Mortgage Constraints: Implications for UK Housing Markets 17 th Annual ERES Conference Milano June 2010 Martin Haran Michael McCord David McIlhatton University.

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Presentation transcript:

Mortgage Constraints: Implications for UK Housing Markets 17 th Annual ERES Conference Milano June 2010 Martin Haran Michael McCord David McIlhatton University of Ulster

Introduction  Residential Mortgages -Epicentre of GFC  Financial De-regulation  Enhanced Accessibility to Mortgage Finance  Expansion in Mortgage Product

An Expanded Mortgage Market Enhanced Efficiency through Competiveness Growth in UK Sub-prime Lending Financial Stimulus to Overheated Market Stability of UK Mortgage Market Post-GFC

Content Analysis of Literature Statistical Evaluation Key Stakeholder Interviews Analytical Modelling of Outcomes Findings Dissemination Methodological Application

Number of Loans & House Prices (UK)

Number of Loans & House Prices (NI)

Separation of House Price to Income

Detachment of Lending and Income ratio

Relaxation in Lending Standards

Loan-to-Value

LTV & The Cost of Borrowing

PROPERTY AQUISITION BY VALUATION (FIRST-TIME BUYERS)

PROPERTY AQUISITION BY VALUATION (HOME MOVERS)

Preliminary Analysis

Analytical Modelling Where:K is equal to capital (Value of Loans) Y is equal to income D represents the level of debt income multiple LTV is the loan-to-value at time t HP represents house price C is the capacity to service interest payments

Model Analysis ANOVA (89.70, p <.005) M AVAIL = β β β 2 – β 3 – β 4

Conclusions Contraction in risk appetite Current inflexibility in lending decisions Wholesale removal of 100% LTV Products Turbulent period of realignment (Lag), economic (macro & micro) balance The panacea of financial and economic uncertainty will create ongoing discord.