A surge in the market come jan 2014

JencParker

HAMISH_MCTAVISH wrote: »

It really doesn't work that way.

The cause of price rises is simple, it's when demand for property exceeds supply of property, so rising prices must then exclude a sufficient number of people from buying that demand and supply regain equilibrium.

Increasing the quantity of available credit will enable more people to buy, which is a good thing.

It will likely also increase prices from today's artificially lowered levels, but this is also a good thing as higher prices will then attract more people to sell, and cause more houses to be built, so supply of houses will increase as well.

It is not a coincidence that the number of people able to buy, now that prices are lower and interest rates are also lower, is only half what it was in 2007.

Well, it has in the past! What is so different this time around. When people taking out mortgages on two salaries, rather than the one and a half that had been allowed before - prices shot up. When banks started lending more than x 3 of the main salary - house prices kept going up. At one time more than the average salary - people could save a whole salary and still not keep up with the rise in prices.

House prices remain artificially low thanks to mortgage rationing,

Are you kidding - you seriously think house prices are artificially low! They may be in Scotland, but that doesn't apply to London

lessonlearned

JencParker wrote: »

Are you kidding - you seriously think house prices are artificially low! They may be in Scotland, but that doesn't apply to London

London, was, is and always will be, a law unto itself and is in no way representative of the country at large.

It is a premier league city with premier league prices. Wave after wave of foreign investment will ensure that it stays that way.

Property will always be in high demand, price per square foot in prime locations will always be sky high - just like New York.

World class cities command world class prices.

HAMISH_MCTAVISH

JencParker wrote: »

Well, it has in the past! What is so different this time around. When people taking out mortgages on two salaries, rather than the one and a half that had been allowed before - prices shot up. When banks started lending more than x 3 of the main salary - house prices kept going up. At one time more than the average salary - people could save a whole salary and still not keep up with the rise in prices.

You're completely confusing cause and effect there.

-The housing shortage caused prices to rise.

-Rising prices caused people to take on more debt.

Or as is explained clearly in this BBC article.....

It's true that house prices and debt levels went up, but his research suggests the causation runs from prices to debt, not the other way round.

Here's the argument: first you had a structural fall in the real interest rate, long before quantitative easing. This, alongside very limited new supply of housing, pushed up UK house prices, because it made it easier to make money renting property, and made it easier to service a higher level of debt.

Those higher prices (and lower interest rates), in turn, led households to need - and obtain - higher mortgages, to go with the higher price of a house. But, as I said before, the rising value of houses meant that overall, the household sector was getting better off.

Here's another interesting fact: the median loan-to-value ratio on a new mortgage didn't go up during the "boom" years - in fact, for most of the 1990s and noughties it was falling.

That's consistent with the idea that rising house prices caused bigger mortgages - not the other way around.

http://www.bbc.co.uk/news/business-17398014

lessonlearned

ILW wrote: »

I know at least 5 people that got self cert loans of well over 5 times income 10 years ago.

As a matter of interest have any of them defaulted.

My husband and I had a self certificated mortgage.

Reason?? We were both self employed running our own companies. His work was an IT contractor, mine as a freelance EA/Property Finder.

At the time many mainstream lenders would not lend to workers on short term contractors or the self employed.

A friend of mine is a builder/developer/landlord. Most of his loans were self cert on dozens of properties, both residential and commercial.

Neither he nor my husband and I, nor any of my husband's self employed IT comrades, have defaulted on our mortgages or loans.

Self-certification mortgages were not dished out like sweeties to the "bottom end of the market". At least not in the UK. America, of course, was a different story.

Glastoun

HAMISH_MCTAVISH wrote: »

The total number of people able to get a mortgage at 90% or greater is only a few hundred a month, no matter how good their credit or how little they want to borrow, between all the banks combined.

...

However up to 90% of applicants with a clean credit history, a job, and a 10% deposit are refused for mortgages.

Or rather, they are refused for the mortgage they applied for, but offered an inferior product at higher rates or deposit levels.

Do you have references for these stats?

This article shows there were 53,000 mortgages for homebuyers in March, and 30,000 remortgages - I'd find it hard to believe that only a few hundred of these were granted at 90% LTV.

http://www.guardian.co.uk/money/2013/apr/30/mortgage-approvals-rise-bank-of-england

ILW

lessonlearned wrote: »

As a matter of interest have any of them defaulted.

My husband and I had a self certificated mortgage.

Reason?? We were both self employed running our own companies. His work was an IT contractor, mine as a freelance EA/Property Finder.

At the time many mainstream lenders would not lend to workers on short term contractors or the self employed.

A friend of mine is a builder/developer/landlord. Most of his loans were self cert on dozens of properties, both residential and commercial.

Neither he nor my husband and I, nor any of my husband's self employed IT comrades, have defaulted on our mortgages or loans.

Self-certification mortgages were not dished out like sweeties to the "bottom end of the market". At least not in the UK. America, of course, was a different story.

No, but these were multiple purchase speculative deals.and they timed it right.

JencParker

As a matter of interest have any of them defaulted.

It's irrelevant whether they defaulted or not - they allowed a higher spending power which fuelled house prices. Had people been limited to x3 times income, they would not have been able to afford property so the prices would have stabilised, but throwing more credit at people enabled them to pay more.

JencParker

lessonlearned wrote: »

London, was, is and always will be, a law unto itself and is in no way representative of the country at large.

It is a premier league city with premier league prices. Wave after wave of foreign investment will ensure that it stays that way.

Property will always be in high demand, price per square foot in prime locations will always be sky high - just like New York.

World class cities command world class prices.

I don't disagree that it has always been more expensive, however, having come to live in London in the late 70's it was still perfectly possible to find affordable accommodation and buy property. It is no longer possible for the average person.

JencParker

You're completely confusing cause and effect there.

-The housing
shortage caused prices to rise.

-Rising prices caused people to
take on more debt

Not confusing anything. If that hadn't been able to take out more debt they wouldn't have been able to buy at inflated prices.

ukcarper

JencParker wrote: »

I don't disagree that it has always been more expensive, however, having come to live in London in the late 70's it was still perfectly possible to find affordable accommodation and buy property. It is no longer possible for the average person.

I suppose that depends on what you call affordable in the late 70s prices had fallen they were not so affordable in the early 70s.