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Subject: Banks, Building societies & Mortgage companies

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NaeChanceOfBuying

Concerned Citizen

Posts:60

21/03/2006 12:04 AM	Alert
I think you should be pushing for stricter government regulation of the Banks, Building societies & Mortgage companies. I know the FSA have started on mortgages but it really isn't enough is it. Commercial pressures and lack of regulation have encouraged them to let borrowers take on more and more risk when buying homes. Self certification, ricidiculous multiples (I heard someone mention 6x salary somewhere!) have been the rope which has let many people hang themselves. In my opinion you need look no further than this and low interest rates if you want to see the cause of this particularly bad house price boom. I'm sure someone will come on and say 'low interest rates means it's affordable' blah blah blah. The point is interest rates are low now, but there's no guarantee they will stay there and the historical norm is 8.0%. A 6x salary mortage isn't going to look so good then is it. Let's face it credit deregulation has been an enormous disaster for everyone except the banks shareholders. Although it might still be a disaster for them in a couple of years Strict regulation should be 3.5x salary mortgage simple as that.

frugalista
Volunteers

Concerned Citizen

Posts:64

26/03/2006 7:48 PM	Alert
I am with you on this one. Deregulation is at the root of the boom-bust cycle. Although I don't think you need to go to a 3.5 x salary rule. What about the following plan: Income / affordability must be verified. No mortgage payments at more than 35% take home pay. No more self-cert (beyond what's necessary for the self employed). Deposit must be at leas 5%, phasing in to 10% over a number of years. No more interest only without a verifiable savings vehicle. frugalista

adrian1000

First Timer

Posts:3

11/04/2006 11:53 AM	Alert
frugalista couldn't have put it better myself, in the meantime prepare for nast times ahead

NaeChanceOfBuying

Concerned Citizen

Posts:60

11/04/2006 1:58 PM	Alert
Posted By frugalista on 03/26/2006 7:48 PM I am with you on this one. Deregulation is at the root of the boom-bust cycle. Although I don't think you need to go to a 3.5 x salary rule. What about the following plan: Income / affordability must be verified. No mortgage payments at more than 35% take home pay. No more self-cert (beyond what's necessary for the self employed). Deposit must be at leas 5%, phasing in to 10% over a number of years. No more interest only without a verifiable savings vehicle. frugalista But we didn't have deregulation during the 70's bust. I think it's lack of supply that's the root cause, however deregulation is what has caused this bubble to be so extraordinarily bad. Also the no mortgage payments at no more than 35%, good idea but the flaw is low interest rates distort this. Now if you coupled it with fixed rates across the mortgage term that would work. Why is it we don't have more European style long term fixed rate mortgages... government regulation or financial institution policy? Just my 5 cents...

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