A surge in the market come jan 2014

lessonlearned

JencParker wrote: »

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.

I was not arguing about whether or not self cert mortgages were the cause of the runaway house price rises of the last housing boom.

Frankly I don't believe for one moment that they did. It is far too simplistic to argue that this is the case. There were a number of very complex factors at work which underpinned the last boom.

I think it is nearer the mark to say that self certs were a symptom of the boom and not a root cause. They were also a reflection of what was happening in the job market, with the swing from permanent staffing to short term contract work.

Self certs were popular because lenders were refusing to lend to anyone who was not in permanent employment. They would not lend to contract workers, who by the very nature of their jobs had variable income.

IT contractors could easily earn £500 per day and then be out of work for a couple of months between contracts. Most self employed people can never guarantee that they will be working 5 full days a week, 48 weeks a year.

Self certs were the answer. Most people who took out self certs were very cautious about their ability to service the mortgage and and therefore tended to borrow fairly conservatively.

I know all of this, not through guesswork, but because I was actively engaged in selling properties up until late 2006 and knew exactly what my clients were borrowing, their income levels etc.

I merely asked the question "how many had defaulted on their self cert loans" out of curiosity. Although I have know at least 100 or so people have self cert loans I have not known any of them to default.

I have, however, known dozens of people default on traditional loans. In a previous incarnation I worked in the arrears department of a traditional building society so have first hand experience of people losing their homes through mortgage defaults.

My argument was simply that the criticism levelled at what many people disparagingly called "liar loans" was largely unwarranted, because of the low levels of default compared with more traditional lending.

Obviously this was not the case in America, where "liar loans" were unsustainable because the loans on offer were designed to be very low cost for the first couple of years, with higher interest rates kicking in further along the line.

They were deliberately targeted at blue collar workers of limited means and whose jobs were often transient. This tended not to happen in the UK where the target market were young professionals and the self employed.

Self certs were generally more sustainable in the UK.

joujou

Holy Moly... We've seen about the worst financial disaster in most people's lives, with millions of jobs lost and a double dip recession and what not, all on the back of subprime mortgages, and an overheating house market...

And people still advocate that those were the best days!!

The government has no business shoring up the housing market artificially like this. Help to buy is the next bubble that will burst. Once the 5 year grace period ends and the loan interests start to kick in a lot of people will be in for a nasty surprise...

Except that the government will be compelled to act and extend the interest free loans, at the back of everyone else...

That's right, WAKE UP - IT'S THE TAXPAYER WHO IS PAYING FOR THESE LOAN GUARANTEES, that's right, you, me and everyone else are guaranteeing these loans so a lot of people who like to speculate in houses see their property values artificially rise...

It's like we never learn... All a result of college boys running the treasury...

Thrugelmir

lessonlearned wrote: »

The banks' refusal to lend has been a fiasco, driving businesses to the wall and freezing the housing market.

This govt backed guarantee scheme may well have its flaws but it's high time govts did intervene.

Banks have to start lending again.

Times have changed. The credit boom 1995-2007 is over. That's the reality.

Government schemes are merely part of the adjustment process.

geoffky

This thread is so 2007..I saw the exact same arguments...Then the rampers disappeared from here and have not returned because they know they where so wrong..
Ask Hamish about how much he panicked?

brit1234

At the end of the day wages haven't risen for years and inflation has technically reduced them. Qe, funding for lending, 0.5% interest rates won't last for ever and with the bond crisis now taking off rates are likely yo start go up sooner than thought.

What we have now is a fools bounce in housing and people are going to get burnt.

ukcarper

brit1234 wrote: »

At the end of the day wages haven't risen for years and inflation has technically reduced them. Qe, funding for lending, 0.5% interest rates won't last for ever and with the bond crisis now taking off rates are likely yo start go up sooner than thought.

What we have now is a fools bounce in housing and people are going to get burnt.

Still not changed your sig and what happened to 50% fall you were predicting.

gazzabboi

joujou wrote: »

Holy Moly... We've seen about the worst financial disaster in most people's lives, with millions of jobs lost and a double dip recession and what not, all on the back of subprime mortgages, and an overheating house market...

And people still advocate that those were the best days!!

The government has no business shoring up the housing market artificially like this. Help to buy is the next bubble that will burst. Once the 5 year grace period ends and the loan interests start to kick in a lot of people will be in for a nasty surprise...

Except that the government will be compelled to act and extend the interest free loans, at the back of everyone else...

That's right, WAKE UP - IT'S THE TAXPAYER WHO IS PAYING FOR THESE LOAN GUARANTEES, that's right, you, me and everyone else are guaranteeing these loans so a lot of people who like to speculate in houses see their property values artificially rise...

It's like we never learn... All a result of college boys running the treasury...

Most perople are expecting to remortgage to clear the loan, or not max out their mortgage so they can save up to pay off the loan. House prices WILL rise, they have been flat for the last few years. Look at housing trends, then draw a line to show the average positive correlation, the current prices are below that line. Population increases are going to increase demand. Help to buy will help slightly. There are too many factors to suggest a price increase. Just go to the average new build builders, they have nothing left and are all selling at close to full asking.

grifferz

brit1234 wrote: »

0.5% interest rates won't last for ever and with the bond crisis now taking off rates are likely yo start go up sooner than thought.

What are your predictions for Bank of England base rate in June 2015 then?

AFAIK BoE doesn't intend for it to go above 1% for 5 years.

geoffky

grifferz wrote: »

What are your predictions for Bank of England base rate in June 2015 then?

AFAIK BoE doesn't intend for it to go above 1% for 5 years.

What it intends and what happens are two different matters,
"Events" my friend "events"...

yorkshire_terrier_owner

I have seen this issue debated time and time again. The long and short of it that nobody really knows what will happen to house prices, next week, next year, next decade. You only have to look at the vastly conflicting reports almost daily from various market analysts to see that the only real answer to the question will a surge in the market come in Jan 13 is:

Who knows? Maybe, maybe not.

Unfortunately my crystal ball recently failed its MOT so can't help any further!