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Debate House Prices
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How we'll know when house prices hit rock bottom
brit1234
Posts: 5,385 Forumite
How we'll know when house prices hit rock bottom
The head of Barclays, John Varley, has predicted that house prices have about 15pc further to fall. And the bank is putting its money where its mouth is, it seems.
It's impossible to write anything about buying a house without mentioning the initials LTV. They stand for "loan to value" - the maximum percentage of the purchase price that a bank is prepared to lend. So if you've set your sights on a £100,000 property (yes, that once-extinct species is beginning to reappear) and your lender stipulates an LTV of 90pc, it simply means that the most you can borrow is £90,000 and you will need a deposit of at least 10pc.
In the heady days of the property boom you could borrow 100pc or even more. But as the credit crisis has unfolded, the LTV has assumed greater and greater importance. Lenders now often differentiate between LTVs of 90pc, 75pc, 60pc etc - they offer some of their deals to people with 40pc equity in their properties, another tier of mortgages to those with deposits between 10pc and 25pc, and so on.
The rule is: the higher the LTV, the higher the interest rate.
What's this got to do with John Varley's prediction about house prices? Well, Barclays' maximum LTV at the moment, across its entire range of mortgages, is 85pc, so any buyer who wants a home loan from Barclays (or Woolwich, its mortgage arm) needs a deposit of 15pc. If you buy now with a Barclays mortgage and the price of your property falls in line with Mr Varley's expectations, you'll just escape negative equity and the home will remain adequate security for the bank's loan.
There's more to setting the maximum loan than this, I'm sure. But could LTV-watching be, in a slightly tongue-in-cheek way, the means to discover what banks really expect to happen to house prices? When you see the first offer of a 100pc mortgage again, perhaps the market has hit bottom...:eek:
http://blogs.telegraph.co.uk/richard_evans/blog/2008/12/15/how_well_know_when_house_prices_hit_rock_bottom
:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
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Nice theory.0
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Interesting theory, slightly spoiled by the fact that Banks didn't see it coming, so how will they see it going...?
Were they withdrawing/reducing 125%, as peak was approached...no, because they aren't any better at predictions than Mystic Meg.
90% should be law, anyway, imo.0 -
Cannon_Fodder wrote: »90% should be law, anyway, imo.
I think we will have the bottom when we see 90% LTVs everywhere. 100% is just to recent in the banks memories with all the troubles.:think::exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
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What happened to septic Meg ???
I came in to this world with nothing and I've still got most of it left. :rolleyes:0 -
Ahem.....:When you see the first offer of a 100pc mortgage again, perhaps the market has hit bottom...http://www.metro.co.uk/news/article.html?A_100%25_home_loan_on_taxman&in_article_id=445921&in_page_id=34
The 100 per cent mortgage is on the way back as taxpayers' money is used to tempt first-time buyers to move into empty new homes.
The loans will be backed with £400million pledged by ministers to a scheme to help the less-well-off get on to the property ladder.
Liberal Democrat housing spokeswoman Sarah Teather accused ministers of being irresponsible.
She told Bloomberg: 'First-time buyers are being bribed into a falling market, putting them at serious risk of negative equity.'poppy100 -
If my memory of the last crash is anything to go by, things will bump along at the lowest point for a few years, before the whole crazy business starts again.Been away for a while.0
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Nice theory spoiled by the conclusion. If the government had the sense, they'd ban 100% house loans for the reasons currently being seen.
When 90% loans become competetive relative to 80 or 70% loans then you know the odds of further falls are reducing.
No one knows the future but theres good bets and bad ones0 -
Nice theory.... Question is would anyone with half a brain take a 100% mortgage now a days??MF aim 10th December 2020 :j:eek:MFW 2012 no86 OP 0/2000
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We'll know when prices have hit rock bottom by the sight of Krusty & Phil emerging from their respective bunkers and shamelessly ramping house prices again.0
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We'll know when prices have hit rock bottom by the sight of Krusty & Phil emerging from their respective bunkers and shamelessly ramping house prices again.
Mr Ajay Aluga is already busy ramping prices up with his predictions.
http://www.ahuja.co.uk/property-news/ajays-blog/date/2008/11/Since the bottom end of the property market make up the majority of the average house price statistic the Halifax and Nationwide start to report a slight increase in house prices in the month of April 2009.
This statistic is further confirmed by Rightmove and Hometrack.
Land Registry figures come out for Quarter 1 of 2009 in May 2009 reporting a slight increase in house prices.:eek:
Ajay can either predict abnormal future events, rig housing survey data or he is just dribbling a runny No. 2 yet again:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
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