New lending rules may change housing market forever

New lending rules may change housing market forever

15:58 PM, 20th January 2011, About 12 years ago 17

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Poor mortgage market management by governments and greedy lenders is blamed for triggering the global financial crisis and hindering recovery  in a blistering study.

Lenders giving easy access to credit fuelled rising house prices – and irresponsible banks were aided in pushing the economy to the brink by the lack of financial regulation from governments.

The solution, says the Organisation for Economic Co-operation and Development (OECD), a think tank sponsored by all the world’s major economies, is a combination of reforms overhauling tax, rental market rules and financial sector regulation.

The OECD has issued a roadmap for governments to follow for promoting sounder housing policies.

“OECD countries have seen the damage caused by badly designed policies through their effects on housing markets,” said OECD Secretary-General Angel Gurria.

“As we search for new sources of growth, as we seek to restore trust in our financial sectors, as we try to green our economies, policies related to housing can have a huge impact on our future”.

Lenders in bitter battle against mortgage reform

The OECD says that easy credit over the past two decades amplified price volatility, with real housing price jumps of 90% or more in Australia, Belgium, Finland, Ireland, Netherlands, New Zealand, Norway, Spain and the UK.

At the same time, deregulation and innovation in mortgage markets – coupled with inadequate supervisory frameworks – contributed to a significant relaxation in lending standards, an increase in non-performing loans and the sub-prime crisis.

The OECD recommends tighter controls over mortgage lenders and  the availability of mortgages.

The UK’s Financial Services Authority is already moving towards this against bitter arguments from banks that claim home loans will be restricted to only a few borrowers if the rules are imposed on them.

The FSA’S mortgage market review includes proposals to scrap interest only loans, to restrict borrowing limits to  75% of a home’s value and to force lenders to make sure customers can afford to repay a loan.

The FSA proposals are backed by an EC mortgage directive containing many similar proposals that will soon come in to force in the UK.


10:29 AM, 28th January 2011, About 12 years ago

This is going to be a disaster....
does anyone have a timeline?
What % of UK mortgages are interest only
Will it apply to all, including BTL?
Is it definatley going to be applied 'retrospectively' to all existing homes?
Does a mortgage on 2 year fix actually come up 'for rewenal'. I would argue the contract has not ended, the bank/mortgage is an ongoing contract obligation, even if that means it moves onto SVR.
I have 4 house all working fine, all mortgages supplied with full IFA advice and endorsed by bank. How can it be legal to change the rules on a contract retrospecively and throw people onto street?
Madness heaped on madness

10:57 AM, 28th January 2011, About 12 years ago

I lost two properties because £2k of arrears, as the tenants couldn't pay the rent, and I was not able to stretch to cover all 4 properties including my residential property.

My 1 remaining buy-to let is £3.5k in rent arrears. I had to fight to stop a repossession order before Christmas. I am concerned about the future as the tenant is struggling to get bac in work. With 2 in 3 jobs going to EC candidates (press earlier this week) and more and more Brits unemployed, I fear for the future of the private rental market.

11:00 AM, 28th January 2011, About 12 years ago

gradually over time the gap between income and house prices had increased, if this continues over the next 10 - 20 years and so on, it will mean

a) capital repayment will eventually be removed as it is no longer affordable.
b) BOE base rate will be governed by the nations incomes.

Mark Alexander - Founder of Property118

11:04 AM, 28th January 2011, About 12 years ago

Hi Janette

I'm so sorry to hear of your woes but thank you for sharing your story.

It is possible to insure against this for a premium of 6% of rent, subject of course to tenant referencing. In return rental payments are guaranteed to be paid on the due date every month.

I'm so sorry this news is too late to help with your circumstances but it may well be useful for other people reading this.

Just remember, several millionaires lost everything many times over before succeeding. Easier said than done I know but there's plenty proof out there that it's possible.

I wish you well.


Mark Alexander

11:32 AM, 28th January 2011, About 12 years ago

b) BOE base rate will be governed by the nations income ability to service the existing debt,
c) inflation will become mans best friend 🙂
d) pensions will become invested in commodities and property.

14:18 PM, 28th January 2011, About 12 years ago

I have two mortgages on repayment and one on interest only for small low value properties. When I took out the loans nine years ago - at that time as an expatriate with a low income, only one lender would lend to me since I didn't meet the normal rigorous lending criteria even in the time of easy credit.
Now I am left with a total debt of 30k spread over 5 properties. It must be rated an excellent risk on anyone's criteria. The lender was a bit pricier than the others but they made an excellent judgement. It seems to me that conditions do need to be tightened up, but more attention should be given to judgement and assessment of the record of the borrower and less to rigid criteria. Interest only loans obviously fulfil a role, particularly where the risk can be spread over several properties (as in my case). I agree that increasing the deposits required is sensible - but that has happened in the marketplace anyway - but it definitely needs to be done in such a manner that FTB can still enter the market otherwise there will, as some have commented, be a catastrophic fall in the market that has a knock on effect to the whole economy.

Mark Alexander - Founder of Property118

10:42 AM, 29th January 2011, About 12 years ago

Hi Richard

Apart from our views on interest only, our strategies are not too dis-similar. My strategy is explained more fully here.



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