House Price Crash 6

Generali

nelly wrote: »

Thats not what I meant,

he said they wont lend 5 times salary in a falling market

if im on 50 grand now and I can get 250 grand why will i not be able to get 250 if the house prices are dropping, a bank doesnt care what the value of the house is only that you can pay back what you borrow!

Sorry, I see what you mean.

Banks care a lot about risk. If house prices fall we'll probably see a credit crunch coupled with a liquidity crisis.

In a liquidity crisis, cash is all. Nobody will extend credit to you.

Look at it fromt he banks' point of view.

If house prices are rising rapidly and interest rates are low, why not lend 5x salary? If the NINJA (No Income, No Job or Assets) can't pay you back, it's ok. Just reposess and sell the house at a profit. The bank gets their money and lost interest back. Hell, it probably won't even come to that - when the schmuck that crippled himself because he lied on a self cert mortgage realises his mistake he'll sell out cheaply and pay the bank back.

On the other hand, if prices are falling what happens? Who wants to lend someone money against a depreciating asset? You need a big deposit and a big cushion. The banks definitely don't want to think about reposession when they are then going to be holding an asset that's falling in value so they only lend to the least likely to default and make them take out insurance against job loss and death.

If you want to know what a banker's thinking, it's all about how to reduce risk.

lazygoose

Dead_Eye_Jones wrote: »

People have been predicting this for ages, and have been wrong for years now. I've no doubt one day they will be right - and we look frwd to the 'told you so posts' (not!), but im glad I didnt hang around. At my rate Ill be mortgage free before some have even started!

Will there be a crash? Maybe! But FTBs need to know that they will be competing for these bargins against Investors who have hung back, City bonus spenders, and people like me who will fancy riding the next wave with a few BTLs. Im not so sure people will have any better access to property, even if they cost less.

Ominously, repossessions in the UK have crept up to the
highest level since the early 1990s even though house prices
are rising briskly and the world economy is humming.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/03/15/ccmort15.xml

Wig

I heard that the US market is crashing now, and UK divisions of banks like HSBC / city Bank are feeling the pinch because they bankrolled a lot of the US lenders.

Roll on the price crash! It's coming.

meanmachine_2

After the last crash I investigated getting a mortgage.

They'd lend me exactly 3.25x my salary - provided I was on staff.

I was on a 12 month contract and couldn't get the moolah.

So there - even though house prices were much lower then, they were still "just out of reach".

Why wouldn't anyone lend me 5 times my income then, or allow me to lie my way into a property? Because the banks were still cautious after the last crash.

Will the US disease spread to us? People like Ed Balls don't think so - cos the UK government has tried to rig the market, keeping supply artificially tight.

But we'll see.

MickKnipfler

What happened to Tarique Aziz?