qualify for mortgage funds = "mortgage rationing". In better times more funds = more people qualify for mortgages. Mortgage drought or mortgage shortage would be a better description.

The argument that I think Hamish is making that is being twisted by others is that if there wasn't the current "mortgage rationing" more people would buy. So it's "mortgage rationing" that is stopping people buying more than high house prices.

Generali

chucky wrote: »

It's a circular argument that's being skewed by some people because it's Hamish making a point.

Lenders have limited funds compared to previous times, less people will qualify for mortgage funds = "mortgage rationing". In better times more funds = more people qualify for mortgages. Mortgage drought or mortgage shortage would be a better description.

The argument that I think Hamish is making that is being twisted by others is that if there wasn't the current "mortgage rationing" more people would buy. So it's "mortgage rationing" that is stopping people buying more than high house prices.

I see. So the point I'm missing is that different people mean different things by mortgage rationing. Fair enough.

There is less money available for house purchases than previously as a result of the economic theory known as 'once bitten, twice shy': people are less willing than they were to buy mortgages from banks as investments via CDOs and so on.

I guess for the future of the UK's housing market the key is will banks be able to find additional funds into mortgages? If not, will owners of houses continue to be willing to hold on to houses that are surplus to requirements in one way or another (e.g. the 'accidental landlord').

chucky

Generali wrote: »

I guess for the future of the UK's housing market the key is will banks be able to find additional funds into mortgages? If not, will owners of houses continue to be willing to hold on to houses that are surplus to requirements in one way or another (e.g. the 'accidental landlord').

You're right, for me the key is the banks lending not if house prices are high or not. People will always want to buy houses, it's too hardcoded in culture to change any time soon.

the.ciscokid

chucky wrote: »

It's a circular argument that's being skewed by some people because it's Hamish making a point.

Lenders have limited funds compared to previous times, less people will qualify for mortgage funds = "mortgage rationing". In better times more funds = more people qualify for mortgages. Mortgage drought or mortgage shortage would be a better description.

The argument that I think Hamish is making that is being twisted by others is that if there wasn't the current "mortgage rationing" more people would buy. So it's "mortgage rationing" that is stopping people buying more than high house prices.

The banks could have an unlimited amount mortgage finance available, but if people do not meet the lending criteria it is irrelevant.

It is this criteria tightening which, rightly or wrongly, is preventing people buying a house. The question is, what would make it easier for people to meet the new rules the banks have applied to lending?

the.ciscokid

chucky wrote: »

You're right, for me the key is the banks lending not if house prices are high or not. People will always want to buy houses, it's too hardcoded in culture to change any time soon.

They will lend, if you meet the lending criteria. Your point here appears to disagree with that though, since lower house prices would mean more people meet the criteria (salary multiples, real savings required for a deposit and so on).

Of course if you loosened lending criteria this would also, as you intimate, mean more people were able to buy. The only issue with that is, look where it led us just a few years ago (I'm specifically thinking about Northern Rock here).

chucky

the.ciscokid wrote: »

They will lend, if you meet the lending criteria. Your point here appears to disagree with that though, since lower house prices would mean more people meet the criteria (salary multiples, real savings required for a deposit and so on).

Of course if you loosened lending criteria this would also, as you intimate, mean more people were able to buy. The only issue with that is, look where it led us just a few years ago (I'm specifically thinking about Northern Rock here).

Lending criteria has been upped since 2007 right? That's the point, it's because there are less transactions, less funds to lend or a bank is not willing to take the risk to lend.

Also lending margins in the current mortgage market have to be high because there is a less volumes of funds. Banks still need to make a profit.

We have low volume and high lending margins, previously we had high volumes of lending and low lending margins.

The_J

Spot on chucky. Mortgages are very profitable at the moment which is why Bank of India, Bank of China and other foreign banks are looking for a chunk of the UK mortgage market. They were extremely impressed by the resilience of UK property prices.

Thrugelmir

the.ciscokid wrote: »

They will lend, if you meet the lending criteria. Your point here appears to disagree with that though, since lower house prices would mean more people meet the criteria (salary multiples, real savings required for a deposit and so on).

If interest rates were to rise. As one assumes they will over time. Then lowering of prices will be of little benefit, unless of a significant nature.

As an example it costs the same in total repayments to borrow £150k at 4% over 25 years as £123k at 6%. (That would require an 18% reduction in price to compensate).

Though people's perception will be that houses are cheaper if they pay £123k. As its the base cost that they think about. Not the total to be repaid.

Always the danger when one factor is singled out for micro attention. Rather than taking account of all factors with a macro perspective.