Are house price rampers and investors........

ukcarper

Graham_Devon wrote: »

Yes, which means a load more people will be able to meet the affordability criteria overnight come 1st Jan 2014.....

Seems you disagree?

Of course it was one of the things preventing people buying. On a very basic level, if you don't have the money you can't buy the goods. It wasn't the only thing stopping people though, the higher prices go and the smaller the deposit, the higher the monthly payments are.

But if strict lending criteria is used you can only borrow what you can afford so if prices go higher you won't be able to buy.

In fact if the loan is restricted to say 4x earnings the price you can afford to pay will be reduced as the size of deposit reduces.

Graham_Devon

ukcarper wrote: »

But if strict lending criteria is used you can only borrow what you can afford so if prices go higher you won't be able to buy.

Yes, I understand that.

But as I was saying, you are not looking at the effects of the scheme coming into place.

I dunno how to explain this any other way really, but if you have 1,000 people and 800 of them cannot afford the deposit of 10,000. That means that only 200 people can buy the product.

However, if suddenly, overnight the deposit drops to 5,000 many of those 800 people WILL now be able to purchase the prodcut. £10,000 may have alienated them, but £5,000 may be do-able for many of them.

So lets say that 350 can now buy, leaving 650 still priced out. Some of those 650 will always be priced out. Maybe they can afford the deposit, but not the repayments. Maybe they can't afford the deposit.

But overnight, you have nearly double the amount of people who can afford the product. However the supply of the product has not increased.

That is, in essence, what is going to happen in 2014. You will still have those who cannot meet the affordability criteria of the 95% LTV mortgage as you quite rightly say.

BUT you will have created MANY more that CAN met it.

The effect of the scheme overnight will be to create a surge in demand. Hence why there are many reports that people (especially BTL) are buying NOW to cash in on the surge of demand in 2014 and the equivalent price rises that brings.

For investors, theres no point in waiting until 2014, you need to get in now, which is what's happening and pushing prices up now.

John1993_2

shortchanged wrote: »

hoping that unemployment in the UK remains high for many years?

I'm the second of the things that you said, and no, I don't hope this.

I bought as I decided that I preferred to own my own place after a few years renting, and I felt that house prices were likely to I crease quite rapidly. I'd actually prefer to see a crash in prices, as I could swap my Docklands flat for an entire warehouse if properties half in value.

ukcarper

Graham_Devon wrote: »

Yes, I understand that.

But as I was saying, you are not looking at the effects of the scheme coming into place.

I dunno how to explain this any other way really, but if you have 1,000 people and 800 of them cannot afford the deposit of 10,000. That means that only 200 people can buy the product.

However, if suddenly, overnight the deposit drops to 5,000 many of those 800 people WILL now be able to purchase the prodcut. £10,000 may have alienated them, but £5,000 may be do-able for many of them.

So lets say that 350 can now buy, leaving 650 still priced out. Some of those 650 will always be priced out. Maybe they can afford the deposit, but not the repayments. Maybe they can't afford the deposit.

But overnight, you have nearly double the amount of people who can afford the product. However the supply of the product has not increased.

That is, in essence, what is going to happen in 2014. You will still have those who cannot meet the affordability criteria of the 95% LTV mortgage as you quite rightly say.

BUT you will have created MANY more that CAN met it.

The effect of the scheme overnight will be to create a surge in demand. Hence why there are many reports that people (especially BTL) are buying NOW to cash in on the surge of demand in 2014 and the equivalent price rises that brings.

For investors, theres no point in waiting until 2014, you need to get in now, which is what's happening and pushing prices up now.

I understand that but what you are saying is people who could easily pay a mortgage are forced to rent. These are the same people that you say find it impossible to save.

Thrugelmir

Graham_Devon wrote: »

BUT you will have created MANY more that CAN met it.

Also have have to meet the very stringent criteria for obtaining a mortgage. Affordability is one part of the application.

Lenders aren't going to take undue risk with what is effectively a 95% mortgage.

OffGridLiving

shortchanged wrote: »

Just asking those difficult questions many shy away from.

It's just a thinly disguised attempt by shortchanged to have the same "What will happen to home owners when interest rates rise" discussion all over again. He'll receive the exact same answers as he did in his 10 other "what will happen when interest rates rise" threads, ignore them and then start the whole conversation off again in a new thread.

Shortchanged is stuck in a ground-hog day loop because this is the only bear meme that he has left. All the other HPC triggers are slowly disappearing as the global economy recovers and he's clinging to the hope of a housing crash on the back of rate rises like a drowning man clings to a life raft.

What is interesting is that he and Graham can't make the logical connection between their assertion that 'the government will do everything to try and re-inflate the housing bubble' and the idea that the same government will allow rates to rise in a sufficiently reckless manner to cause a housing crash.

Does...not...compute, but then logic has never been one of Graham and smallchange's strong points.

Thrugelmir

OffGridLiving wrote: »

All the other HPC triggers are slowly disappearing as the global economy recovers

While the UK is stuck in the mud........

OffGridLiving

Thrugelmir wrote: »

While the UK is stuck in the mud........

Every silver lining has a cloud, eh Thrug?

However, for the purposes of this discussion, if the UK stays stuck in the mud then interest rates won't rise and so the point is moot.