Funding for Lending on mortgages is ended

Graham_Devon

HAMISH_MCTAVISH wrote: »

And what will you say if that level is higher than now?

As the economy recovers, unemployment falls, growth accelerates, lending returns to normal, etc, we'll continue to see various support and stimulus withdrawn.

As it will no longer be needed.

This does not however mean prices will fall.

Just the opposite in fact.

Let's just be clear here. NONE of us expected FFL to be withdrawn as early as it has done. Certainly NONE of us assumed it would be withdrawn for mortgages ONLY and in 2013.

This is a surprise to all of us. You make it sound somewhat normal and part of the strategy. Which does lead us down the road of asking why you didn't state all this just a few weeks or months ago?

Indeed, you were stating the opposite. You were stating that this is the BOE / Government doing it's job by providing liquidity to a dysfunctional market.

This is as much of a surprise to you as it is the rest of us, and while you are obviously doing your best to gloss over the cracks, you certainly didn't think the market was ready for this, hence describing it as dysfunctional in only the past month.

This was a bold move. One which threw a surprise to all of us. So let's not pretend it's somehow normal and you are not at all taken aback by it's possible implications. It's quite clear in your posts that you simply don't want to state anything which suggests you are even just a little disheartened by this move. Markets can't move from the dysfunctional you have been describing to "health and recovering" within a month. So which is it? Was it dysfunctional a month ago? Or was it recovering and normalising reducing the need for support?

HAMISH_MCTAVISH

Graham_Devon wrote: »

Let's just be clear here. NONE of us expected FFL to be withdrawn as early as it has done. Certainly NONE of us assumed it would be withdrawn for mortgages ONLY and in 2013.

It's not being withdrawn in 2013.

It's being withdrawn at the end of January in 2014.

Banks will still be able to fully withdraw their entire annual unused allowances before that date and use those funds for mortgage lending even after the scheme ends.

All banks still have a sizeable allowance to use in 2013, and if drawn down before the end of January 2014 that could be used to support mortgage lending. That should mean the market does not change overnight.

Another positive sign is that the Council of Mortgage Lenders says funding conditions outside the scheme have improved. So it seems reasonable to expect the end of record-breaking rates without fearing massive increases.

http://www.theguardian.com/money/2013/nov/28/funding-for-lending-bank-of-england-policy-mortgage

And as the CML report funding conditions outside the scheme have improved, then as Carney says, there is simply no need to continue it further.

The scheme was launched in 2012 and scheduled to run until 2014.

As conditions have improved in the market, it can be ended without negative consequences, so that's what they are doing.

As usual Graham, you are running around crowing about something that will not cause prices to fall, nor in all likelihood decrease mortgage availability, as funding conditions have improved.

Graham_Devon

I see you have avoided the question.

Why were you describing the market as dysfunctional very very recently? Only to now describe it as you do above?

Was changed (other than the removal of FFL) to change your outlook so drastically?

Or are you literally going to sit there and pretend you are not at all taken back?

If I'd turned my outlook on the head of a pin, you'd be questioning me too.

antrobus

Graham_Devon wrote: »

Let's just be clear here. NONE of us expected FFL to be withdrawn as early as it has done. Certainly NONE of us assumed it would be withdrawn for mortgages ONLY and in 2013.

This is a surprise to all of us. ....

It's only a surprise to the ill-informed.

From the 'Explanatory Note' to the Funding for Lending Scheme;

Over the eighteen months to the end of January 2014 – the ‘drawdown period’ –

http://www.bankofengland.co.uk/markets/Documents/explanatory_notefls120713.pdf

FFL was always supposed to end on January 2014. The only surprise is that is being extended for lening to businesses.

HAMISH_MCTAVISH

Graham_Devon wrote: »

I see you have avoided the question. .

Not at all.

The return of functionality to mortgage markets is an ongoing process. It is not yet complete, but they continue to improve.

And as they improve further I would expect more of these schemes and support to be withdrawn.

They won't all be withdrawn at once.

They'll be withdrawn gradually, over time, as the market regains functionality and can stand on it's own two feet.

In this case we have FFL, which addressed the availability of funds the banks had access to, and they chose to mostly lend these funds at the more profitable (thanks to capital withholding regs) lower LTV brackets.

Now both Carney and the CML say the wider market for those funds has improved, therefore this scheme is no longer required.

FFL did very little for high LTV lending though, hence why HTB1 and HTB2 were introduced. Both those schemes remain operational, and will continue to do so until they are also no longer required.

Gradual improvement = gradual withdrawal of the various support.

It's a simple concept.;)

Graham_Devon

antrobus wrote: »

It's only a surprise to the ill-informed.

From the 'Explanatory Note' to the Funding for Lending Scheme;

Over the eighteen months to the end of January 2014 – the ‘drawdown period’ –

http://www.bankofengland.co.uk/markets/Documents/explanatory_notefls120713.pdf

FFL was always supposed to end on January 2014. The only surprise is that is being extended for lening to businesses.

That's a technicality and nothing more.

Indeed, I can sit behind the very same technicality and state that funding for lending hasn't ended. As it hasn't. It will continue on after Janusary 2014.

Was changed is it's use.

Generali

HAMISH_MCTAVISH wrote: »

Because you don't have one.

Rates rising back to normal levels, when the economy is also recovering, will not cause house prices to fall.

Simple as that really.

I agree with that with one caveat.

My belief is that house prices in London have been propped up to a large extent by people wanting to get money out of the Eurozone because they are worried that the whole thing is going to blow up.

IMHO, the Eurozone economies are starting to show the first signs of life that the UK's did about a year ago. When Europe's economies sort themselves out, something that will happen eventually, that support for London house prices may well disappear.

House prices in the rest of the UK should track up with wages as unemployment plummets next year. We were chatting at work the other day about how to profit from a UK recovery and buying a house in the Midlands was the consensus decision. London's too frothy and the North is too reliant on Government spending. The Midlands is set to do well from increasing output in both services and manufacturing.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Gradual improvement = gradual withdrawal of the various support.

It's a simple concept.;)

It is, incredibly simple. And thank you for letting us know all this after the event.

I'd now be incredibly suprised if I found you suggesting that the only reason for improving mortgage conditions was FFL which was a result of the US policy....in say, August?

I'd be even more surprised if I saw you talking of the "dysfunctional" market in say November, as this is such a simple concept, I just cannot imagine you saying anything else?

I'd be, somewhat less surprised if I saw you cheering on the bringing forward of help to buy as a result of a "dysfunctional market" and the government doing their job to "provide liquidity to a dysfunctional mortgage market"..in say, the last couple of months?

Blimey Hamish, you change your tune more than someone with a hygiene OCD changes their underpants.

HAMISH_MCTAVISH

Generali wrote: »

House prices in the rest of the UK should track up with wages as unemployment plummets next year. We were chatting at work the other day about how to profit from a UK recovery and buying a house in the Midlands was the consensus decision. .

Sounds about right to me.

Gains should now start to spread out from London, as in all previous recoveries.

grizzly1911

CLAPTON wrote: »

To some extent it depends upon what one considers corrupt.

There is a clear difference between personal corruption (i.e. a payment to council officer or politician) and work done targeted at say a particular area favoured by the ruling party or work that would never occur except for the payment.

The current system of builder incentives payments is almost totally opaque.

As far as I know there is no central register of payments made and and no register of actual spending or in the current jargon 'outcomes'.

Certainly the hapless buyer is not told how much of the purchase price is on compulsory levies.

At least an total open system, properly audited could at least be discusses and debated in some democratic way.


Although I don't want to go off topic but I see a parallel with the 'green' levies/taxes on the utilities companies. Again a totally opaque system. It now seems that although the money is being collected in bills, the money collected is largely unspent on it's intended purpose and the actual outcomes are totally unaudited.

Many taxes aren't spent on what they were originally collected against.

Central and local government also have a habit of acting contrary regardless of colour although that can magnify the positions.

The energy analogy is a worthy one.