Hometrak: +0.2% MOM. Supply exceeding demand

HAMISH_MCTAVISH

the.ciscokid wrote: »

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

They could have an unlimited amount for lending, but they don't.

And the reason they tightened the criteria is to prevent most people from buying.

Because they don't have the funds to lend.

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 point you're missing is that it is totally irrelevant what would make it easier for people to meet the new criteria.

Because if any more people met the criteria, they'd have to change the criteria again, to exclude them.

They are already lending 100% of the money available to lend.

If a million people with perfect credit and 25% deposits applied for a mortgage tomorrow, they'd have to move the goalposts again so they could deny 95% of them a loan.

the.ciscokid wrote: »

They will lend, if you meet the lending criteria.

Only as long as most people don't meet the criteria. If more people do, they'll change the criteria to exclude them.

That's why it's called "rationing".

HAMISH_MCTAVISH

Generali wrote: »

There is less money available for house purchases than previously as a result of the economic theory known as 'once bitten, twice shy':
.

Actually, there is less money available for house purchases than previously as a result of the economic theory known as "throwing the baby out with the bathwater".

The UK housing market is the baby.

The Irish, Spanish, Greek and American housing markets are the bathwater.

Graham_Devon

Thrugelmir wrote: »

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.

The only problem with this is that it's hard to fix for over 5 years without paying higher rates in the first place.

Therefore, after 5 years, the person borrowing 123k could be significantly better off.

the.ciscokid

Thrugelmir wrote: »

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.

One question and one point, if you'll permit me.

If not lowering of prices, what would be of significant benefit if interest rates rise as you suggest?

Following on from that, an 18% decrease in price to compensate for a 50% rise in interest seems like a reasonable trade. Plus banks still make the same, or more, profit. Win win!

the.ciscokid

HAMISH_MCTAVISH wrote: »

They could have an unlimited amount for lending, but they don't.

Potential mortgagees could also all have the appropriate deposit and salaries, but they don't either. This is the same type of straw man argument you used only spun a different way.

HAMISH_MCTAVISH wrote: »

And the reason they tightened the criteria is to prevent most people from buying.

Because they don't have the funds to lend.



The point you're missing is that it is totally irrelevant what would make it easier for people to meet the new criteria.

Because if any more people met the criteria, they'd have to change the criteria again, to exclude them.

They are already lending 100% of the money available to lend.

If a million people with perfect credit and 25% deposits applied for a mortgage tomorrow, they'd have to move the goalposts again so they could deny 95% of them a loan.



Only as long as most people don't meet the criteria. If more people do, they'll change the criteria to exclude them.

That's why it's called "rationing".

The point you are missing is, what you are describing is a market, nothing more, and certainly not "rationing" by the mean banks. On top of that, your fantasy million people don't exist, and the general public, especially the younger generation and new entrants, is too saturated with debt to be buying even more of it!

the.ciscokid

chucky wrote: »

Lending criteria has been upped since 2007 right?

Thanks for your reply. Yes, I would say lending criteria is stricter.

chucky wrote: »

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.

Not willing, because we have been down that road, and we didn't like where we ended up?

chucky wrote: »

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.

I would expand on your last sentance and say:

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