Osborne: Scrapping HTB would be "intergenerational theft"

HAMISH_MCTAVISH

shortchanged wrote: »

. Once rates do go up this will not be such an attractive figure then.

Affordability will still be very good by historical standards even when rates rise.

As has previously been pointed out on here by many people over the last few years, most credible commentators and analysts expect the spread between mortgage rates and the base rate to narrow as base rates rise.

Indeed, the Governor of the BOE explicitly stated this to the Treasury select committee back in 2012, so it should be no surprise.

Now the OBR have estimated what this narrowing will look like.

They project the average mortgage rate will only rise 0.8% from present levels despite Bank Rate rising 2.5%.



Affordability was not a problem in 2007 with base rates ten times higher than today, it's not a problem now, and it won't be a problem in the foreseeable future.

The problem is the lack of lending.

Mortgage rationing remains endemic, and this is causing fewer houses to be built, fewer people to be able to buy, and rents to soar, as the housing shortage inevitably worsens.

It is beyond belief that so many people on here still suffer from such cognitive dissonance that they cannot see what is right in front of their faces.

shortchanged_2

HAMISH_MCTAVISH wrote: »

The problem is the lack of lending.

Mortgage rationing remains endemic, and this is causing fewer houses to be built, fewer people to be able to buy, and rents to soar, as the housing shortage inevitably worsens.

It is beyond belief that so many people on here still suffer from such cognitive dissonance that they cannot see what is right in front of their faces.

Hamish, house builders will use any excuse to limit supply. You know full well they weren't building enough houses even during 'the good ol days'.

As myself and others have stated on here for ages, any truly functioning market should not need all these helping hand schemes to function. It shows there is something seriously flawed with the UK housing market.

HAMISH_MCTAVISH

shortchanged wrote: »

Hamish, house builders will use any excuse to limit supply.

Except in this case, it is clearly not an excuse.

The evidence is right in front of your eyes......



But of course, "there are none so blind as those that will not see".

any truly functioning market should not need all these helping hand schemes to function. It shows there is something seriously flawed with the UK housing market.

Completely agree.

Mortgage rationing remains a serious problem.

And we won't be able to fix the housing shortage until we fix the lending famine.

Generali

HAMISH_MCTAVISH wrote: »

That graph says it all. The spread (difference between the 'risk free' rate and commercially available lending rates) for mortgages went from about 1% to being about 3%. In fairness, 1% is lower than the long term average spread: long term it's probably more like 1.5-2% and 1% shows how desperate banks were to chuck money at anyone with a pulse.

Still current spreads are huge and reflect the fact that banks simply can't lend due to policies requiring them to keep more money in reserve, a very peculiar policy to introduce during a credit crunch when loan quality will be rising quickly anyway.

HAMISH_MCTAVISH

Generali wrote: »

current spreads are huge

Yes they are.

and reflect the fact that banks simply can't lend due to policies requiring them to keep more money in reserve, a very peculiar policy to introduce during a credit crunch when loan quality will be rising quickly anyway.

Indeed.

Those policies are socially and politically unsustainable though. They have caused an artificial mortgage famine and consequently worsened the housing shortage.

And as we all know, that which is unsustainable cannot be sustained. Hence why HTB was introduced, to help restore functionality to the dysfunctional mortgage market.

But people are right, it's only a sticking plaster, and comes nowhere near close to addressing the underlying issue which is that lending needs to increase by very significant levels if we are to build enough houses.

As with all governments though, I expect this one to continue trying everything that won't work first before they are forced to do the one thing that will.....

alberty

Have to admire the journalistic effort in those charts and stats. My (totally unresearched) question is, the slightest easing of mortgage restrictions that we saw last year resulted in a 25% boom in london. If the mortgage market was unrestricted and only buyers nerve restrticted what they could borrow prices would probably double, so by the time town planning and increasing the housing supply has happened there will be a catastrophic imbalance between what early and new buyers have paid for the same value property, which shouldn't be allowed to happen.

Generali

alberty wrote: »

Have to admire the journalistic effort in those charts and stats. My (totally unresearched) question is, the slightest easing of mortgage restrictions that we saw last year resulted in a 25% boom in london. If the mortgage market was unrestricted and only buyers nerve restrticted what they could borrow prices would probably double, so by the time town planning and increasing the housing supply has happened there will be a catastrophic imbalance between what early and new buyers have paid for the same value property, which shouldn't be allowed to happen.

The rise in prices has been mostly caused by cash purchasers, not mortgages.

As to allowing something to happen, in a free market the price is the price and consistently over time we've seen that the free market is by far the best way to discover prices (with a few exceptions mostly relating to monopolies). When you decide you'd like to buy an apple, shares in Apple, or a house in Orchard Close you take a look at the price and decide whether or not you can afford it and it offers value to you. If it doesn't then perhaps you buy a some strawberries, shares in Robinsons or maybe try buying in Bolton rather than Brixton.

I'd be interested to see how you'd prevent new buyers having to pay more (or less) than earlier ones.

Bantex_2

London prices have gone beyond supply and demand. Many rises are being driven by speculation of future rises.

alberty

Generali wrote: »

The rise in prices has been mostly caused by cash purchasers, not mortgages.

As to allowing something to happen, in a free market the price is the price and consistently over time we've seen that the free market is by far the best way to discover prices...

I'd be interested to see how you'd prevent new buyers having to pay more (or less) than earlier ones.

I would keep protecting people from themselves in the blind panic of the London housing market, 3.5x -4x mortgage lending cap. The cash buyers buy in the knowlege they will make money from mortgaged buyers when they are ready to sell. It would take policy intervention to New York-ify whole towns of London not just just convert a few more victorian terraces and charge for each flat what the whole thing cost a year before.

HAMISH_MCTAVISH

alberty wrote: »

My (totally unresearched) question is, the slightest easing of mortgage restrictions that we saw last year resulted in a 25% boom in london.

Of course it did.

Many of us have posted here for years warning that mortgage rationing was worsening the housing shortage, and would only result in a bigger boom down the road.

Because high prices in the UK were the result of a housing shortage, not lax lending, so restricting lending would not solve the underlying problem.

And it didn't.

You can't fix a housing shortage with mortgage rationing. You only make it worse as building falls to 100 year lows, rents soar, and millions of people are prevented from buying and forced to enrich their landlords.

The "can kicking" policies of restricted lending that so many around here cheered on have only worsened the housing shortage and guaranteed the next boom will be even bigger.

If the mortgage market was unrestricted and only buyers nerve restrticted what they could borrow prices would probably double, so by the time town planning and increasing the housing supply has happened there will be a catastrophic imbalance between what early and new buyers have paid for the same value property, which shouldn't be allowed to happen.

What shouldn't have been allowed to happen was the mortgage famine....

But the damage has been done, we can't roll back the clock on seven years of record low house building and huge pent-up demand, we can't build more houses without more lending, so now it's time to pay for those mistakes....

And people will be paying for those mistakes with much higher house prices for a very long time to come.

Perhaps those who cheered on the dreadfully damaging policies of mortgage rationing will at least learn their lesson, but I won't hold my breath.