House prices to crash

[Uncle Spielberg]

I'm confused. First you said it would "stall" the market, then when [MENTION=6886]Bozza[/MENTION] replied that he felt this is exactly what the market needs, you appeared to change your view and are now saying it will force a downturn in the market.

So as a mortgage broker, what do you actually mean? Is MMR likely to force the market to stall (plateau/cool down?) or will there be a downturn (prices going to fall)?

I'm interested because my house goes on the market TODAY.

It is all opinions Simster. I think the MMR and the resulting tightening of lending will have a big impact on the market, at least initially. If people struggle to get mortgage finance that will have an impact on the market so a stall is likely for 6 months, maybe a slight fall in prices in london and the south east. However making predictions is always risky as the OP has found out 4 years on.

 

[somerset]

Give it a month or two and ways around the expenditure criteria will be exploited. Whenever this amateurish, ill founded, inexact and incompetent measure is used to 'improve' any lending decision a few years down the line it is found to have been manipulated and has added no value to the decision making process

Not this time because of course the government is virtually eliminating the risk to bank lending by insisting on all these new pre reqs being enforced. So if it starts to go the way of the pear, the government has underwritten huge chunks of the exposure.....but they will withdraw their support if they find that the banks have been taking short cuts or exploiting loopholes.

 

[Tim Over Whelmed]

Supply is still going to be outstripped by demand, prices will continue to rise albeit slower. Houses are still going to be very much in demand. No crash.

 

[Vegas Seagull]

Not this time because of course the government is virtually eliminating the risk to bank lending by insisting on all these new pre reqs being enforced. So if it starts to go the way of the pear, the government has underwritten huge chunks of the exposure.....but they will withdraw their support if they find that the banks have been taking short cuts or exploiting loopholes.

Honourable, but incorrect.

For example, who is going to uncover a stated monthly clothing expenditure of £200, when the average is say £100, when that person actually spends £300pm over a year?

Conversely I&E forms also give a misleading picture AGAINST the borrower. They do not take into account how people adjust their habits after gaining a product ie in order to pay a mortgage the above person may well happily reduce their clothing bill to £100pm.

Statistically proven to be not predictive

 

[somerset]

Honourable, but incorrect.

For example, who is going to uncover a stated monthly clothing expenditure of £200, when the average is say £100, when that person actually spends £300pm over a year?

Conversely I&E forms also give a misleading picture AGAINST the borrower. They do not take into account how people adjust their habits after gaining a product ie in order to pay a mortgage the above person may well happily reduce their clothing bill to £100pm.

Statistically proven to add no value

Since it was only fully introduced in April, I fail to see where the stats come from. all your assertions are just guesswork.

 

[Vegas Seagull]

Since it was only fully introduced in April, I fail to see where the stats come from. all your assertions are just guesswork.

I&E forms have been 'used' for decades across various lending products..and always statistically dismissed.

 

[Uncle Spielberg]

Honourable, but incorrect.

For example, who is going to uncover a stated monthly clothing expenditure of £200, when the average is say £100, when that person actually spends £300pm over a year?

Conversely I&E forms also give a misleading picture AGAINST the borrower. They do not take into account how people adjust their habits after gaining a product ie in order to pay a mortgage the above person may well happily reduce their clothing bill to £100pm.

Statistically proven to be not predictive

Lenders scrutinize 3 months bank statements looking at all transactions.

 

[Bozza]

Lenders scrutinize 3 months bank statements looking at all transactions.

The curious thing about that approach, for someone like me, is that my bank statements tell you absolutely nothing about my spending habits as I use a credit card for every purchase I can, no matter how small, so that I pick up Virgin Atlantic miles. What my bank statement will show is:

- Salary coming in
- Usual direct debits coming out
- The odd very small cash withdrawal
- Payment to a credit card

My bank statement never contains a single debit card payment, so reveals absolutely nothing about how I spend my money.

 

[Uncle Spielberg]

The curious thing about that approach, for someone like me, is that my bank statements tell you absolutely nothing about my spending habits as I use a credit card for every purchase I can, no matter how small, so that I pick up Virgin Atlantic miles. What my bank statement will show is:

- Salary coming in
- Usual direct debits coming out
- The odd very small cash withdrawal
- Payment to a credit card

My bank statement never contains a single debit card payment, so reveals absolutely nothing about how I spend my money.

The flaw in the whole process is that a lender will decide a 25 year mortgage on a snap shot of that persons finances the day it hits the underwriters desk. The issue is the applicant could take out a £ 400 pm loan or put £ 10k on their credit card the day after completion so their meticulous checks have been an utter waste of time.

 

[Brighton Mod]

No they won't, they may stabilise, but they won't CRASH

 

[Bozza]

The flaw in the whole process is that a lender will decide a 25 year mortgage on a snap shot of that persons finances the day it hits the underwriters desk. The issue is the applicant could take out a £ 400 pm loan or put £ 10k on their credit card the day after completion so their meticulous checks have been an utter waste of time.

If that's a flaw, then it's not a new one. Prospective borrowers have always been asked if they have a loan and, if so, the term and monthly repayments. They've always been asked about credit card balances.

So, a borrower has always been able to say, truthfully, 'no loan' and 'no outstanding credit card balances' when applying for a mortgage before plunging themselves into debt as soon as they have a mortgage agreed.

Given what has happened in the past I'm not sure how anyone, least of all someone in the industry, can argue that any attempt to make lending more responsible is a bad thing.

 

[Uncle Spielberg]

No they won't, they may stabilise, but they won't CRASH

This is my take on it. Stable for a while, maybe a small decrease the second half of this year, 2%.

 

[Uncle Spielberg]

If that's a flaw, then it's not a new one. Prospective borrowers have always been asked if they have a loan and, if so, the term and monthly repayments. They've always been asked about credit card balances.

So, a borrower has always been able to say, truthfully, 'no loan' and 'no outstanding credit card balances' when applying for a mortgage before plunging themselves into debt as soon as they have a mortgage agreed.

Given what has happened in the past I'm not sure how anyone, least of all someone in the industry, can argue that any attempt to make lending more responsible is a bad thing.

The idea is sound , yes.

 

[somerset]

I&E forms have been 'used' for decades across various lending products..and always statistically dismissed.

No , the new system that applies from this year, where both parties are responsible and accountable.... risk mitigation is the name of the game, backed up by FSA regs in a way it never has been before,....so lenders cannot massage the figures just to increase their income, and borrowers cannot lie in the way they used to.

This has the effect in most cases of individuals cutting their cloth, it also means that the larger deposits being asked for are at risk, so borrowers are less likely to risk losing money scrimped and saved for by being reckless.

 

[The Antikythera Mechanism]

I've been looking to buy investment properties, but in my area - Surrey/Hampshire borders - property prices are overheating. New developments are being sold out as soon as they come to the market, with a queue of 3 buyers per property in case someone pulls out. There is almost a panic to buy and most properties sell at the asking price. My take on it is that with a lot of the buyers having low deposit, 2 year fixed deal mortgages there are going to be a lot of sad faces when they find that the remortgage offers after that date have increased considerably, as rates are bound to rise between now and then. Any increase in interest rates will impact on selling prices and people will find that their properties haven't appreciated and will have possibly fallen as a result of buying at inflated prices. I think that in 2 years time there will be a glut of properties coming onto the market because of people not being able to pay the mortgage, coupled with the fear that prices will fall if they stay put.

 

[DJ NOBO]

It is all opinions Simster. I think the MMR and the resulting tightening of lending will have a big impact on the market, at least initially. If people struggle to get mortgage finance that will have an impact on the market so a stall is likely for 6 months, maybe a slight fall in prices in london and the south east. However making predictions is always risky as the OP has found out 4 years on.

Decent prediction, that

 

[Diablo]

Here we go, it's show time. The proper house price crash is under way.

We have just passed the denial and bull trap phases where recent buyers have been suckered into the market by a mismatch between supply and demand.

The "return to normal" was never going to last, so get ready for the real action.

In the last four years house prices in South East have increased 16.6%. Hardly a crash. Hindsight is a fine thing....Most so called experts are now predicting 30/40% increase in next five years. Frightening for anyone wishing to buy first home.

 

[CheeseRolls]

So let's see,

Schools are absolutely bulging with sprogs, so long term demand looks strong.

Next year the 55 pluses get to raid their pension funds, some will fritter their money away, some will invest wisely, others will put their money in the tried and tested and buy UK property.

This is neither investment advice or a plan I intend to follow through myself, just an observation, that our over-valued housing market, still has some potential to grow further.

 

[Uncle Spielberg]

Decent prediction, that

On the money

 

[Zukey Seagull]

In the last four years house prices in South East have increased 16.6%. Hardly a crash. Hindsight is a fine thing....Most so called experts are now predicting 30/40% increase in next five years. Frightening for anyone wishing to buy first home.

I am looking to buy my first ever property at the moment and the house prices are crazy at the moment. we can not afford to much. sorry to bump the thread but I didn't want to start a new (thread) one when I saw this.
we are looking in lancing way and portslade. does anyone recommend anywhere else? which is not over-priced