Isn't "tightening the lending criteria" the same thing as cherry-picking?

Can't mortgage lenders refuse to lend money, or impose a higher rate the way that loan companies do?

So doesn't this just mean that even those who are credit-worthy are also having to pay much more for their mortgage? Or does it just save them having to reject so many applications?

Jon, Winchester,

I'm afraid fear has replaced greed as the primary motivation of the banks. Having got us into this mess in the first place they are determined to bring the whole market crashing down by choking off what little demand there is left.

The FSA has been too busy making it as hard as possible to open a bank account to regulate Northern Rock.

The Banking Industry is busy widening it's margins so that we pay for it's incompetent lending.

Jeff Robertson Belfast.

Jeff Robertson, Belfast, Northern Ireland

Historically mortagage interest rates have been significantly higher than they are now (or are likely to get to), so the last few years of very low rates is a blip. The problem is people have been taking out mortgages they can only afford, not sure who I blame them, the brokers or the lenders? So some are likely to be in trouble.
Its worth noting though that in previous crashes the whole environment was different, in particular there was high unemployment and there was not such a shortage in the housing supply. No one can really predict whether there will be a crash but I think a small correction is more likely.
Personally I got on the housing market 3 years ago, had a 10% deposit (that I spent years saving for) and took a mortgage I could afford and is now even more affordable (pay rises, etc). If house prices go down, so what? I bought it to live in not to make money on and am unlikely to want to move up for 5 years or so.
The moral I think is only buy what you can afford!

Jon, St Albans,

Are these people fools?

Do these people not listen to what Gordon Brown tells them?

Our economy is booming.

We have millions of migrant workers contributing to our prosperous economy.

Inflation is running at 2.5% whilst wages are rising by 4%.

Property is a sound investment and will continue to appreciate in value ad infinitum (as long as we keep sucking migrants into our country).

So come on, stop moaning and wallow in the splendour of our New Labour 'multicultural paradise'.

jane balls, leigh, england

"prices have gone up and up. Ergo they will never go down. It's SIMPLE logic, with a capital C....David, Guildford"

No, David, that's WRONG with a capital W.

Prices have been going up recently faster than the historical average because
a) cheap loans were easy to come by, and
b) people like the "oh, the price of my house has gone up 20% in the last year"

This clearly CAN'T go on. If it did, in 10 years time house prices would be about 50 times the average wage. As with all things, prices WILL revert to the historical trend. The only way that can happen is zero growth for a number of years, or - more likely - a "correction" in prices (i.e. sharp negative growth for a year/two).

If you need further proof, there HAVE been times when house prices went DOWN and it will happen again now that cheap loans are a thing of the past (at least for a while).

Clive, Surrey,

I have sold my house last year due to relocation, and currently renting a new-built city centre flat. I am surprised by two observartions:

1) Most people living here are tenants, with many flats vacant for months (new flats popping up everywhere). I guess flat is popular with investors.

2) I am paying 500 for my flat. I looked at buying the flat I am living in, and a 20 years repayment mortage stands at just over 800, with about 400 being interest, if I remebered correctly.

not being a financial expert, it is still obvious that I can either flush 400 pounds of interest payment down the sink or 500 rent. renting seems more financially sound since the landlord will need to pay about 50 per month of flat maintainance & management fee and also building insurance of (like 20 per month?), plus all the liablity of a large loan, falling market, house repair and the cost associated with buying and selling in 10 years time (well, I dont want to live in a flat for the rest of my life)

Mark Owen, Birmingham,

William in Scunthorpe. Why DO buyers need to buy? I currently rent a flat in London, and the rent that I pay is 30% less that I would have to pay in interest on a mortgage (so not even covering any capital repayment), and the property is currently falling in value so I am not missing out on any capital appreciation. I also don't have to pay any stamp duty, or legal fees, or estate agents commission. Or mortgage arrangement fees.

So why would I DO I need to buy at this point in time? In the mean time I am saving the difference between the lower rent that I am paying versus what I would be paying on a larger mortgage, for a deposit to buy a place for a lower value (as prices continue to fall) in the future. if anyone can please let me know the flaw in this logic please let me know!

Matt, London, England

Throwing money away on interest payments is the same as paying rent. If.... house prices are not rising, then the comparison is surely between the interest charge and the rent charge, or am I missing something? In the absence of capital gains, investors will only continue to buy houses if the rental income (yield) is comparable to the interest payments on the loan. As this is not he case my conclusion is that prices will fall until this is the case.

SMiller, Christchurch,

William of Scunthorpe is wonderfully naive. Doesn't he think that youngsters would buy if they could? But THEY CAN'T AFFORD TO BECAUSE HOUSE PRICES ARE TOO HIGH. So, leave it to the professionals eh? Or should I say amateur, johny-come-lately landlords who have leveraged themselves to the hilt to buy property where the rent is hundreds of pounds short of the (interest only) mortgage payment. Really BRIGHT these people - because that business model only works if prices go up forever - and prices can only go up forever if people borrow more and more and more and more ...

Of course we have now reached the tipping point and credit is no longer cheap and easy.

The housing market, and the UK economy, is going down.

Mike, Winchester,

Know what you mean, William, Scunthorpe. I keep throwing money away on food and clothes and what do I get for it, I ask you. As you say, we need to move FAST, rather than SLOW, because prices have gone up and up. Ergo they will never go down. It's SIMPLE logic, with a capital C.

David, Guildford,

The argument for renting during this period is strong. If the housing market weakens it becomes critical to buy a quality property. In a falling market lower quality properties will suffer disproportionate falls. Waiting for the best buying conditions is important.

Also, many people will have forgotten or be too young to remember the last recession. During the boom times jobs are created and unproductive jobs are held in place. When times get hard jobs can and will be cut very quickly. At least tenants can claim housing benefit from day one. Property owners will have to wait 9 months before getting help with mortgage repayments.

Costas, Cyprus,

Wrong William,

buyers do not need to buy. A first time buyer now can pay much less on rent than mortgage repayments on a similar property. They can thus save for a couple of years towards a larger deposit on a property that will be worth significantly less then. The larger deposit will mean that they will get a more favourable mortgage rate. This is not wasted money; this is spending less in the long term. While prices continue to fall, or even stagnate, it makes no sense to buy.

C Murphy, Bath, UK

It's going to be a tough year for millions of us

AP, bristol,

Uh. Banks raise their interest rates to fleece existing mortgage holders. If they want to restrict entry, the simple way to do it is to increase the down payment, and lower the gearing ratio for earnings. End of story. Increasing interest rates puts existing mortgage holders in jeopardy. It forces the sale of a house for those who cannot pay the increased premium when the mortgage is reviewed. It increases the likelyhood of what they say they are trying to forestall (a collapse in the housing market). Since they will collect the penaly fees and the equity on reposessions, this isn't the end of the world for the banks. They can also right and real losses off further dampening the impact on their P/L. How this turns into an article about reponsible lending is pretty humorous.

Larry, Stratford,

The mortgage lenders have brought this problem upon themselves. They can continue begging the BoE to create more currency out of thin air or to balance their books they can:

1. Refuse to take any new mortgage customers.

2. Put all those without a fixed rate deal onto the standard variable rate.

3. Increase savings rates to encourage more deposits and hence improve their 'liquidity'.

For its part the BoE should offer no further assistance. All these mortgage lenders have huge asset bases in the form of housing stock as well as having the above measures available to them.

Anyone without a fixed rate deal who cannot afford the standard variable rate should look to sell up and cut their losses asap. Regardless of what the BoE does to the base rate, the Libor rate and hence standard variable rates are not going to come down in the forseeable future.

Paul, Coventry,

Wrong, Stephen. Buyers DO need to buy ... the alternative is to throw money away on rent and see nothing for it. People have been forecasting a fall in house prices for the past decade, yet prices just keep going up and up and up.
The more people rent, the higher prices will rise, due to the demand for rented properties.
The choice is simple; to make landlords rich or to get on the property ladder FAST, before prices go ever higher.

William, Scunthorpe, England

Folks will have to save up for a big deposit in future.
Maybe that will be a good thing in the long run.
People should stop thinking about their houses as piggy banks.

Bert Glasdon, Ilford,

Saving is a virtue and now maybe peopel will realise how the real World functions. When I was young you had to have an account for quite a long time and a savings ethic before they would even consider you for a mortgage. Houses were cheap but debts were repaid. You only have to watch the stupid property shows on the BBC to realise what has become of the housing market. Greed!

Frederick, London, UK

This is as it was historically in my lifetime and before.

As a result though house prices continued to rise they did not become unaffordable as they are today for first time buyers.

Prudent lending means that the outrageous price increase in housing and hence (real) recent inflation as yet unrecorded in goverment figures would not happen.

At least twice in my lifetime I have seen lending on housing move away from the principle of more than 3.5 times income and 90% maximum as a general rule and each time house prices have soared.

Governments of both persuations have depended on this, in my opinion, to the overall detriment of the general population of the UK in terms of attitudes and negative effects upon manufacturing industry.

M. Sheridan, Oldham,

This is the mirror image of the NR stratagy.A fall of around 40% in UK house prices over the next 2 to 3 years is on the cards.Who'd want to buy anyway when you can earn a years salary by doing nothing?Some sellers need to sell,buyers do not need to buy.

stephen hulton, eure, france