Buyers mortgage valuation

Tokmon

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house, but that has nothing to do with the real value of a house which can change very quickly if sentiment or maybe interest rates change.

Banks don't control the value of a house at all and the value of a house is how much people are willing to pay for them. If you look at mortgage criteria now they only allow up to 4.5x salary and at least a 5% minimum deposit but in the past they would happily lend far more and over 100% mortgages. So using your logic house prices should be on a downwards trend because banks are willing to lend less but that obviously hasn't been the case over the last 20 years.

Also there are less first time buyers being able to afford somewhere now so people with lots of equity are choosing to move instead. Due to the large amount of equity they have already it makes little difference to them if the bank value a house 20k less than they are willing to pay because they don't need to borrow anywhere near the maximum amount they are willing to lend them.

So people are the ones who definitely control the valuation because they are the one's offering more and more above what banks value them at and are happy to pay the difference to get the house they want.

Banks don't want people to borrow as much as possible and that's why they offer lower rates the more deposit someone has because the less they borrow the less risk their is for them. They certainly wouldn't want to overvalue houses and lend loads of money because that is extremely risky for them, they much prefer smaller mortgages with lots of equity so they know they won't lose out if anything goes wrong.

user1977

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house

Eh? It's surveyors who value properties, not banks. Do you really think the banks say to the surveyors "hey, we need to get some more interest by bumping up the amount we're lending, can you please inflate your valuations even though there's absolutely no evidence to back them up"?

lookstraightahead

I'm not so sure.

Purchaser has £40000, bank will lend £160000, price paid for house £200000

Purchaser has £40000, bank will lend £180000, price paid for house £220000.

Most people will take the most they can from the bank without a second thought.

Crashy_Time

user1977 said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house

Eh? It's surveyors who value properties, not banks. Do you really think the banks say to the surveyors "hey, we need to get some more interest by bumping up the amount we're lending, can you please inflate your valuations even though there's absolutely no evidence to back them up"?

So you think we got to this point in the biggest property bubble in history due to supply and demand?

Crashy_Time

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house, but that has nothing to do with the real value of a house which can change very quickly if sentiment or maybe interest rates change.

Banks don't control the value of a house at all and the value of a house is how much people are willing to pay for them. If you look at mortgage criteria now they only allow up to 4.5x salary and at least a 5% minimum deposit but in the past they would happily lend far more and over 100% mortgages. So using your logic house prices should be on a downwards trend because banks are willing to lend less but that obviously hasn't been the case over the last 20 years.

Also there are less first time buyers being able to afford somewhere now so people with lots of equity are choosing to move instead. Due to the large amount of equity they have already it makes little difference to them if the bank value a house 20k less than they are willing to pay because they don't need to borrow anywhere near the maximum amount they are willing to lend them.

So people are the ones who definitely control the valuation because they are the one's offering more and more above what banks value them at and are happy to pay the difference to get the house they want.

Banks don't want people to borrow as much as possible and that's why they offer lower rates the more deposit someone has because the less they borrow the less risk their is for them. They certainly wouldn't want to overvalue houses and lend loads of money because that is extremely risky for them, they much prefer smaller mortgages with lots of equity so they know they won't lose out if anything goes wrong.

That is because interest rates have been cut to near zero, and transactions dropped to about half their peak some time ago (obviously the stamp duty stunt gave transactions a boost but that will soon peter out...........so obviously less tax and lower monthly payments push up prices, but what else can they do to keep prices going up?)

Tokmon

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house, but that has nothing to do with the real value of a house which can change very quickly if sentiment or maybe interest rates change.

Banks don't control the value of a house at all and the value of a house is how much people are willing to pay for them. If you look at mortgage criteria now they only allow up to 4.5x salary and at least a 5% minimum deposit but in the past they would happily lend far more and over 100% mortgages. So using your logic house prices should be on a downwards trend because banks are willing to lend less but that obviously hasn't been the case over the last 20 years.

Also there are less first time buyers being able to afford somewhere now so people with lots of equity are choosing to move instead. Due to the large amount of equity they have already it makes little difference to them if the bank value a house 20k less than they are willing to pay because they don't need to borrow anywhere near the maximum amount they are willing to lend them.

So people are the ones who definitely control the valuation because they are the one's offering more and more above what banks value them at and are happy to pay the difference to get the house they want.

Banks don't want people to borrow as much as possible and that's why they offer lower rates the more deposit someone has because the less they borrow the less risk their is for them. They certainly wouldn't want to overvalue houses and lend loads of money because that is extremely risky for them, they much prefer smaller mortgages with lots of equity so they know they won't lose out if anything goes wrong.

That is because interest rates have been cut to near zero, and transactions dropped to about half their peak some time ago (obviously the stamp duty stunt gave transactions a boost but that will soon peter out...........so obviously less tax and lower monthly payments push up prices, but what else can they do to keep prices going up?)

Less tax and lower monthly payments may have pushed up prices over the last year but there are a lot of other factors that will be pushing up prices because house prices have always been on an upwards trend no matter what the interest rate. 

People are offering 20k, 30k+ over asking price to secure houses and that isn't because they are saving a couple thousand on tax. There is a lot of demand at the moment and not much supply of houses that people want which is one of the reasons why it's so crazy recently.

Crashy_Time

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house, but that has nothing to do with the real value of a house which can change very quickly if sentiment or maybe interest rates change.

Banks don't control the value of a house at all and the value of a house is how much people are willing to pay for them. If you look at mortgage criteria now they only allow up to 4.5x salary and at least a 5% minimum deposit but in the past they would happily lend far more and over 100% mortgages. So using your logic house prices should be on a downwards trend because banks are willing to lend less but that obviously hasn't been the case over the last 20 years.

Also there are less first time buyers being able to afford somewhere now so people with lots of equity are choosing to move instead. Due to the large amount of equity they have already it makes little difference to them if the bank value a house 20k less than they are willing to pay because they don't need to borrow anywhere near the maximum amount they are willing to lend them.

So people are the ones who definitely control the valuation because they are the one's offering more and more above what banks value them at and are happy to pay the difference to get the house they want.

Banks don't want people to borrow as much as possible and that's why they offer lower rates the more deposit someone has because the less they borrow the less risk their is for them. They certainly wouldn't want to overvalue houses and lend loads of money because that is extremely risky for them, they much prefer smaller mortgages with lots of equity so they know they won't lose out if anything goes wrong.

That is because interest rates have been cut to near zero, and transactions dropped to about half their peak some time ago (obviously the stamp duty stunt gave transactions a boost but that will soon peter out...........so obviously less tax and lower monthly payments push up prices, but what else can they do to keep prices going up?)

Less tax and lower monthly payments may have pushed up prices over the last year but there are a lot of other factors that will be pushing up prices because house prices have always been on an upwards trend no matter what the interest rate. 

People are offering 20k, 30k+ over asking price to secure houses and that isn't because they are saving a couple thousand on tax. There is a lot of demand at the moment and not much supply of houses that people want which is one of the reasons why it's so crazy recently.

? Stupidly low interest rates have been pushing up (or preventing prices going down if you want to look at it that way) prices since 2008. The people who keep the bubble going i.e new borrowers, are probably not flush with savings to throw 30k extra at greedy sellers, IMO most of the recent "boost" to the market has been due to the SD holiday and if the noises about "tightening"  from the BOE come to anything people overstretched on mortgage debt could start to feel a bit uncomfortable going forward.

AdrianC

lookstraightahead said:

I'm not so sure.

Purchaser has £40000, bank will lend £160000, price paid for house £200000

Purchaser has £40000, bank will lend £180000, price paid for house £220000.

Most people will take the most they can from the bank without a second thought.

In reality, that's more likely to be...

Purchaser has £40k equity + £160k mortgage - can offer £200k. Offer rejected, property sells to somebody else who can offer £220k.

Unless you're suggesting that this mug is willing to pay £220k for £200k-worth of property, just because that's what they can raise?

Tokmon

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house, but that has nothing to do with the real value of a house which can change very quickly if sentiment or maybe interest rates change.

Banks don't control the value of a house at all and the value of a house is how much people are willing to pay for them. If you look at mortgage criteria now they only allow up to 4.5x salary and at least a 5% minimum deposit but in the past they would happily lend far more and over 100% mortgages. So using your logic house prices should be on a downwards trend because banks are willing to lend less but that obviously hasn't been the case over the last 20 years.

Also there are less first time buyers being able to afford somewhere now so people with lots of equity are choosing to move instead. Due to the large amount of equity they have already it makes little difference to them if the bank value a house 20k less than they are willing to pay because they don't need to borrow anywhere near the maximum amount they are willing to lend them.

So people are the ones who definitely control the valuation because they are the one's offering more and more above what banks value them at and are happy to pay the difference to get the house they want.

Banks don't want people to borrow as much as possible and that's why they offer lower rates the more deposit someone has because the less they borrow the less risk their is for them. They certainly wouldn't want to overvalue houses and lend loads of money because that is extremely risky for them, they much prefer smaller mortgages with lots of equity so they know they won't lose out if anything goes wrong.

That is because interest rates have been cut to near zero, and transactions dropped to about half their peak some time ago (obviously the stamp duty stunt gave transactions a boost but that will soon peter out...........so obviously less tax and lower monthly payments push up prices, but what else can they do to keep prices going up?)

Less tax and lower monthly payments may have pushed up prices over the last year but there are a lot of other factors that will be pushing up prices because house prices have always been on an upwards trend no matter what the interest rate. 

People are offering 20k, 30k+ over asking price to secure houses and that isn't because they are saving a couple thousand on tax. There is a lot of demand at the moment and not much supply of houses that people want which is one of the reasons why it's so crazy recently.

? Stupidly low interest rates have been pushing up (or preventing prices going down if you want to look at it that way) prices since 2008. The people who keep the bubble going i.e new borrowers, are probably not flush with savings to throw 30k extra at greedy sellers, IMO most of the recent "boost" to the market has been due to the SD holiday and if the noises about "tightening"  from the BOE come to anything people overstretched on mortgage debt could start to feel a bit uncomfortable going forward.

What makes you so sure that it's the low interest rates that are the main factor for increasing prices?. Sellers aren't being "greedy" they are simply listing properties for how much they think it's worth and then multiple people are coming along and offering way over that to secure the property, it's not "greedy" to choose the highest offer like you would when you sell anything you own. 
The fact that houses are getting multiple offers so quickly after listing shows there is less supply than demand. If there was more supply there would be less potential buyers per house so less competition when making offers and people would be more likely to offer less knowing they didn't need to compete. So limited supply is definitely a factor in increasing house prices recently. 

Your also blaming new borrowers for increasing prices but like you said they are less likely to have extra cash. The people who already own homes with lots of equity are in the better position to offer over asking prices and again increase house prices because with high equity they can borrow more than a property is valued at and still easily get a mortgage at the LTV bracket they want. 

The Stamp Duty holiday has definitely exasperated the issue of limited supply by encouraging people who were unsure to actually start looking and aim to buy and sell by a certain deadline. But this only benefitted people who already own a home and was no benefit to first time buyers who already get stamp duty reductions which again shows it's more likely to be people who already own being encouraged to move by the SD holiday. 

Gavin83

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Tokmon said:

Crashy_Time said:

Arfa__ said:

We're currently selling and our EA warned us this has been happening a lot, especially where the buyer has offered particularly high. From what I understood, it's only a probably if the buyer doesn't have sufficient deposit and are borrowing more than the mortgage valuation. If they've got the cash or deposit, there's nowt to stop them from paying more.

Which category does your buyer fall in? Are they still able to proceed with their original offer or can they simply not borrow enough now?

Why would anyone want to pay more than the valuation on a house?

If no one every paid more than the valuation then technically house prices would never go up, so the overall trend shows many people will pay more than the valuation on a house which then pushes up the valuations. 

It is banks that ultimately control valuation not people, so what you really mean is that many people are willing to borrow whatever the bank is offering/valuing for a house? The bank is aiming to create as many future income streams as possible and get people borrowing as much as possible on their house, but that has nothing to do with the real value of a house which can change very quickly if sentiment or maybe interest rates change.

Banks don't control the value of a house at all and the value of a house is how much people are willing to pay for them. If you look at mortgage criteria now they only allow up to 4.5x salary and at least a 5% minimum deposit but in the past they would happily lend far more and over 100% mortgages. So using your logic house prices should be on a downwards trend because banks are willing to lend less but that obviously hasn't been the case over the last 20 years.

Also there are less first time buyers being able to afford somewhere now so people with lots of equity are choosing to move instead. Due to the large amount of equity they have already it makes little difference to them if the bank value a house 20k less than they are willing to pay because they don't need to borrow anywhere near the maximum amount they are willing to lend them.

So people are the ones who definitely control the valuation because they are the one's offering more and more above what banks value them at and are happy to pay the difference to get the house they want.

Banks don't want people to borrow as much as possible and that's why they offer lower rates the more deposit someone has because the less they borrow the less risk their is for them. They certainly wouldn't want to overvalue houses and lend loads of money because that is extremely risky for them, they much prefer smaller mortgages with lots of equity so they know they won't lose out if anything goes wrong.

That is because interest rates have been cut to near zero, and transactions dropped to about half their peak some time ago (obviously the stamp duty stunt gave transactions a boost but that will soon peter out...........so obviously less tax and lower monthly payments push up prices, but what else can they do to keep prices going up?)

Less tax and lower monthly payments may have pushed up prices over the last year but there are a lot of other factors that will be pushing up prices because house prices have always been on an upwards trend no matter what the interest rate. 

People are offering 20k, 30k+ over asking price to secure houses and that isn't because they are saving a couple thousand on tax. There is a lot of demand at the moment and not much supply of houses that people want which is one of the reasons why it's so crazy recently.

? Stupidly low interest rates have been pushing up (or preventing prices going down if you want to look at it that way) prices since 2008. The people who keep the bubble going i.e new borrowers, are probably not flush with savings to throw 30k extra at greedy sellers, IMO most of the recent "boost" to the market has been due to the SD holiday and if the noises about "tightening"  from the BOE come to anything people overstretched on mortgage debt could start to feel a bit uncomfortable going forward.

In what way are the sellers greedy if they list their house at X price and the buyers come along and offer over? That’s on the buyers, not the sellers.

Also I’m not really sure what you expect to happen from a BoE point. They’ve kept interest rates as they are. Sure, inflation is increasing and they’ve indicated interest rates will go up in the future but that’s not exactly surprising given how low they are. They won’t increase by anywhere near enough to make a real difference.

House prices increasing is a simple supply and demand situation. Everything else, interest rates, SD, etc is just noise.

My prediction is prices will level off a bit bit we’ll still see a steady increase over the next few years.