MSE News: Risky mortgages to face new crackdown, George Osborne says

Graham_Devon

Conrad wrote: »

Before anyone says it, the impact on prices will be minor as landlords, wealthy parents and the rest of the already owning class will mop up the property the excluded buyers are denied by lenders.

This does leave the more obvious question of why are they not mopping it up now?

AndyGuil

Graham_Devon wrote: »

This does leave the more obvious question of why are they not mopping it up now?

They are. BTL is a strong market.

wotsthat

Graham_Devon wrote: »

This does leave the more obvious question of why are they not mopping it up now?

The BoE being given new powers isn't the same as using them.

If Conrad is right and a whole load of rich people are priced out of Twickers there may a) be a short term fall in prices and b) BTL's will be able to buy without competition from pesky owner occupiers.

It's one of the main reasons I was able to buy a holiday home. There had been a fall in prices and, importantly, mortgage rationing meant that I had less competition from potential owner occupiers. As I had a large deposit to hand and ready finance I was able to negotiate a great deal on top because the vendor wanted to sell quickly.

It makes me shudder to think of the debt associated with a 6x joint income mortgage but, in the main, mortgage rationing will transfer wealth from the less well off to the wealthy.

Thrugelmir

Graham_Devon wrote: »

This does leave the more obvious question of why are they not mopping it up now?

Requires credit to fund. Few people have the actual cash to buy outright.

Tighter regulation is starting to bite as well.

mobfant

AndyGuil wrote: »

They are. BTL is a strong market.

Question is why aren't they taking action against BTL'ers then? What appropriate action is within their power?

AndyGuil

mobfant wrote: »

Question is why aren't they taking action against BTL'ers then? What appropriate action is within their power?

Rent demand is high.

mobfant

AndyGuil wrote: »

Rent demand is high.

Interestingly this is both the right and wrong answer. It's perhaps more a question for the market, but rental yields have been falling and BTL'ers have been banking on property as an investment and prices rising - the main reason we're in a bubble and crazy prices rather than just a more rational, supply-shortage related, price increase.

The house price party's about to end. WOOP.

AndyGuil

mobfant wrote: »

Interestingly this is both the right and wrong answer. It's perhaps more a question for the market, but rental yields have been falling and BTL'ers have been banking on property as an investment and prices rising - the main reason we're in a bubble and crazy prices rather than just a more rational, supply-shortage related, price increase.

The house price party's about to end. WOOP.

Rents are higher than mortgages typically so getting someone to pay off your mortgage is worthwhile. The market is free in the sense that it will react to demand. The demand for rental property is high and it will continue to be. If yields are falling and demand is still there then rents are only going to increase.

mobfant

AndyGuil wrote: »

Rents are higher than mortgages typically so getting someone to pay off your mortgage is worthwhile. The market is free in the sense that it will react to demand. The demand for rental property is high and it will continue to be. If yields are falling and demand is still there then rents are only going to increase.

But the point is rents haven't increased that much. So while they will increase, they aren't increasing at the same rate as house prices have. And so if BTL'ers no longer see house purchases as an safe-as-houses high profit investment, fewer will be willing to buy houses at such high prices (though of course there will still be demand), and the cost of houses will start to fall.

AndyGuil

mobfant wrote: »

But the point is rents haven't increased that much, and are low. So while they will increase, they aren't increasing at the same rate as house prices have. And so if BTL'ers no longer see house purchases as an safe-as-houses high profit investment, fewer will be willing to buy houses at such high prices (though of course there will still be demand), and the cost of houses will start to fall.

The demand to buy has been the driving factor if one increases relative to the other. Rents will increase if costs increase. It may lag but it will catch up. Rent rises are significant too. However mortgages are leveraged so for example a 16% rise is only 4% in salary terms. When you take into leverage rents and mortgage are very similar for increases.