Thursday, 5 January 2012

"Mortgage rationing improves, Bank of England warns"

From the BBC:

Home buyers will find it easier to by a house in future, the Bank of England says. Its quarterly survey of lending activity shows that lenders are going to be more sensible about prospective customers.

"Lenders expected an improvement of credit scoring criteria for granting new secured loans to households," the Bank said.

It said prospective purchers were worried about the poor economy but optimistic about falling house prices.

"Factors such as the cost and availability of funds and the economic outlook were all expected to help deflate the credit-fuelled house price bubble," the Bank reported, in its survey of credit conditions, "Lenders expected the proportion of reckless and purely speculative loan applications being approved to fall significantly over the coming quarter with some lenders commenting that they no longer included future windfall capital gains as part of households' disposable incomes and hence the affordability of taking out new secured loans will improve," the Bank added.

Banks and building societies told the Bank that this outbreak of commonsense had put off many house price speculators from applying for mortgages. Any increase in lending in the next few months, the lenders said, was likely to be concentrated on those borrowers who could afford to cushion banks against losses by putting down a large deposit; with a corresponding fall in highly leveraged speculation.


Lola said...

"Factors such as the cost and availability of funds and the economic outlook were all expected to help deflate the credit-fuelled house price bubble Bloody priceless. 'Credit fuelled house price bubble" And who's fault is that then, Mervyn, you wanker.

Bayard said...

Mark, you wish!

Lola, this is one of Mark's rewrites.

Re the original article, I wonder what proportion of the population believes this shit because they think it's true and what proportion believes it because they want it to be true.

Richard Allan said...

I keep forgetting to post this, but on my high street, a bank/building society (the yellow one??) is trumpeting the return of 95% LTV lending. "Good news!" No it fucking isn't.

Mark Wadsworth said...

L, it's his fault (but Eddie George got it all started).

B, I think people believe it. Ever rising house prices are seen as an unstoppable force that happens entirely independently of anything else, i.e. mortgage lending has only increased because house prices were going up anyway. See also: "if house prices rise, we become collectively richer".

RA, I'm stumped now. Neither the wife nor I can think of a bank/BS that uses yellow.

Anonymous said...

Apologies - but MW might like this - especially the use of non emotive terms like "sprawl" -

better yet, it is running alongside another report which I have no doubt will also have locals reaching for the green pen:-

Mark Wadsworth said...

Anon, yes, very fair and balanced reporting there:

absolutely gutting
crushing blow
absolute mayhem
terrible evening
absolutely appalled

the comments are ten times worse. I just don't understand how we are supposed to survive as a nation when everybody just hates and despises everybody else.

formertory said...

MW: The Yellow One .

They tend to use annualised rates based on a monthly charging period. Makes the headline rate slightly lower while they preserve their lending margin. Interesting also to note the tiered rates! Can't recall when exactly but one of your blog posts some time ago dealt with risk and interest rates and the tiering of rates to match risk.

Personally, don't have too much of a philosophical problem with people looking to fix for 5+ years even at high LTV, as acceptance of the higher rate - in return for security - may be the nearest these people have got to financial sanity since they decided "the housing ladder" was the place to be.

Dunno what Lola thinks, but that's my 2p's worth. At least they're pricing risk better than they used to.

Mark Wadsworth said...

FT, thanks. You said The Leeds and now I'm smiling again.

Personally, I don't think that their tiers come anywhere close to covering the bank for the extra risk of a 95% mortgage not a 90% mortgage, but hey, what do I know.

Richard Allan said...

It's definitely The Leeds, Epsom is the branch I'm thinking of.

Bayard said...

"I just don't understand how we are supposed to survive as a nation when everybody just hates and despises everybody else"

Well, we've survived over a thousand years. I think the hating and despising is what has made the English make good soldiers and gained us an empire. For another take on this (albeit an American one), listen to "National Brotherhood Week" by Tom Lehrer (

formertory said...

MW, as you pointed out in the post I was thinking of, the effective rate on each LTV "tier" increases quite sharply.

Whether Leeds have correctly priced their risk is up to them (and their members) but the point is more about highly leveraged borrowers being prepared to accept pain now in exchange for security in future should rates rise.

Mark Wadsworth said...

RA, but are you smiling?

B, so what happened to the Empire? What good did that do us?

FT, yes, when I did the workings, the marginal rate for anything over 90% LTV was something like 15% (but that might be less now that banks assume they'll always be bailed out and the government will flatly refuse to allow house prices to normalise again).

Bayard said...

B, so what happened to the Empire? What good did that do us?

The pols gave it away, once it was no longer profitable, but before that, a lot of people got very rich out of it.

Richard Allan said...

I should point out that I don't have a problem with 95% LTV as such. I'm just making the rather question-begging point that I believe it's only possible because of damaging regulations/subsidies, which are the real problem in themselves.

Mark Wadsworth said...

B, the top 1% got very rich out of it. The average living standards of the common man was not significantly better in the UK than in France or Germany. If anything, it was probably worse, hence and why so many more Brits buggered off to the USA or the colonies.

RA, agreed. Back in the mid 1990s when houses were very cheap, 95% was perfectly reasonable, because by and large that was still only three times income. Remember: high loan-to-value ratios are at the bank's risk; high loan-to-income ratios are at the borrower's risk.

DBC Reed said...

There is a rich vein of background for the UKipper to mine in the matter of Empire .Some of resistance to the Common Market came from people on the right (some on the left) who saw our joining as being forced on us by the Americans who had robbed us of protected markets in an Imperial Free Trade Area generally subsumed by the term Imperial Preference.This >on Net from the UD Dept of State, Office of the Historian, Milestones 1937-1945 Atlantic Charter "Roosevelt also wished to arrange the terms by which Great Britain would repay the United States for its Lend-Lease assistance.Roosevelt wanted the British to pay compensation by dismantling the system of Imperial Preference which had been established during the Great Derpression and was designed to enlarge trade within the British Empire by lowering tariff rates between members whilst maintaining discriminatory tariffs against outsiders" ie. an Imperial Common Market.This is an official American source.Imperial Preference must have been working because Roosevelt never stopped banging on about it.Imperial Preference was eventually ended under the terms of the Anglo American loan in 1946;the Hansard of the Parliamentary debate on the subject shows some members were only too aware that the end of Imperial Preference was a death knell i.e. the US made us pay for holding out in the war by imposing a loan at commercial rates of interest while taking our export markets.Some MP's like Enoch Powell were even more anti-American than that but they were neutralised by the Suez debacle.Powell's full anti Americanism only came out in the1980's.

Mark Wadsworth said...

DBC, interestingly, it is stated UKIP policy to say

"For sure, we might get chucked out of the EU common market (even though this is highly unlikely as the EU has free trade agreements with dozens of countries), but either way, the first thing we will do is reinstate free trade between Commonwealth countries (the IP in all but name)."

For my part, just because I am anti-EU does not mean I am anti-European countries, it does not mean I am pro-USA, I'm indifferent on the Commonwealth and let's forget about the Empire, that's all past history.

DBC Reed said...

The Empire may be "past history" but it still determines the pattern of settlement and indudtrial infrastucuture of this country.When you ask how the workers profited by Imperial arrangements, a snap answer might be :Liverpool, where people not only worked in the docks,but in industries dependent on sugar (Tate's) tobacco (Ogdens)and cotton (all over Lancashire)from plantations worked by slaves or later indentured labourers from India and China.
The ending of Imperial Preference probably speeds Liverpool's decline with a population loss of one third since the War.All this talk of "managed v unmanaged" decline is after the event .The fact remains that there are vast swathes of North West England with cheap housing and no work from which people can't move because they can't afford the housing in prosperous areas.(The Andrew Oswald effect)
As regards how much Enoch Powell blamed the Americans for subordinating our economic interests to their own,this is from the Observer 25th May 1980:
"Mr Powell revealed to the scholars
that he believed Britain should have sought a peace settlement with Nazi Germany in 1942.He even wrote to his own commanding officer on the General Staff so it's lucky he did n't end up in Spandau....
The young (well youngish)Major Powell reasoned that a peace settlement would have enabled Britain to send all its troops to the East to defeat Japan and thereby prevent a dreaded American takeover of the Far East.He also told the historians that he blamed the Yanks for forcing us to maintain a fixed exchange rate for the pound in the 1950's."
These waters are very deep and murky IMO.

Bayard said...

"B, the top 1% got very rich out of it."

That's a lot of people.