Debate House Prices
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Percentage of 25-34 y/ds owning their own house 2004 - 2014
Comments
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HAMISH_MCTAVISH wrote: »The only reason for current FTB numbers being suppressed, and rents at record highs instead, is mortgage rationing....
Despite mortgages being cheaper than rent on average, the new bank capitalisation rules for higher LTV borrowers (traditionally FTB-s) dictate society would prefer to have youngsters buying houses for boomer landlords than buying them for themselves.
But that is neither politically sustainable nor desirable.
Political pressure will continue to increase until mortgage availability returns to historical norms, where a 5% deposit and a reasonable (but not perfect) credit score is enough to get you a mortgage at circa 35% to 45% of salary in terms of monthly repayments.
So there is only one way prices can go with the current trend of massively under building, and it ain't down...
Is it mortgage rationing or is it an acknowledgement that house prices are high so provisions need to be made to cover potential decreases. And lending to only those who are felt to present the best chance of repaying the loan?
I don't think it's unreasonable to expect people to save up for a 10% deposit before committing themselves to repaying an entire mortgage. 45% of salary is also a susbstantial commitment - particularly at the more average end of the salary scale where it leaves much less in £ terms to cover other living expenses.0 -
Is it mortgage rationing or
It's mortgage rationing, plain and simple, the new bank capital withholding requirements well and truly threw the baby out with the bathwater.
Lets not forget that even Northern Rock's bad bank, the worst of the worst of UK lending, made over a billion pounds in profit last year alone, and it was not the profitability of UK residential mortgage lending books that caused the problems for UK banks. They lost £15 on overseas mortgage lending for every £1 they lost here. Had they just stuck to UK lending instead of chasing overseas misadventures they wouldn't have needed any bailouts at all.I don't think it's unreasonable to....
The most pernicious thing about mortgage rationing is that it is also suppressing construction of the new housing this country desperately needs and forcing rents to record highs in the meantime.
Population grew by over half a million last year and we built just over 100K houses... That is little short of a national disgrace.
The number of young people reaching average FTB age is going to increase by nearly 50% from the 2007 trough by the early 2020's, and here are simply not enough houses for them to buy, because builders won't build what they can't sell, given lending remains throttled at less than half what is required.
Buying a house is almost invariably cheaper than renting the same house in the UK, yet these new regulations force banks not to take money from FTB-s, but instead to allow FTB-s to pay their landlords mortgage for them.
Banks are happy to take the payments provided in rent from young people, and accept that payment stream as security to lend mortgages, so long as they are not lending to the young people directly... Because of the capitalisation rules.
It's a bonkers situation, it's completely politically unsustainable, and it simply cannot last.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0
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