Interest rates

Guy_Montag

carpetbelly wrote: »

Not true... Banks have become more restrictive at who they lend their money too and what type of property it is to.

The bank I'm workign for has restricted it's lending drastically to new builds, the default rate on them is double what was predicted.

And scorecards have been adjusted for risk and nothing more. The same amount of money will be lent but only to risk worthy people.

Granted I can only talk about the bank I work for but it is a large bank and a large provider of mortgages.

If you only lend to worthy people it's the same as reducing lending to everyone.

Example:

Lend 100k to 100 people = £10,000,000 available to be spent on houses
Lend 100k to 50 people = £5,000,000 available to be spent on houses

So as you can see by removing the non-worthy people from the equation there is not just less money floating about, there is also less competition for the housing that's available.


Demand Curve for those that are interested

Generali

Guy_Montag wrote: »

If you only lend to worthy people it's the same as reducing lending to everyone.

Example:

Lend 100k to 100 people = £10,000,000 available to be spent on houses
Lend 100k to 50 people = £5,000,000 available to be spent on houses

So as you can see by removing the non-worthy people from the equation there is not just less money floating about, there is also less competition for the housing that's available.


Demand Curve for those that are interested

In effect, this is what's happening at the moment IMO. As sellers aren't prepared to cut prices, supply is dropping along with demand so prices are staying stable with fewer places completing.

The interesting bit is what happens next. Does demand increase again as happened in 2005 for example or do sellers cut prices? We'll see.

carpetbelly

The interesting bit is what happens next. Does demand increase again as happened in 2005 for example or do sellers cut prices? We'll see.

Indeed. I think this is the question every wants answered.

free4440273

There still remains the problem of a massive shortage in housing (stock), especially in London/South East. This does not guarantee (future) exponential rises in house prices, I'm not suggesting that, but neither does it portend a huge drop in house prices. Even if house prices do drop ten per cent next year, longer term, in, say, seven/ten years time i suspect they still would have risen net (especially so in the South East).

tr3mor

carpetbelly wrote: »

Not true... Banks have become more restrictive at who they lend their money too and what type of property it is to.

The bank I'm workign for has restricted it's lending drastically to new builds, the default rate on them is double what was predicted.

And scorecards have been adjusted for risk and nothing more. The same amount of money will be lent but only to risk worthy people.

Granted I can only talk about the bank I work for but it is a large bank and a large provider of mortgages.

As Guy said, it's the same thing. It still reduces demand.

tr3mor

Generali wrote: »

The interesting bit is what happens next. Does demand increase again as happened in 2005 for example or do sellers cut prices? We'll see.

Demand can only increase if the banks start lending again.

There should still be a steady small stream of houses coming onto the market as fixed rate deals end, BTLers get fed up of subsidising tenants or generally want the equity to spend on other things. I think there might be a mini surge in supply around April too, at the moment people are waiting for the CGT rules to change.

Generali

tr3mor wrote: »

Demand can only increase if the banks start lending again.

That's my thought too. The thing is will they? I'm dubious, personally, but there's nothing harder to predict than the future.

tr3mor

Generali wrote: »

That's my thought too. The thing is will they? I'm dubious, personally, but there's nothing harder to predict than the future.

I'm not convinced that they will be able to any time soon. They've been relying on selling their lending for the past 5 years.

Now, no one is going to want to buy these dodgy investments and the banks aren't going to want to take the risk in a falling market. So essentially there is not much money to lend.

It's going to cause a problem across the whole economy. Lots of money was made in the city by taking cuts on mergers and acquisistions. The banks have got no money to fund these either; Qatar pulled out of buying Sainsbury's for this reason.

HPC and recession here we come.

I wonder whatever happened to "No more boom and bust". Did Clown just get greedy or stupid? :rolleyes:

wibble68_2

IveSeenTheLight wrote: »

The problem is Shaz that I believe house prices have risen so much due to demand out there.

Are you saying that supply and demand is the number 1 driver of house prices?

carpetbelly

tr3mor wrote: »

I'm not convinced that they will be able to any time soon. They've been relying on selling their lending for the past 5 years.

well, I personally we need to see what happens in the credit markets first... That situation needs to settle down first and the impact assessed. That's obviously going to take some time for it to all come out and the consequences of it. Then the banks will make their choices of what they will lend. I'd say at least the middle of next year before we really have a big idea. The markets are just to up and down at the moment and are really reacting to anything. Good old panick mentality.

tr3mor wrote: »

I wonder whatever happened to "No more boom and bust". Did Clown just get greedy or stupid? :rolleyes:

I think he's just stupid... he doesn't hide it that well either really