The correction has been, gone, and is over

cells

mwpt wrote: »

And yet somehow this proves we're rationing credit. The fact that people aren't buying houses priced at far less than what a bank will lend them?

exactly, if a person in stoke can easily service a mortgage of £450pm and buy a house for £100k but the bank says sorry we wont lend to you full stop because of x y and z its mortgage rationing.

In the past banks understood and allowed people who could not get a normal mortgage to go self cert. They might have been the newly employed the self employed or those close to retirement even those who work in the black market. They could all buy via self cert if the normal route was not available. Now the system and your good self says they must rent even if they happen to live in a place with very affordable homes.

mwpt wrote: »

Maybe that's because your credit rationing theory is not true. As I've pointed out many times we have plenty of mortgage products available, at ultra low rates. The only time that may have been looser credit was 2000-2007.

without a doubt there is credit rationing, if there was non you would not have bloody mortgage criteria at banks. the question is the degree of rationing. Its more than it was before the crash that is for sure. My guess is that 10% of households who could get credit pre crash now cannot. You are arguing that 90% can still get a mortgage I am arguing that the 10% that cannot is a very significant 3 million households!

mwpt wrote: »

If mortgage rates were 7% house prices would be a lot lower and the people that you are so valiantly trying to save would have been eligible for the mortgage to buy them.

but that again is not true at least it definitly is not true in about two thirds of the country

Mortgage rates were about 6% ten years ago in the north and midlands yet prices were no lower. So why do you think 6% mortgages will mean 'house prices would be a lot lower'?


also importantly

mortgage rates do not work as a feature in themselves interest rates are much more deep than just the housing market. The government bonds market is just as big and the corp paper probably just as bid too.

If you really wish interest rates to go to 7% you also need to wish for an accept some £150 billion a year more in taxes (or lower services) and goods/services costs as companies and governments paying 2% now need to pay 7%.

cells

mwpt wrote: »

The only thing that makes this possible is lower rates and longer terms. It's not controversial or magic.

from 2003 to 2007 the BOE rate went from 3.5% to 5.75%

can you remind us what prices did from 2003 to 2007?

ukcarper

mwpt wrote: »

Irrelevant really if people weren't borrowing at max affordability. Ask yourself, if people were borrowing the max they could previously, why are house prices multiples of income continuing to rise?

Why are prices rising at exponential rates while mortgage monthly payments rise linearly (roughly in line with rents)?

The only thing that makes this possible is lower rates and longer terms. It's not controversial or magic.

What is irrelevant to this argument is house price multiplies. Have you got any figures to show FTB are borrowing more in relation to thier earnings, I can't find any

mwpt

cells wrote: »

from 2003 to 2007 the BOE rate went from 3.5% to 5.75%

can you remind us what prices did from 2003 to 2007?

What did mortgage rates do?

cells

mwpt wrote: »

What did mortgage rates do?

They went up

What did house prices do from 2003-2007?

HAMISH_MCTAVISH

mwpt wrote: »

And yet somehow this proves we're rationing credit. .

Here you go....

Rigorous mortgage rationing has been in force in the UK since 2007 and the onset of the international banking crisis.

Not only did the crisis dry up the supply of funds for lenders to make available to home buyers, it also provoked a fall in house prices, undermining the security of home loans already made.

http://www.bbc.co.uk/news/business-16425582

And from even earlier....

The Council of Mortgage Lenders warned that mortgage rationing was likely to continue until the wholesale money markets were working more effectively, and as a result there was unlikely to be much easing in lending criteria in the near term.

The group said retail deposits alone were not large enough to fund the market at its current size

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/6200760/Mortgage-rationing-likely-to-continue.html

There is no evidence whatsoever that mortgage rationing has ended in any meaningful way.

In fact, the entire point of the various government schemes, HTB, etc, is to partially overcome mortgage rationing and restore at least a partial return towards something vaguely resembling normal lending.

If mortgage rationing was not still endemic there would be no need for the schemes to keep getting extended in order to try and keep at least a semblance of functionality in what is still a highly dysfunctional credit market.

There is not today and never has been an affordability problem on a national level.

Millions of people are consigned to buying houses for their landlords while paying more for rent than they would for a mortgage, not because they can't afford a mortgage, but because they can't bl00dy get one.

Because of....

[ERICPEBBLERANT]
MORTGAGE RATIONING.
[/ERICPEBBLERANT]

wotsthat

mwpt wrote: »

Of course you don't agree with it. Why would you agree with anything a "crash wisher" says. I've leave it to you to work out why "the most that can be borrowed" is an irrelevant and stupid argument.

Whatever. The main point being it doesn't matter what your equation determines to be the 'price' if..

- the amount is above c4.5 earnings (you won't get the loan)
- the amount is above LTV limit (you won't get the loan)

Can't you see that in determining credit amount the interest rate is almost irrelevant? As long as someone can afford the payment at 7% the amount is really multiple of earnings and not a factor of interest rates.

mwpt

ukcarper wrote: »

What is irrelevant to this argument is house price multiplies. Have you got any figures to show FTB are borrowing more in relation to thier earnings, I can't find any

How can they not be if multiples are higher?

http://www.standard.co.uk/news/london/almost-a-fifth-of-firsttime-london-buyers-pay-record-500000plus-for-homes-a3187906.html

Record low interest rates and increasing availability of mortgages for buyers with small deposits are encouraging young Londoners to load up with unprecedented levels of debt.

The median mortgage advance to a firs-time buyer in the fourth quarter of last year was also a record — at £242,920. The typical deposit was 25 per cent or £80,973.

Interest and capital repayments combined accounted for 19.5 per cent of earnings.

Now I realise some of that is just throw away comment from an article. But if we look at the medium figures presented. I'm going to assume a repayment mortgage with 30 year term (quite normal now) at 2% rate. The rest of the figures are according to the article.

House price: £322k
Deposite: £80k
Mortgage: £242k
Interest rate: 2%
Term: 30 years
Repayment pm: £895
% of salary: 19.5%
So salary pa = (895/0.195)*12 = £55k
House price as multiple of salary: 5.85
Mortgage as multiple of salary: 4.4

mwpt

Also remember, MMR does not apply to lending on fixes of 5 years or greater.

Thrugelmir

cells wrote: »

from 2003 to 2007 the BOE rate went from 3.5% to 5.75%

can you remind us what prices did from 2003 to 2007?

Yeah. The likes of Northern Rock , Bradford & Bingley, Chelsea Building Society , Southern Pacific Mortgages, Alliance & Leicester relaxed their lending criteria and offered interest only deals as a solution. History tells us what the outcome was and the unwinding that's still to be done.