Two banks to offer interest only mortgages again

wotsthat

Graham_Devon wrote: »

Dubbed "low start" deals, Yorkshire and Clydesdale Bank are releasing an interest only mortgage

Don't worry, someone told me people aren't buying houses because they're simply too expensive.

If that's the case these loans will be shunned.

HAMISH_MCTAVISH

Graham_Devon wrote: »

What could possibly go wrong?

As UK mortgage lending did not cause the financial crisis, then the answer is "not very much".

Graham_Devon

To be fair, I wasn't really suggesting it would start a global financial crisis.

?????

HAMISH_MCTAVISH

CLAPTON wrote: »

the problem here is with supply of new houses

True.

if this additional money simply chases the existing stock then there will be a significant increase in house prices

Also true.

At first.... Until supply responds to price signals.

with little overall benefit to either individuals or the economy

False.

Rising prices are a jolly good thing for most individuals and the wider economy, and will also ultimately result in an increase in supply, meaning more people can buy and the housing crisis stops worsening.

HAMISH_MCTAVISH

Graham_Devon wrote: »

To be fair, I wasn't really suggesting it would start a global financial crisis.

It won't start a British financial crisis either.

Graham_Devon

HAMISH_MCTAVISH wrote: »

It won't start a British financial crisis either.

Dont think I was suggesting that either.

Look at the problems of interest rate only mortgages today (I realise you don't see any problems whatsoever, so this is a rather mute point) and that's what I meant. Especially considering this is being done at a time of such low base rates, houses are rapidly approaching 5x income again on the charts etc etc.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Dont think I was suggesting that either.

Oh good.

So no Global crisis, no British crisis....

Large G&T's all around. :beer:

Look at the problems of interest rate only mortgages today (I realise you don't see any problems whatsoever, so this is a rather mute point) and that's what I meant.

OK, lets look at the problems.

Far cheaper to rent from a bank for 25 years on an I/O mortgage than to rent from a landlord for 25 years.

At the end of 25 years renting from landlords you've bought them a house, AND paid for all the maintenance and other costs, AND put a significant wad of cash in their pockets.

Whereas with the bank you've paid far less than market rents, more than covered the costs of maintenance, etc, AND had some capital gains as inflation eats away the debt.

It's really a no brainer.

Buying on a repayment mortgage is better than buyng I/O, but buying I/O is miles better than renting.

Especially considering this is being done at a time of such low base rates etc etc.

You keep saying that as if it's a problem?

CLAPTON

HAMISH_MCTAVISH wrote: »

True.



Also true.

At first.... Until supply responds to price signals.



False.

Rising prices are a damn good thing for most individuals and the wider economy, and will also ultimately result in an increase in supply, meaning more people can buy and the housing crisis stops worsening.

the concern here is that the planning rules and various government charges will prevent more available money leading to sufficient new builds

Cornucopia

Guys - you're spoiling the fiscal puritanism narrative by talking far too much common sense.

:beer:

Thrugelmir

Graham_Devon wrote: »

Look at the problems of interest rate only mortgages today (I realise you don't see any problems whatsoever, so this is a rather mute point) and that's what I meant. Especially considering this is being done at a time of such low base rates, houses are rapidly approaching 5x income again on the charts etc etc.

You slate the banks for not lending. When a couple of banks offer a niche product to lend money you slate them.

This recovery is going to be a long drawn out affair. Small steps.

Providing everything is done in a controlled measured way then there's no issues. Much has changed since 2002-2007 in the lending markets. So best to accept that times have changed.

The problem doesn't lie with new mortgage advances, but the legacy left by the mortgage lenders that failed.