Pensions to be used for mortgage guarantees?

Generali

michaels wrote: »

So is the amount available for mortgage lending capped or is it not the case that banks could expand their balance sheets if the lending was within the basle 3 low risk category?

The banks can't expand their balance sheets while also building their reserves, the two things are mutually exclusive.

Longer term, the problem is going to be that banks will find it hard to attract funds from investors to fund lending as the higher reserve requirements will make the ROE for banks lower than for companies like utilities.

HAMISH_MCTAVISH

shortchanged wrote: »

Because you see property as an investment and therefore need prices to rise. Does that answer your question?

Not really.

Prices could remain the same, or even fall, and I could still do well from property. My holding costs are circa 2.5%, and the imputed yield is circa 7%. Prices up here would need to have fallen over 20% in the last 5 and a half years for renting to have made more sense for me, and instead they've risen 6%.

And you still have to explain why I would be "financially shafted" if prices don't rise.

homelessskilledworker

shortchanged wrote: »

Well I have asked you the question Hamish. Why do you feel the need to ramp up property prices?

What are your reasons for seeing HPI as beneficial to the country?

The sooner people find "the next big thing" the better. Property has now gone 6 to 8 years(depending on who you believe) without rising in nominal terms, closer to 10 in real.
As soon as the next tulip, tech, or South sea bubble comes along and the get rich investors bog off to somewhere where they can do less harm the better.

And for the record if anyone wants to plough their life and soul and all their money into housing as a lifestyle choice, then I fully get it, and those that plough money into property with the emphasis on investment then I could not give a monkey if they lose their shirt.

HAMISH_MCTAVISH

shortchanged wrote: »

Why do you feel the need to ramp up property prices?

I don't.

If I wanted to do that, then a hidden board with no more than a few dozen regular readers would be about the last place you'd pick....

What are your reasons for seeing HPI as beneficial to the country?

Can I suggest you read my previous few thousand posts on the topic, and then come back with any questions....

purch

FWIW from conversations I have had recently, it appears most lenders are "uncomfortable" with schemes where the Government (or other body) provides part or all of the deposit on a property.

FirstBuy, HomeBuy or whatever have not been a huge success, and often mortgages have been difficult (even more than normal mortgages) to obtain.

I cannot see them being over eager to lend in positions where 3rd persons pensions are being offered as a form of security.

Now all they have to do is stop being so incompetent and launch a scheme that will actually work

Yes, they clearly appear to have little understanding of how mortgage lending ( or any other sort of lending ) works in practice.

As Gen noted, expecting Banks to rebuild and reinforce their balance sheets whilst expanding their lending books is rather silly.

Loughton_Monkey

shortchanged wrote: »

Don't you think too much of the nations income is sucked up by housing costs?....

No.

I'm assuming that you mean "People's Income" because nations don't really have an income do they?

Many of us will remember the extremely high interest rates in the 80's/90's, which sucked in up to 50% of earnings for a lot of people.

Housing costs consist of a very complex mix of things:

Cost of land
Cost of building
Physical price of houses
Cost of borrowing money
Cost of mortgage/rent defaults
ROI required by landlords
Cost of Housing Benefit to taxpayers
......

Then there are 'soft' factors to take into account, like the 'quality' of housing considered 'adequate'. It is well known that FTB's these days would rather (e.g.) delay to get a 3-bed rather than get a 2-bed now.

An absolutely huge proportion of houseowners have owned a long time. All of these people were paying 7% to 9% from 1995 to 2007. Now they are paying 4.5% tops. None of these people would agree with you.

A couple on £50K who buy a £200K house with 25% deposit, will pay £6,750 on Interest, and 'lose' £1,500 on deposit interest on their £50K deposit. That's £8,250, or 16.5% of gross income.

That's extremely modest.

So please try to understand that the only 'problem' today is that the demographic group that includes wannaby FTB's have never saved. They are struggling to find their £50K deposit. Although mortgages are tighter to get, if you have 25% deposit you will get one.

Reducing house prices would have virtually no effect.

moneyinmypocket

Sounds awful idea to me, I would never want to put my parents or grandparents in that situation - people should buy a house on there own 2 feet - in an ideal world prices would be linked to wages and everyone would be happy problem is house prices where allowed to run away and the market is now what a person will pay - just because person a cant afford it doesn't mean person b can't

chewmylegoff

HAMISH_MCTAVISH wrote: »

Well that would solve the problem.

And it's not entirely unheard of in modern western societies...

The Aussie grant was what I had in mind. The Tories can't really do it though as they are ideologically tied to deficit reduction, and they'd need to find something like £2 billion a year to finance this I should think.

HAMISH_MCTAVISH

chewmylegoff wrote: »

The Tories can't really do it though as they are ideologically tied to deficit reduction, .

And therein lies the problem.

HAMISH_MCTAVISH

Clegg said....

'I can announce today that the Government is going to do something that hasn't happened before: we are going to work out ways in which parents and grandparents who want to help their children and grandchildren buy a property of their own, we are going to allow those parents and grandparents to act as a guarantee if you like so their youngsters...can take out a deposit and buy a home.

‘It’s a pension-for-property scheme, and that’s yet another example of the way in which we’re getting people who don't have a great deal of disposable income, but do have a pension pot, to use that for the good purposes of helping their children and grandchildren buy a home that they can call their own.’