House price inflation? Simple as this?

2 is the way, doubt they got the balls for it tho.

The lack of council housing and the growth of Buy to let has resulted in private Landlords renting their properties to the council for the people they don't have properties for.  A couple of blocks of private owned flats near me are now half occupied by council tennants not to the delight of those private owners now finding themselves living a defacto council block.

Melv

The Housing market and the banks. You can not have healthy banks if you do not have a healthy housing market. The UK and its future depends on getting the taxpayers money back with Interest. To do this the housing market will be protected at all costs, because it will lead to massive profits for the banks. 5 years of low interest rates equal a healthy housing market and healthy banks!

we dont HAVE a healthy market though chisel. houses are COMPLETELY unaffordable by historical measures and need to drop massively if people o fmy generation (im 25) are to have anything like the chances our parents got with regard to home ownership. Frankly, I suspect the biggest house I will ever live in was my parents house which has tripled in value in about 15 years - which is clearly ridiculous.

chilly you need a 20% deposit and a motrtgage at about 6 to 7 %,should be possible if you have 2 wages coming in,your parents along the way will have spent alot of time paying rates at 10% plus,100 to 110% mortgages are a modern trend

In my opinion one of the major reasons the banks got into such a mess was because of the astronomical sums they were lending as a direct result of over-inflated house prices.

The more expensive houses are the more money the banks need to lend.

I dont want a mortgage at 110%, I want to be able to afford a house within 2 hours of where I work - I'm willing to save up for my deposit.

Chilly

The housing market is not the problem it is the credit market. If lenders were lending at 95-100% like they were two or three years ago houses are actually very affordable in a lot of areas..

Margins on mortgages of 85-90% are enormous, and are one of teh reasons that the banks are making so much money

chisel 24 Aug 10 14:04   
If lenders were lending at 95-100% like they were two or three years ago

And what happend 3 years ago ?? Havn't you learnt anything in the last 3 years ?? You really want to go back to 95-100% mortgages almost all on a interest only basis ?? ... You thick sh1t .

dont mention interest only mortgages on here you,ll have the usual loonies on ,telling us what a great vehicle for borrowing they are,quoting there grannys inheritance,reinventing the wheel etc as reasons they should be given one

I firmly believe that selling mortgages at rates of over 85% is not healthy for society. It means people will take their responsiblity as a debtor less seriously and generally take more risks. Saving for a deposit implies financial sense and a good income. Asking somone to only pony up 10 grand on a 300k house is a joke. The PROBLEM is that house prices are too high. It's nothing to do with the credit market.

Chilly

How do you work that out then?

The fact is that mortgages at 90-95% for the right people are not a problem. You are basically saying that mortgages at 85% are fine , and that it does not matter how much money they owe elsewhere on Car loans and credit cards!!

Somebody with no loans and a mortgage at 95% is a better borrower than someone with £300 per month car loan, 10000 on a credit card and an 85% mortgage.. You have tyo look at the bigger picture!

Sharky

I agree that 100% pplus mortgages are wrong, but 95% lending should be commonplace for the right borrower, who has a good steady income stream and no silly uinsecured commitments. It was Buy to Let and 100% mortgages that fueled teh market .  There will be no return to teh good old days so you neednt worry!!

Chisel,

There is no problem with 95% loans if the market moves perpetually upwards. Any significant drop, though, and obviously the borrower is f*cked.

I understand teh concerns. Maybe lenders could protect themselves by making maximum terms of 25 years and mayber reducing the income multiples they lend at.. Something needs to be done to help decent borrowers with good jobs and nmodest deposits. There is nothing wrong with Borrowing money if you can afford the payments.

but 95% lending should be commonplace for the right borrower, who has a good steady income stream and no silly uinsecured commitments.

Lenders protect themselves, in a steady market and a growing economy there is no problem with 95% mortgages.
In today’s market where defaulting on a mortgage is more likely and a fall in the market could leave the lender out of pocket if they had to reposes and sell, big deposits are to be expected.

The lack of social housing thanks to Thatchers right to buy scheme has left the young in this country, stuffed, facing living at home till their 30s or paying exorbitant private rentals and unable to afford to buy exorbitantly priced housing of their own .  It leads to a lack of a future generation since the only way many people can afford to have children is through subsidized housing and there isn't anywhere near enough of it.  I remember years ago friends of mine getting a £16k golden handshake in return for buying their rented property.  I thought it stank at the time for differing reasons as it was inherently unfair.  Not only had they been paying a fraction of what others had to pay in rent but on top of that they were being offered a £16k bonus.  Now it appears that what this amounted to was a sell off of public assets that the country cant afford to replace.  The recent Labout govt has exacerbated the problem with public finance initiatives getting private contractors to build schools and hospitals and renting them back from them meaning a future debt that our kids will have to pay back.  The govt cant just build new housing because we have no money thanks to years of overspending.  Raising taxes for more public spending isnt an option as the economy is too fragile so it has to be private housing and much more relaxed planning and mebbe some tax initiatives for building firms.  I have shares in Wolseley which is a building materials firm and they have bombed recently so clearly some tax breaks are needed to get builders building again.

I sold my 2 bedroom flat in Harlesden NW London in 1996 for £62,500.  An almost identical property is currently on offer for £235k.  Harlesden tbh is a bit of a dive (was probably the cheapest zone 2 area covering the whole of NW and SW London when I lived there) and to think that a first time buyer would need to earn £60k a year and have a £60k deposit is mind boggling to me.

You can't just blame Thatcher for the lack of social housing.  She has been of the scene for 20 years - she resigned in 1990.

The last government had 13 years, a good working majority and the strongest post-war economic inheritance.  If it had wanted to address the housing issue it could have done - it had the monehy and the votes.  In fact, NuLab presided over 5 consecutive record lows in post-war housing starts, 3 of these before the credit crunch.

Brown & Co fuelled the property bubble with its illusion of increasing wealth for all (who owned property) which they thought translated into votes.  It was a short-term strategy with no regard to the longer term consequences.

theres a major point being missed here, punters.

the problem is this. the cost of living in a house takes up far too much of a person/couples income.

by the time the person pays their mortgage/rent, poll tax, utiliities, food, car costs, etc - how much is left? the average person doesnt have a lot left. how much can he put away for saving - hardly any. saving is the key. msot people live a hand to mouth existence.

so, if the poor sod loses their job, they havent got anything to fallback on. thats when even the shrewdest HAVE to use credit cards, etc and get even deeper in the 5hite.

something HAS to give. the cost of living is far too great for the average person.

personally i would look at taking the banking structure apart and starting again. brown ahd the chance to nationalise it nearly 2 yrs ago - but didnt, the twunt.

No you're wrong Brown DID nationalise the banks.  Should have let them fail in my opinion... they need to learn from their mistakes not be rewarded for them at the tax payer's expense. 

But you're also right about crazy house prices meaning people don't have money to save/spend on anything else.  Low interest rates won't be here forever so prices will fall, it's just a case of when.

he didnt totally nationalise them completely. 70%of rbs, 40% of another, 12% of another.

he should have gone in and said 'you lot naused it - u need govt cash, so we're taking u over 100% at the share price'. what were their share prices - rbs 12p, lloyds 30-40p. the amount he would have laid out would have been buttons, compared to what he was getting - a huge %age of the retail banking industry.

the govt would then have been in control of a lump of high st lending and been able to offer serious competition to bx and hsbc, whilst getting the nations biggest porfit makers for shrapnel.