Guardian: 95% Mortgages "not a source of risk"

Graham_Devon

HAMISH_MCTAVISH wrote: »

Better yet, increase funding to everybody.

You can't fix a housing shortage by restricting credit.

As we've seen only too well, and as this article points out clearly.

You can't magic up money either.

The funds are not there to lend loosely to everyone. Were back to you wanting 2007 all over again....yet again.

If you care so much for FTB's (which we all know you don't, but I'll humor you for a while) wouldn't you prefer BTL funding reigned in and that funding directed at FTB's instead?

HAMISH_MCTAVISH

Graham_Devon wrote: »

You can't magic up money either.

Oh you most certainly can.

America has done exactly that, with unlimited QE into mortgages.

lend loosely to everyone.

That is not required.

A return to sensible, historically normal, and prudent lending, where a 5% to 10% deposit, a reasonably stable job, and an average or better credit score will get you a mortgage at non-punitive margins above bank funding costs is required though.

And when that happens we'll be issuing well over 150,000 mortgages a month instead of sub 50K as we are today.

If you care so much for FTB's (which we all know you don't, but I'll humor you for a while) wouldn't you prefer BTL funding reigned in and that funding directed at FTB's instead?

I care about everyone equally.

We need more housing. The only solution to that is more lending.

We should lend as much as is required to enable all the FTB-s that want to buy, and all the BTL landlords that want to buy, and all the existing homeowners that want to sell/buy, to create enough demand that builders can build.

You can't fix a housing shortage by restricting credit.

As we have seen.

Graham_Devon

Ok, you can magic up money. But with that comes consequences.

Didn't think you'd be too happy about money flow being sent to FTB's and reigned in from BTL's.

Says it all Hamish, so please don't pretend you are somehow concerned about FTB's. As with all these conversations, it always ends up at the same point. You just want unlimited amounts of money sent into the housing market and screw the consequences.

HAMISH_MCTAVISH

Graham_Devon wrote: »

You just want unlimited amounts of money sent into the housing market and screw the consequences.

I want whatever amount of money sent into the housing market as is required to fulfil existing and projected housing need.

The consequences of that are.....

- Millions more will be able to buy than can today.

- Many more houses will be built.

- Fewer people will be forced to enrich their landlords.

Which is all immensely good for most of society, a few crashaholics excepted.

CLAPTON

Graham_Devon wrote: »

You can't magic up money either.

The funds are not there to lend loosely to everyone. Were back to you wanting 2007 all over again....yet again.

If you care so much for FTB's (which we all know you don't, but I'll humor you for a while) wouldn't you prefer BTL funding reigned in and that funding directed at FTB's instead?

If money is truely very very scarce, why aren't interest rates very very high?
There should be massive competition for that scarce resource unless there are other none monetary reasons.

the_flying_pig

HAMISH_MCTAVISH wrote: »

I rather suspect you'll find the distribution of income multiples is fairly tightly grouped in a bell curve around the average.

The vast majority of new mortgages will be within spitting distance of the average. A small and relatively insignificant minority will form the outer edge of the bell.

what!?!?!?!

in the early to mid noughties the average income multiple actually borrowed very quickly went up from about 2 or less historically to nearly 3 [e.g. see figure 4.3 of the FSA's mortgage market review]. that is a seismic change.

and of course this increase was due to the maximum allowed going up. this is just an inescapable fact.

imagine there are 4 households. the amount of money that they want to borrow follows something like a Bell curve, so:

household A wants to borrow 2 * income
households B & C want to borrow 3 * income
household D wants to borrow 4 * income.

let's say that the cap on borrowing is 2 * income. all 4 households will borrow 2 * income, even though B-D would like to borrow more. the average multiple borrowed will obviously be 2.

if the cap on borrowing leaps up to 4 * income then:

household A will borrow 2 * income
households B & C will borrow 3 * income
household D will borrow 4 times income.

the average borrowed is now 3 * income.

although hugely simplified the spirit of this is very close to what actually happened during the bubble.

of course there are complications, like cash buyers, single vs. joint incomes, 'keeping up with the joneses' [e.g. people in group A actually starting to borrow more than 2*, against their better judgement, because prices have got so high that if they borrow 2 * they'll barely be able to buy anything - i myself am in this group, albeit not with exactly the same numbers], but the spirit is certainly captured by this example.

the_flying_pig

HAMISH_MCTAVISH wrote: »

I want whatever amount of money sent into the housing market as is required to fulfil existing and projected housing need....

:D:D:D

good old H.

HAMISH_MCTAVISH

the_flying_pig wrote: »

if the cap on borrowing leaps up to 4 * income then:

household A will borrow 2 * income
households B & C will borrow 3 * income
household D will borrow 4 times income.

the average borrowed is now 3 * income.

although hugely simplified this is very close to what actually happened during the bubble.1

So then under your own explanation, 75% of households borrowed at or below the average.

As I say, tighten up LTV at higher LTI if you wish, and if it allows many more mortgages to be issued.

I have no objection.

dryhat

HAMISH_MCTAVISH wrote: »

I want whatever amount of money sent into the housing market as is required to fulfil existing and projected housing need.

What you are too silly to realise is that there is TOO MUCH money allocated to property already.

That is the problem.

The solution is lower prices not more paper to pay the high prices.

HAMISH_MCTAVISH

the_flying_pig wrote: »

good old h.

..........