Falling house prices means more affordable homes/ moving house with negative equity.

"Andy Pandy" wrote

Well, if we have, then you probably lost the argument last time too!!

"Andy Pandy" wrote

Well, you pick whatever rate you think will be the maximum you can get.

"Andy Pandy" wrote

"Andy Pandy" wrote

"Andy Pandy" wrote

Yep, of course. But if the agents fee and SDLT had been lower so that the "new house" had cost between

100K and 105K, then the mortgage would be higher than previously and the house would be worse!

"Andy Pandy" wrote

"Andy Pandy" wrote

Yes, of course. But it might be easier for some people to afford a higher mortgage than a higher deposit.

"Andy Pandy" wrote

No, not ignored - just irrelevant. They can afford the bigger mortgage, but not a higher deposit.

"Andy Pandy" wrote

No, because then it would cost 138,750 so they'd need 42,000 for deposit/SDLT/agent, but only have 30,000 equity to spend.

"Andy Pandy" wrote

... which wouldn't be possible because we chose the maximum LTV available, see above.

"Andy Pandy" wrote

Perhaps because (say) they have only just finished paying off a car loan, and also just got a pay rise?

"Andy Pandy" wrote

Well, as long as it works for even just *one* person, then that means your comment at the top ("The only advantage ... is...") was WRONG!!

"Andy Pandy" wrote

Why do you think they chose that time to move house? It was because their circumstances had just changed...

Did it involve one of your famous fiddle factors? "The joy of having a

75% mortgage" - worth at least x,000 I think?

Any fixed LTV is a silly proviso Timmy. Not specifically 75%.

Unless there is some religion which has a commandment stating that "thou shalt not change thine LTV when thou movest house".

So why move?

But not a higher LTV. Oops sorry, I forgot the commandment.

And of course their God will strike them down should they dare change their LTV.

Ah yes, the 11th commandment...

Which gives them exactly enough to be able to move without breaking the 11th commandment. How convenient!

Sorry, I'd forgotton about those who worship the God of Fixed LTV.

Is that like when all the planets are in opposition? You can only move house when you get a 65% pay rise and your house has gone up by 25% - then you can move whilst retaining your 75% LTV.

"Andy Pandy" wrote

I doubt it.

"Andy Pandy" wrote

"Andy Pandy" wrote

If that's the maximum LTV that lenders are allowing, then you're stuck at that level, aren't you?

"Andy Pandy" wrote

You mean: "thou cannot force your lender to increase their maximum LTV?"

"Andy Pandy" wrote

Because their new job is 100s of miles away?

"Andy Pandy" wrote

The commandment that you can't force a lender to increase their maximum LTV?

"Andy Pandy" wrote

Maybe even their God can't force the lenders to change their maximum LTV?

"Andy Pandy" wrote

The commandment that you can't force lenders to increase their maximum LTV?

"Andy Pandy" wrote

Well, it gives them "at least enough" to move; not necessarily "exactly"...

"Andy Pandy" wrote

No, just those who realise that they can't force the lenders to increase their maximum LTV!!

"Andy Pandy" wrote

Eh? Been on the drink today, have you?

Oh, what a short memory you have!

No. You could get an unsecured loan. Which would of course be more expensive, but if the mortgage is cheaper then even with the higher rate on the unsecured loan you could end up paying less.

OK - 12th commandment: "Thou shalt not secure credit save from thine mortgage lender."

13th commandment: "Thou shalt not save for thine next deposit." 14th commandment "Thine lender shalt ignore salary multiples"

So how do you know the house would be "worse"? In a different part of the country housing could be cheaper.

No the 12-14th. See above.

God is all powerful. He can smite those lenders who use salary multiples to restrict mortgages, yet who are rock solid on LTV.

And the 12-14th.

Nor those who can obtain no credit elsewhere, despite getting a 65% pay rise....

Yes. I was celebrating reducing my LTV.

Thanks for answering the question.

Most people want to pay of the capital by the time they stop working. With inflation this may be quite painless (as long as wages rise as fast a prices as the did in the 1970s).

That seems too cruel, and not conducive to a social cohesion. (But a good opportunity for the rich to get richer!)

I am still wondering how non-oil Muslim world are getting on economically, since they're not supposed to have usury. e.g. Turkey / Indonesia / Egypt.

These people must be stupid, I only tend to increase my discretionary spending e.g. going to concerts.. Keeping your house becomes essential expenditure, and when you lose your job and the only one you can get is on much lower pay, this can cause anxiety.

I think a grammar flame is in order at this point.

I think wherever you've been using "thine" it should have been "thy". "Thine" means "yours" (as in "for thine is the power and the glory"), but "your" is "thy". "Drink to me only with thine eyes" is an example of incorrect usage, excused only by poetic licence.

Your additional commandments are intended to ridicule, but I think you'll find that the 12th commandment does actually apply. Is it not the case that standard mortgage T&Cs require you to confirm that the deposit is your own money? You're not allowed to borrow it, secured or otherwise (except perhaps informally from a family member on terms which would commute the loan into a gift if things should go pear-shaped), because otherwise the borrower's equity is lower than declared, and the lender's security is thereby compromised.

Profound apologies - they'd stopped using the 2nd person singular when I went to school ;-)

Just the normal banter with Tim...

Do they? I don't remember being asked.

Surely that's easily got around? For instance instead of buying a fridge, take out a loan for the fridge and then the money you would have spent on the fridge use towards your deposit. Similarly for the sofa. Or the credit card bill. Gas bill. Etc.

Mind you a pedantic God might view it as a breach of the 13th commandment.

The your/yours distinction is not between singular and plural, it is between singular nominative and singular genitive (or possessive if that's what you'd prefer to call it).

Shows how little attention you paid at school. :-)

Of course. I know.

Perhaps it was buried in the fine print.

That it would be easy is no excuse for doing it. It'd be deception, lying to your prospective lender. With all this talk of commandments, I should say it'd be a sin.

Quite, provided the 13th commandment is corrected to "Thou shalt save for your next deposit" (without the "not").

Not sure what a lender (an embodiment of God) could do about it if they found out, though. They'd be unlikely to force you to repay the loan immediately just out of spite, since they are after all in the business of making money off you. But if you did get into trouble with payments, they might be less sympathetic when deciding whether to repossess.

In the local rag, I've started using their feedback pages to rewrite articles from the buyers', rather than the sellers', point of view

If this means what I think, rather than as it reads, then what happens is the land price ratchets down, only geared. In Ireland, house prices are down about 40% (and counting) whereas land prices are down 75%

The problem of course is that once credit bubbls are over, real deposits are required by banks reacquainted with the concept of safe loans. Those changing houses also need to raise stamp duty and moving costs. Whereas in the bubble they can load this onto the new mortgage, essentially paying through equity gains, they have to raise real cash after the bust. Since that's hard, the market becomes less liquid.

IMHO the banks will choose, or be forced, to do this sooner or later.

FoFP

I doubt it. What we've seen up to now are housing cycles within a long credit cycle. Now that the credit bubble at the end of that cycle has burst, we'll be headed into a new credit cycle. One of the clear rules of those is that the Golden Ticket doesn't repeat. My guess would be that memory of the perniciousness of debt stays around long enough to prevent another cycle getting started until the second generation reaches adulthood. At that point the received wisdom mitigates against the previous Golden Ticket and there's usually legislation in place "to prevent this ever happening again".

Conclusion: another large credit bubble will get going around 2040 or so, but it won't be in domestic housing.

Tulips never did reach their peak price again.

FoFP

In fact there's a better way in (Sweden?). Make the price of mortgage-backed bonds vary with the house price index and allow people to settle their mortgages either with cash, or with the equivalent in face-value of the mortgage-backs.

E.G: You buy a house for 100 grand. Somewhere that's transferred into standardised mortgage-backed bonds (standardisation is important and it's one aspect of what was wrong in most western countries during the bubble as the yank industry is this week discovering to its cost).

If house prices go up 10%, then so do the bonds. So the homeowner could settle the mortgage with 100 grand in cash. If instead they go down, then so will the bonds. The homeowner then buys 100 grand in face-value of mortgage-backs for 90 grand and settles the mortgage with the bonds.

End result: no negative equity.

Of course what this does is put the capital risk with the lenders and they will of course charge extra interest for that risk. Looks like that amounts to a half-percent give or take. Perhaps worth it to substantially rid an economy of negative equity? Note that NE still exists where local conditions mean that prices have fallen more than the national average.

The advantages of creating standard mortgage-backs are obvious and the complete chaos in the US mortgage markets just now indicate why: you can do the paperwork honestly and straightforwardly when all the bonds are identical rather than all custom-built.

The advantages of getting rid of negative equity are also obvious and the qustion is simply whether the extra interest is a reasonable price for this.

I'm certainly surprised that none of the inquires into what went wrong have touched upon these possibilities.

FoFP

M Holmes gurgled happily, sounding much like they were saying:

It reads clearly enough to me - and you're on the right lines, but need to go a bit further.

The build cost is below the market value of the finished property - in other words, the land value is effectively negative.

No, you mean "more than ..."

I believe that OP Dave and you have this backwards - it is in more healthy times than is alleged now in Ireland that the build cost is less than market value so that the land has value and also the developer can make a profit.

Tony

i don't believe credit is the only driver....

there is population growth and fiat based currency

that's a relief, eh

people don't live in tulip bulbs...

regards

When students are going to be leaving university with a debt larger than their parents had when buying their first house I can't see fear of debt being a problem.

Tim.

Yebbut thine/thy etc is (or rather, was) second person singular. They'd stopped using it when I went to school which explains why I mixed the nominative and genitive.

I always read the small print.

Why would it be deception? Is any money you have in your bank not "yours" if you have any sort of loan? Even temporary credit card debt which you always pay off in full?

Housing stock is growing faster than population. The population only grew about 3% over the last 10 years, the number of households grew about 9%.

Ah yes, the usual bullshit reasoning as to why the housing market is completely different to any other market.