George Osborne is reinflating house prices - and we couldn't be happier

alleycat`

ILW wrote: »

I spent a good few years in the early 90s in negative equity. Wasn't too terrible, just kept paying the mortgage and living in the place.

That's fine and a pretty solid way to deal with it but it does appear to have some impact.

It freezes a person to an area.
You are now effectively tied up which means you are not mobile in a "labour market" scenario.

Again i don't know if that is a problem or not, just a curiosity, if you do that on a large scale what the fall out would be.

WestonDave

High house price inflation isn't a good thing - stability verging on the side of slight increase is. If we are to build more housing stock, its going to have to be via borrowed money - no-one is going to lend money against a significantly depreciating asset however much those in rental at the moment want a cheap house to buy. So if house building or deflation pushes house prices down too far in relative terms, bank balance sheets will be stuffed and lending will dry up - buying a £200k house on a 10% deposit in static or slightly rising prices means finding £20k - if prices decline 10% banks will want that 10% margin plus their original safety net so deposits might be nearer 20%. 20% of £180k is now £36k to find as a deposit (very much simplified numbers).

There isn't a short term solution to the housing shortage although there is a short term option that could make things worse! The right long term solution to a problem which has built up over a long term is to build houses at a rate where prices can be maintained at least in line with loan balances secured against them. The very best hope for those wanting cheaper housing is that prices fall at the rate people can/will pay off their borrowings against them - but arguably if that happens its likely people won't "invest" and will wait, causing building to stall again as in 2008.

Trouble is politicians still seem to think that as house prices rise they release money via MEWing which causes an illusion of growth which will hopefully hang around long enough to make it look as though they were competantly managing the economy long enough for them to get that highly paid city job!

Thrugelmir

TruckerT wrote: »

I don't think anyone wants to drive house prices down - they just don't understand why there is still a body of opinion that escalating prices upwards is a good way to go.

TruckerT

Only opinion not fact. The key priority at the moment is stability for the banks. House prices are a secondary issue. That more recent tougher underwriting criteria on the part of lenders is slowly but surely turning the situation around. Will take 20 years to turn round the consumer debt binge of 2003-2008.

TruckerT

Thrugelmir wrote: »

Only opinion not fact. The key priority at the moment is stability for the banks. House prices are a secondary issue. That more recent tougher underwriting criteria on the part of lenders is slowly but surely turning the situation around. Will take 20 years to turn round the consumer debt binge of 2003-2008.

The tougher underwriting was the belated panic measure which stalled the stupid escalation in house prices.

It now serves to prevent further escalation, but the mortgage subsidies which the government is offering seem to be a direct challenge to common sense.

TruckerT

HAMISH_MCTAVISH

ruggedtoast wrote: »

I mean other people. Normal people.

My cousin is quite normal, thanks.

Went to a comprehensive and saved up his 5% deposit.

And is nearly three quarters of the way through his mortgage despite being only 36.

Don't think it's his fault that the banks now require 25% from most FTB-s, and this above all else is the biggest impediment to buying.

HAMISH_MCTAVISH

TruckerT wrote: »

The tougher underwriting was the belated panic measure which stalled the stupid escalation in house prices.

No.

The "tougher underwriting" is the means through which banks ration the limited pool of funding.

By denying historically normal, prudent, and sensible mortgage terms to most potential borrowers, they can shrink the pool of applicants until it matches the much smaller pool of available funds.

It now serves to prevent further escalation,

But only by excluding most potential buyers from the market, forcing them into rented, driving up rents to record highs, and making them enrich their landlords instead.

And lets face it, you'd have to be a complete idiot to think that was a good idea.

How do you think that conversation would have gone with a couple of youngsters....

Steve - "House prices are too expensive, a few of us can't afford to buy"

Johnny - "I know, lets make sure millions more people won't be able to buy through restricting mortgage lending."

Steve- "Eh?...."

Percy1983

HAMISH_MCTAVISH wrote: »

My cousin is quite normal, thanks.

Went to a comprehensive and saved up his 5% deposit.

And is nearly three quarters of the way through his mortgage despite being only 36.

Don't think it's his fault that the banks now require 25% from most FTB-s, and this above all else is the biggest impediment to buying.

or 10% to those with normal credit files?

HAMISH_MCTAVISH

Percy1983 wrote: »

or 10% to those with normal credit files?

Most people with normal credit files cannot get a 10% mortgage.

Up to 90% of such applications are denied, and only 2% of mortgages issued were for 10% deposits last year, versus around 10% in normal times.

That a very few lucky people with 'normal files' can get them, does not mean that everyone with a 'normal file' can.

TruckerT

HAMISH_MCTAVISH wrote: »

No.

The "tougher underwriting" is the means through which banks ration the limited pool of funding.

By denying historically normal, prudent, and sensible mortgage terms to most potential borrowers, they can shrink the pool of applicants until it matches the much smaller pool of available funds.



But only by excluding most potential buyers from the market, forcing them into rented, driving up rents to record highs, and making them enrich their landlords instead.

And lets face it, you'd have to be a complete idiot to think that was a good idea.

How do you think that conversation would have gone with a couple of youngsters....

Steve - "House prices are too expensive, a few of us can't afford to buy"

Johnny - "I know, lets make sure millions more people won't be able to buy through restricting mortgage lending."

Steve- "Eh?...."

Your post appears to confirm that it is the banks which control house prices - just as they artificially inflated them prior to 2007/8, they are now artificially depressing them.

Many youngsters are very happy to be excluded from the property ladder - they continue to be fed and housed by their parents whilst claiming that they need their wages to go clubbing etc...

TruckerT

Percy1983

HAMISH_MCTAVISH wrote: »

Most people with normal credit files cannot get a 10% mortgage.

Up to 90% of such applications are denied, and only 2% of mortgages issued were for 10% deposits last year, versus around 10% in normal times.

That a very few lucky people with 'normal files' can get them, does not mean that everyone with a 'normal file' can.

Did all 90% have decent credit files? or where the less financially savvy just giving it a go at 10%? as in of course they is more rejection at the lower entry points as more people will try entry?