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

J_i_m

As I alluded to in the other thread this has the potential to price people like myself right out of the ownership market.

I thought the government was supposed to be helping people to buy? The 'help to buy' scheme? Well, that combined with 'further' tightening up on lending would be akin to have given people something with one hand and taken it straight back with the other.

If they want to further limit what banks can lend, then really they also ought to do something about how properties are valued and try brining the prices down and keeping them down. But ofcourse a whole minefield of politics will ensure house prices remain increasing in value well above the nations supposed affordability because why help someone into ownership when you can have them 'ya know' ripped off with extortionate rent?

I fully appreciate the need for certain safeguards in lending, but also it needs to individualised. It really irritates me that the mathematics of my personal circumstances tell me that I could afford a x4.5 mortgage and yet the likes of Vince Cable and George Osborn are about to arbitrary decide that I can't, despite not knowing anything about my finances.

Thrugelmir

AndyGuil wrote: »

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.

There's next to no increase in disposable income for many people at the current time. So the property market whether it be rent or purchase is dependent on affordability. MMR is only just beginning to impact mortgage lending.

AndyGuil

Thrugelmir wrote: »

There's next to no increase in disposable income for many people at the current time. So the property market whether it be rent or purchase is dependent on affordability. MMR is only just beginning to impact mortgage lending.

For some yes. Not everyone buys a home though. MMR has caused a lag in the market but I doubt it will reduce the demand.

Pincher

This is the kind of cherry picking approach which would have caused public consternation if the insurance companies said they wanted to not insure houses in flood zones, young drivers, people with more than three claims in five years.


If you cannot get car insurance, do you just take the bus? Or are you one of the 25% who drive without insurance?
If you cannot get a mortgage the straight way, do you just live in a hole, or find a friendly mortgage adviser who will lie for you?


It seems there are some people who think that if you put up a stop sign, people will just turn back and go where they came from. Well, it ain't very nice where they came from, and that's why they want to go to the other side. It's just going to cost them more time, money and hassle to go round the stop sign.

LydiaJ

J_i_m wrote: »

I thought the government was supposed to be helping people to buy? The 'help to buy' scheme? Well, that combined with 'further' tightening up on lending would be akin to have given people something with one hand and taken it straight back with the other.

If they want to further limit what banks can lend, then really they also ought to do something about how properties are valued and try brining the prices down and keeping them down.

The government do not value houses. The value of a house is whatever a potential buyer is willing to pay for it. If the only people buying houses were people who wanted to live in them, then limiting mortgage borrowing would bring prices down and keep them down, just as you want to happen. However, houses are also bought by people who do not want to live in them but want to make money from them, either from rental income or from capital appreciation. This is what makes the economics of house prices far from straightforward.

If you want more people like you to be able to buy houses to live in, there are only two ways for that to happen:
Either (a) more houses are built, or
(b) fewer people buy houses that they aren't going to live in, so that more can be bought by owner occupiers.

If you want to be able to buy, you should be saving a deposit as aggressively as you can manage, and, if you want to do something about it politically, campaigning for of lots more building programmes to build new houses and/or changes to some kind of rules about BTL to decrease the incentive for people to invest in it.

For example, BTL mortgages are generally available for 60-75% LTV. Suppose the banks brought in new rules cutting that to 25% LTV - ie 75% deposit. (I'm not recommending it as a strategy, just considering hypothetically what the effect would be.) Demand from investors would decrease, and more houses would be bought by owner occupiers. There would be various unintended consequences too, I imagine, some of which would cause significant problems for some people.

J_i_m

LydiaJ wrote: »

The government do not value houses. The value of a house is whatever a potential buyer is willing to pay for it. If the only people buying houses were people who wanted to live in them, then limiting mortgage borrowing would bring prices down and keep them down, just as you want to happen. However, houses are also bought by people who do not want to live in them but want to make money from them, either from rental income or from capital appreciation. This is what makes the economics of house prices far from straightforward.

If you want more people like you to be able to buy houses to live in, there are only two ways for that to happen:
Either (a) more houses are built, or
(b) fewer people buy houses that they aren't going to live in, so that more can be bought by owner occupiers.

If you want to be able to buy, you should be saving a deposit as aggressively as you can manage, and, if you want to do something about it politically, campaigning for of lots more building programmes to build new houses and/or changes to some kind of rules about BTL to decrease the incentive for people to invest in it.

For example, BTL mortgages are generally available for 60-75% LTV. Suppose the banks brought in new rules cutting that to 25% LTV - ie 75% deposit. (I'm not recommending it as a strategy, just considering hypothetically what the effect would be.) Demand from investors would decrease, and more houses would be bought by owner occupiers. There would be various unintended consequences too, I imagine, some of which would cause significant problems for some people.

Thanks, I didn't for one moment think that the government valued houses, but they ought to do something to drive prices down perhapps along the lines as you suggested.

Plus, I already am saving my deposit as agressively as I can, unfortunately due to my circumstances I am unable to cobble together large sums of money in short time.

If the Bank of England really ultilised the power to cap all mortgages at x3.5 salary and the prices market remained largely the same then I'd have to add £30-40k on to my target deposit, which would take me an extra 6-8 years to save under my present circumstances. This would take me onto the cusp of my forties and quite frankly I do not wish to wait that long to buy my first property.

Another article yesterday suggested that the BOE is unlikely to use these new powers, or at least not for a while and maybe only gradually which gives me back some hope.

AndyGuil

They won't drive down prices. That is not a good situation. They will just reduce the extremes of growth if they were do anything at all.

CLAPTON

J_i_m wrote: »

Thanks, I didn't for one moment think that the government valued houses, but they ought to do something to drive prices down perhapps along the lines as you suggested.

Plus, I already am saving my deposit as agressively as I can, unfortunately due to my circumstances I am unable to cobble together large sums of money in short time.

If the Bank of England really ultilised the power to cap all mortgages at x3.5 salary and the prices market remained largely the same then I'd have to add £30-40k on to my target deposit, which would take me an extra 6-8 years to save under my present circumstances. This would take me onto the cusp of my forties and quite frankly I do not wish to wait that long to buy my first property.

Another article yesterday suggested that the BOE is unlikely to use these new powers, or at least not for a while and maybe only gradually which gives me back some hope.

of course the government could reform the planning rules and abolish the levies and charges on new builds

the solution to a shortage of housing is to build more.

J_i_m

In fairness, in some areas they are building more. Over the last decade or so there have been plenty of new housing estates popping up around my area. There are even plans for more.

Unfortunately for me, new builds tend to be embarrassingly small whilst actually really quite expensive.

J_i_m

AndyGuil wrote: »

They won't drive down prices. That is not a good situation. They will just reduce the extremes of growth if they were do anything at all.

Why are lower prices not a good situation?

If the amount of what people can borrow is to be restricted then surely it makes sense of prices to be low enough for those people to be able to buy?

Or are we thinking that only wealthy people should be allowed to buy?