Comments on: House Prices Really Are Falling

By: John

John — Mon, 09 Jun 2008 16:11:32 +0000

Pete,

I’m not a mortgage adviser… I don’t believe you’ll need to wait much beyond 9 months too see more properties stack up as investment opportunities and I certainly don’t believe the market won’t have recovered in 4+ years.

Yes the credit crunch is a crucial factor, but so are the market fundamentals and demand currently exceeds supply (even if the demand can’t currently raise finance).

By: Pete

Pete — Mon, 09 Jun 2008 13:27:56 +0000

Interesting you think there will be investment opportunities in 6-9 months. As a mortgage adviser I’m surprised you don’t appreciate the seriousness of the credit crunch. Try 4-5 years and you’ll be looking at real investment opportunities.

By: John

John — Wed, 04 Jun 2008 16:09:20 +0000

They might be in a position where a better loan book actually makes them more profit than high interest rates loans though. Therefore it might be more profitable to pick the safest customers.

By: Tristan

Tristan — Wed, 04 Jun 2008 15:09:36 +0000

I would argue that they are being risk averse in that, if they really wanted to cherry pick the customers that will make them more profit, they would go for the higher interest rate deals over 75% LTV, as these would be a clear 1% more expensive (in most cases) and therefore represent a much greater margin over LIBOR than the safe less than 75% LTV products.

I expect what a lot of the lenders are trying to do is increase the number of “good” loans on there books, in a bid to shore up there assets and make themselves look more responsible to the investors that ultimately provide the funds for lending.

By: John

John — Wed, 04 Jun 2008 14:50:44 +0000

Are the lenders really being risk averse though, or are they just picking the cream of the customers because with limited funds (because of the credit crunch) they can only lend to a limited number of customers?

By: Tristan

Tristan — Mon, 02 Jun 2008 13:55:19 +0000

What I am seeing in the mortgage market, is that the lender’s are wise to the fact that property prices are coming down, so they are being risk averse, in that they only really want to lend to buyers or re-mortgage customers who have a loan to value of 75% or less.

The interest rates on products with a loan to value of over 75% are much higher, and the maximum loan to value for most lenders now is 95% if you can prove your income and 85% if you cannot prove your income, though there are still some that will still do a self-certified mortgage at 90% loan to value.

By: John

John — Fri, 30 May 2008 13:14:06 +0000

It’ll make it harder for those with a high Loan To Value (LTV) mortgage to re-mortgage.

Another reason why it’s not a good idea to take all the equity out and go on a buying spree - as some BTL landlords have.

By: Mark

Mark — Fri, 30 May 2008 13:09:26 +0000

How does this reduction in property prices affect those wanting to re-mortgage? The amount you can borrow is directly affected by the property value in the market, so presumably those re-mortgaging - and I’m particularly thinking of BTL investors who re-mortgage regularly, and who pay off interest only on their mortgage - will presumably have to find more of the money to pay off the old (more expensive) mortgage?

- Mark.