Which house buyers are worst affected by this?

[Brendan Burgess]

The ordinary borrower who has saved up 10% and wants to borrow 4 times their salary will not be able to get a loan. The banks can make some exceptions, but they won't be able to make exceptions for all those borrowers.

The problem is that the interest on a mortgage is often cheaper than the rent for a similar property. So it makes sense to buy with a mortgage than to rent.

If house prices are "normal" , i.e. not rising by 20% a year, then this waiting won't matter too much. But it will cause intense frustration if people expect house prices to rise over the coming years.

I think it makes sense from the prudential point of view to stop lenders outcompeting each other to lend much higher LTVs. But it will delay a lot of people getting onto the housing ladder.

 

[44brendan]

The problem is that the interest on a mortgage is often cheaper than the rent for a similar property. So it makes sense to buy with a mortgage than to rent

A reasonable point. However, the whole basis of a "mortgage" is that it is a repayable loan. thus requiring ongoing capital as well as interest payments. One might well point out that the capital element of the repayments are an investment, in that they increase the equity in the property as the loan is repaid. equally one could point out that an interest only mortgage over a 30 year term would have a broadly similar result. i.e. inflation over that period a c4% pa will mean that the current value of the loan in 30 years time is only a small fraction of the house value and could be paid off over a very short term. I would be one of the small number of those in the financial sector who sees a good potential future in IO mortgages.