"It shows funding for lending is working"

Graham_Devon

The title was a quote I heard on the radio today, in response to Nationwide postive figures.

So, would increasing property prices suggest funding for lending is working?

Or if it is the case that funding for lending has increased property prices (whcih, by the way, I highly doubt), wouldn't this suggest funding for lending was it's own worst enemy?

Is increasing prices via government backed loans a positive result? Or should it be classed as a negative result, increasing costs for everyone? Guessing it depends on your interests?

In what other situation woudl government incentives leading to a rise in living costs, be classed as a positive result?

Thrugelmir

Graham_Devon wrote: »

So, would increasing property prices suggest funding for lending is working?

Amount drawn down so far is negligible mortgage wise. So jury is out.

HAMISH_MCTAVISH

Graham_Devon wrote: »

would increasing property prices suggest funding for lending is working?

Well given the huge housing shortage and millions of people who can easily afford mortgage payments but can't get a mortgage, the only thing holding prices down is the absurdly draconian mortgage rationing that has been ongoing for several years now.

Preventing more people from buying houses than high prices ever did, and ensuring house building has fallen to the lowest level in a century, worsening the shortage.

So yes, if funding for lending is even partially successful in repairing the broken and dysfunctional mortgage market, then prices should absolutely rise.

Is increasing prices via government backed loans a positive result?

Undoing the damage caused by years of mortgage rationing is a positive result.

Freeing up the millions of people forced into renting thanks to mortgage rationing is a positive result.

Getting more houses built, because buyers have access to mortgages, is a positive result.

Starting to repair the dysfunctional lending market is a positive result.

Reducing the numbers of people in negative equity is a positive result.

Clearing the backlog of people unable to move, sell, remortgage or buy thanks to insufficient equity is a positive result.

And of course, getting the housing, home furnishings, white goods, construction, etc, businesses around the country moving, with all the job creation and economic benefit that would create, is a positive result....

So yes, of course rising prices is indicative of a positive result.

In what other situation woudl government incentives leading to a rise in living costs, be classed as a positive result?

Rising prices will result in a reduced cost of living for several million people with a mortgage., as they fall into a better LTV bracket...;)

And as rising prices will also boost the wider economy, as above, then many millions more will also benefit.

But more importantly, funding for lending is not a government "incentive", it's simply the government acting as it's supposed to in trying to step in and repair the damage caused when markets become broken and dysfunctional.

Loughton_Monkey

Funding for lending could not possibly have resulted in the actual completion of house purchase transactions yet.

Those of us owning houses during the 90's 'correction' know that it took 9 or 10 years for prices to come back to pre-correction levels (in £ terms. Longer for 'real' terms).

With hindsight, I somehow feel grateful that we didn't have powerful broadband Internet with which to check a dozen different 'indicators' of price movements every month. We just kept calm and carried on.

I make an assessment of my own house value once a year. Some would argue that even that's too frequent. It's a lifetime investment for god's sake.

Any person's wealth will depend first and foremost upon their overall career and earnings. After that, it will depend upon how much you spend, and how much you leave over for retirement. After that, it's where you invest your retirement money. Only after that will the ups and downs of your house value have an impact. Even then, for the vast majority, that impact is mainly about the economics of buying versus the cost of renting all your life. Most of us will die with a house and never spend it.

DervProf

HAMISH_MCTAVISH wrote: »

Well given the huge housing shor.........

.......sed when markets become broken and dysfunctional.

I actually agree with many of the things that Hamish just typed.

However.

I get the feeling, based on past experience, that if and when lending is increased, and more properties are changing hands, and prices are rising again, the number of new properties being built will not be enough to meet the demand caused by increased purchasing of property for investment purposes. We'll get back into the viscious circle of HPI and increased loosening of credit. Some of our banks left themselves very vulnerable to financial problems elsewhere in the world, because they needed ever increasing supplies of funds to maintain our "booming" property market.

I think it's a dangerous game to play - intervening in the property market when it's struggling, but "letting go" when things seem to doing OK. The Americans really let things go, and we are now witnessing the consequences.

HAMISH_MCTAVISH

DervProf wrote: »

The Americans really let things go, and we are now witnessing the consequences.

Indeed.

But you don't think it's possible to find a happy medium?

Somewhere between the current absurdly draconian mortgage rationing in the UK where people with good jobs, above average credit scores and historically normal deposits are routinely denied mortgages.....

And the American situation where people with no jobs, no deposit, no money, no assets and the worst credit imaginable were handed half million dollar mortgages on 1% teaser rates that were guaranteed to default when they reset to 5% within 2 years....

Seriously?

You think it's beyond the ability of man to design and implement a system that is not one extreme or the other?

shortchanged_2

o

HAMISH_MCTAVISH wrote: »

Indeed.

But you don't think it's possible to find a happy medium?

Somewhere between the current absurdly draconian mortgage rationing in the UK where people with good jobs, above average credit scores and historically normal deposits are routinely denied mortgages.....

And the American situation where people with no jobs, no deposit, no money, no assets and the worst credit imaginable were handed half million dollar mortgages on 1% teaser rates that were guaranteed to default when they reset to 5% within 2 years....

Seriously?

You think it's beyond the ability of man to design and implement a system that is not one extreme or the other?

Maybe Hamish. But to get a fairer system in the long term some people have to feel to pain from the point we are at now.

It's either FTB's who are expected to take on huge loans at the bottom of the pyramid scheme or the people who lose out from buying during the boom prices.

As I've said before there will always be losers somewhere but I feel for the greater long term good for the UK housing market house prices need to correct at a lower level, yes this means many people in negative equity but as you know that is not the end of the world.

From this lower point of correction and with a controlled market with sensible lending then there is no reason why the UK can't then maintain a healthy level of HPI more in line with wage inflation instead of this continual boom and bust cycle we always seem to have.

Graham_Devon

shortchanged wrote: »

o

Maybe Hamish. But to get a fairer system in the long term some people have to feel to pain from the point we are at now.

It's either FTB's who are expected to take on huge loans at the bottom of the pyramid scheme or the people who lose out from buying during the boom prices.

As I've said before there will always be losers somewhere but I feel for the greater long term good for the UK housing market house prices need to correct at a lower level, yes this means many people in negative equity but as you know that is not the end of the world.

From this lower point of correction and with a controlled market with sensible lending then there is no reason why the UK can't then maintain a healthy level of HPI more in line with wage inflation instead of this continual boom and bust cycle we always seem to have.

I read a good comment on an article.

Basically Hamish is one of those who is desperate to see others hoover up the crumbs from the table....the crumbs he would reject.

If we can pass a few crumbs and educate people that these crumbs represent an opportunity, or good deal, we can keep the whole scheme going. When people reject the crumbs, those gorging themselves on the main course are left with their pants down.

Hence why all this newbuy, funding for lending etc is around. It's passing the crumbs as without those crumbs it all falls down.

DervProf

HAMISH_MCTAVISH wrote: »

Indeed.

But you don't think it's possible to find a happy medium?

You think it's beyond the ability of man to design and implement a system that is not one extreme or the other?

Looking at recent events, I think it will be difficult to avoid the extremes. Once HPI kicks in, it's quite a barrage of "more good news for homeowners/the property market - prices increased 2% last month". Politicians, vested interests etc are not likely to "put the brakes on" when they know their voters are being told how much wealthier they are getting because of HPI.

I repeat something I heard Tony Blair say at a public meeting in the East of England a few years ago (I'm paraphrasing here).....

"And look what New Labour have done for your local area. In 1997, the average house price around here was £25K, it's now closer to £100K".

He obviously thought this was an entirely positive thing, and was fishing for votes.

HAMISH_MCTAVISH

shortchanged wrote: »

Maybe Hamish. But to get a fairer system in the long term some people have to feel to pain from the point we are at now.

It's either FTB's who are expected to take on huge loans at the bottom of the pyramid scheme or the people who lose out from buying during the boom prices.

Again you're presenting a false choice, based on false assumptions.

The housing market has nothing to do with fairness..... It's just a market, like any other, where supply and demand set prices.

And the lifetime housing costs of those stuck in rented, enriching their landlords, are rapidly growing anyway. Removing any so-called benefit from lower prices.

Nor indeed does it even remotely resemble a pyramid, more like a pipeline with areas of higher and lower pressure, but we'll leave that for another thread.

As I've said before there will always be losers somewhere but I feel for the greater long term good for the UK housing market house prices need to correct at a lower level, yes this means many people in negative equity but as you know that is not the end of the world.

Well the biggest losers today by far are the FTB-s frozen out of the market thanks to mortgage rationing. While rents soar and their lifetime housing costs steadily increase.

Prices aren't falling, because of the housing shortage, and even despite mortgage rationing and the recession remain at 90% or so of peak levels.

Houses aren't being built because builders won't build what they can't sell, and few people can get mortgages to buy them. Even though rent is now more expensive than a mortgage in 90% of the UK.

And the housing shortage worsens by the day, ensuring the next boom will be even bigger.

From this lower point of correction and with a controlled market with sensible lending then there is no reason why the UK can't then maintain a healthy level of HPI more in line with wage inflation instead of this continual boom and bust cycle we always seem to have.

Just, no.

You're already locking in the next boom, thanks to all the restricted lending now.

Graham_Devon

HAMISH_MCTAVISH wrote: »

The housing market has nothing to do with fairness..... It's just a market, like any other, where supply and demand set prices.

Then stop banging on about rationing!!!!

Stop suggesting lenders should have lending targets with fines imposed if they don't reach them!!!!