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Amnesia10
Legend
Joined: Fri Apr 24, 2009 2:02 am
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Location: Guantanamo Bay (thanks bobbdobbs)
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 http://www.telegraph.co.uk/finance/pers ... gages.html | | | | Quote: The powers will mean that, for the first time in the modern era, the Bank could impose restrictions on the amount banks can lend.
The reforms, to be sketched out in the Chancellor's first Mansion House speech in the City of London, represent a revolution for the City, since in the past banks have always had freedom to decide to whom they can lend.
The Bank and its Governor, Mervyn King, would be able to prevent banks from lending too much, or to over-extended customers, if they judge that this would destabilise the economy.
The precise details of the controls the Bank is to be given will be detailed fully at a later date.
However, they are likely to include restrictions on the loan-to-value ratios offered to customers. For instance, families could be prevented from taking out a mortgage for anything more than 75 per cent of the value of their home. | | | | |
A good thing but really if this had been in place we would have had a far more stable property market.
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| Wed Jun 16, 2010 3:43 am |
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l3v1ck
What's a life?
Joined: Fri Apr 24, 2009 10:21 am
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Location: The Right Side of the Pennines (metaphorically & geographically)
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I agree in principle, but a maximum mortgage of 75% is just stupid. 90 to 95% (including any fees etc) is a more realistic limit.
100% mortgages (and over) should be banned. If you can't afford to save a small deposit, how are you going to afford the repayments? Mortgages are nearly always more expensive than the rent people pay before they buy a house.
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| Wed Jun 16, 2010 10:28 am |
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dogbert10
Doesn't have much of a life
Joined: Thu Apr 23, 2009 8:23 pm
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Location: 3959 miles from the centre of the Earth - give or take a bit
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Surely a mortgage should be based on how much money you earn, not the price of the house?
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| Wed Jun 16, 2010 10:58 am |
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jonlumb
Spends far too much time on here
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Location: Exeter
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Well both really, as the mortgage is secured against the value of the property, so it is important in assessing the risk involved to the lender.
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| Wed Jun 16, 2010 11:00 am |
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l3v1ck
What's a life?
Joined: Fri Apr 24, 2009 10:21 am
Posts: 12700
Location: The Right Side of the Pennines (metaphorically & geographically)
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How much they'll lend you is based on what you earn. The rate at which they'll lend it you depends on the loan to value ratio. The higher the ratio, the greater the risk of negative equity for the bank. The greater the risk the greater the interest rate to help protect the bank from losing any money.
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| Wed Jun 16, 2010 11:55 am |
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Amnesia10
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Location: Guantanamo Bay (thanks bobbdobbs)
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Over the long term I do agree with it being a maximum of 75% but until then it should be higher and come down slowly. People need to realise that housing is not a great investment and if everyone had a loan to value of 75% it would eliminate foreclosures in a crash. This last crash property values fell more than 20% much more than than they have ever fallen before, yet people still think of it as a investment. Banks like the fact that people can borrow way more than they can afford because they can charge higher interest rates on high loan to values. _________________Do concentrate, 007... "You are gifted. Mine is bordering on seven seconds." https://www.dropbox.com/referrals/NTg5MzczNTkhttp://astore.amazon.co.uk/wwwx404couk-21
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| Wed Jun 16, 2010 9:36 pm |
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Linux_User
I haven't seen my friends in so long
Joined: Tue May 05, 2009 3:29 pm
Posts: 7173
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Negative equity is not a problem as long as you can keep making repayments. Over the long term house prices continue to increase, and thus property was/is about the best investment you can make.
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| Wed Jun 16, 2010 10:38 pm |
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ProfessorF
What's a life?
Joined: Thu Apr 23, 2009 7:56 pm
Posts: 12030
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They certainly used to be. During a garage tidy out, we found some info on a house my parents owned in the 70s. They bought it for about £4,500. Over the long term, property is still a very sound investment. It's a commodity of very limited supply in a time when housing is in demand due to a growing population. It's not rocket science. We don't have limitless space or homes, so what we have therefore commands a premium above what you might reasonably expect. The price of a house isn't going to get significantly cheaper in the long term.
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| Wed Jun 16, 2010 10:45 pm |
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Amnesia10
Legend
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Location: Guantanamo Bay (thanks bobbdobbs)
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Add in the fact that it is tax free unlike any other investment.  _________________Do concentrate, 007... "You are gifted. Mine is bordering on seven seconds." https://www.dropbox.com/referrals/NTg5MzczNTkhttp://astore.amazon.co.uk/wwwx404couk-21
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| Wed Jun 16, 2010 11:03 pm |
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Linux_User
I haven't seen my friends in so long
Joined: Tue May 05, 2009 3:29 pm
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Unless it's not your primary residence, in which case it will attract capital gains tax when you come to sell it. And that's not to mention stamp duty etc.
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| Wed Jun 16, 2010 11:08 pm |
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Amnesia10
Legend
Joined: Fri Apr 24, 2009 2:02 am
Posts: 29240
Location: Guantanamo Bay (thanks bobbdobbs)
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And why do you think MP's were flipping their residences? To avoid that tax. It is very easily avoidable. It might take some time to sell a large number of homes to avoid the tax but it is avoidable for the vast majority who only have half a dozen homes or less. _________________Do concentrate, 007... "You are gifted. Mine is bordering on seven seconds." https://www.dropbox.com/referrals/NTg5MzczNTkhttp://astore.amazon.co.uk/wwwx404couk-21
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| Wed Jun 16, 2010 11:11 pm |
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