Government repressing house prices.

MacMickster

So it seems that, despite the increased deposit requirement, and house prices remaining stagnant, first-time buyers are now buying more expensive properties, requiring even higher deposits.

Also, I would question the stated incomes. Surely most first-time buyers would have below-average incomes (as generally earnings potential increases with age until the mid 50s).

MacMickster

I see that shortchanged beat me to it, and made the point rather more eloquently.

HAMISH_MCTAVISH

Before the credit crunch, a typical FTB borrowed around 90% of the property’s value.

As a result, he or she often therefore paid a deposit of less than 40% of their annual income.

But since LTV ratios have tightened, many FTBs are now paying a deposit equivalent to a year’s income.

http://www.cml.org.uk/cml/publications/newsandviews/83/303

Clearly, this is the major cause of FTB numbers falling off a cliff.



Restricted lending has prevented a million FTB-s from buying, and this has kept prices down. So far...

But it can't last forever.

HAMISH_MCTAVISH

DervProf wrote: »

To be fair, those figures are surely based on real purchases by FTBs. It may well be that FTBs are paying more for their first properties.

Correct.

Mortgage rationing meant only wealthier FTB-s could afford to buy.

shortchanged_2

OK going by the figures that you presented from the jackanory CML report from the 2010 figures. If 10% deposits were available or the norm then FTB's would need to take over a 3.7 times mortgage to pay those prices.

Now my question to you Hamish.

Does that mean that houses are overpriced?

Conrad

HAMISH_MCTAVISH wrote: »

If the state really wanted to prop up prices, they'd fix that problem

This is an age old problem of generals being too removed from the trenches and thus not comprehending the issues on the ground.

Imagine for example high level FSA meetings with Ministers in attendance. None of those Ministers will be aware that perfectly good mortgage applicants are declined specifically because of the FSA's core TCF principles.
The FSA's output all gives a positive impression that good is being done.
There is no mechanism to identify the unfairness in the system.

I've discussed this with FSA staff and they are utterly unconcerned as they to are too far removed from the trenches to be able to comprehend the detriment caused. They have no remit to address the unfairness of casting millions into rented property.

Graham_Devon

HAMISH_MCTAVISH wrote: »

The average FTB deposit in 2007 was right around 10% Graham.

Switching to averages now?

You realise to get an average of 10%, many many people had to be borrowing 100%, 110%, 125% loans?

The average LTV is different to whether products are available or not.

Christ, why do you do this to yourself?

DervProf

HAMISH_MCTAVISH wrote: »

Correct.

Mortgage rationing meant only wealthier FTB-s could afford to buy.

So, lending more will mean less wealthy FTBs can afford to buy.

Problem solved ? Not really, but you'll see rising HPI, and let's face it Hamish, that's what YOU want (and you'll no doubt explain away the rising amounts of debt that FTBs will have to take on to "get on the ladder").

And as you haven't yet done so, I'll predict what will happen if 90% + LTVs were readily available again. Prices would soon rise to meet the lending conditions. Then there will be calls for higher LTVs. Who knows, 100% mortgages might soon be available. Where's the harm in that ?

HAMISH_MCTAVISH

shortchanged wrote: »

OK going by the figures that you presented from the jackanory CML report from the 2010 figures. If 10% deposits were available or the norm then FTB's would need to take over a 3.7 times mortgage to pay those prices.

No, because with smaller deposit requirements and less mortgage rationing, more FTB-s would be able to buy.

Including those at the lower end of the income spectrum who buy cheaper houses.

Therefore the average paid would also have fallen.

Unless you really think the average FTB house price rose markedly between 2007 and 2010? :rotfl:

Now my question to you Hamish.

Does that mean that houses are overpriced?

Obviously not.

HAMISH_MCTAVISH

DervProf wrote: »

So, lending more will mean less wealthy FTBs can afford to buy.

Well yes, that is blindingly obvious.

you'll see rising HPI,

Probably. At first.

But you'll also see vastly more houses being built.

Which should eventually limit HPI. And if it doesn't, affordability eventually will.

I'll predict what will happen if 90% + LTVs were readily available again. Prices would soon rise to meet the lending conditions.

What you are really describing there is the fact that vastly more people will be able to buy houses.

Prices may well then rise, but this will also attract more houses to be built to meet the increase in effective demand.

Then there will be calls for higher LTVs. Who knows, 100% mortgages might soon be available. Where's the harm in that ?

There is no harm in 100% mortgages, but the reality is we don't need them.

Remember, it wasn't UK mortgage lending which broke the British banks.

The UK banks lost £15 on overseas mortgages for every £1 they lost in the UK.;)