I dont believe the 25% price increase in the last year amounts to a bubble I think it represents a bounce off the bottom of the market which had overshot. As others have already said, for a bubble to exist, an abundant supply of credit is needed and this is not the current situation.
I'm a frequent reader of this forum but only just registered now to ask a question on the above that has been troubling me.
We keep hearing that for a bubble to exist cheap and easy credit must exist and because the banks aren't lending at high levels ergo we are not in a bubble.
But surely the level of arrears in the mortage is a form of cheap and easy credit? I am not talking about borrowers who are month or two behind but more those in longer term arrears, the only section of arrears which appears to be growing:
Longer-term arrears continued to increase, however, as the number of accounts in arrears over 360 days reached 60,995 at end-June, equivalent to 8 per cent of the total stock of PDH mortgage accounts. All of this increase was driven by accounts in arrears of over 720 days, which rose by 1,752 and now constitute 29.4 per cent of all accounts in arrears, and 70.3 per cent of arrears outstanding
If you are two years behind in your mortgage the chances are you can't afford the mortgage and consequently you cant afford the house you live in. Those houses should be on the market and easing supply and prices.
In my opinion this bubble is driven by a supply problem, but the supply problem is driven by abundant credit, albeit in an inverse fashion, but ultimately the bubble is driven by credit. Just because the banks are not issuing new loans it does not mean there is no credit in the property market.
However this would also then impact the demand for rental at the lower end of the market, putting more pressure on prices as supply has not been increased.
This is a standard CCMA 120 day letter. Under CCMA guidelines this letter must be issued to all MARP clients in arrears on a 3 monthly cycle. The "blah blah blah" element is dictated by CB requirements.He is still paying the "old" monthly payment but the letter that arrived a few days ago says he is more than 90 days in arrears for the whole lot and that blah blah blah will happen
This is a standard CCMA 120 day letter. Under CCMA guidelines this letter must be issued to all MARP clients in arrears on a 3 monthly cycle. The "blah blah blah" element is dictated by CB requirements.
I agree with that but to develop the point made by 110
1: Loan say of 1 mill with 20 years to run, arrears in payments of say 4k
2: the case I describe, loan term has expired, loan balance 500k
What gets reported by lender to CB as arrears for these two loans: 504K?
Hi ircoha, Brendan has a KeyPost " understanding what arrears actually means"
from 23/11/2013. You will find it helpful.
Every lending institution is obliged to file a monthly return on all MARS cases(HL's & BTL loans) to the CB. Arrears amount quoted are actual arrears i.e. 4K in your case. However in some cases historic arrears may have been capitalised to the loan and client may be currently on a reduced repayment schedule. This will mean that if the revised repayments are on line the loan is not in arrears.I agree with that but to develop the point made by 110
1: Loan say of 1 mill with 20 years to run, arrears in payments of say 4k
2: the case I describe, loan term has expired, loan balance 500kWhat gets reported by lender to CB as arrears for these two loans: 504K?
I'm not sure that it would put pressure on rents. If these 60,000 odd houses come on the market, it would have a massive increase on supply of both for sale and rental stock since people who purchase them will either do so to live in or rent out.
If they are purchasing as a PDH they'll free up a rental property, if they are an investor they'll create another rental unit on the market.
Again I'd stress I'm no economist, just thinking out loud and cannot really see the flaw in the logic.
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