One in seven homeowners face negative equity

Leighthal

pinkshoes wrote: »

So we're going to have lots of cheap houses but none for sale?? :rotfl:

Or homeowners who can afford their mortgages who will just sit tight and not sell at all.

ManAtHome

The main impact of reduced prices is that LTV percentage could become a problem if you need to re-mortgage. However, the much bigger problems are more likely to be inflation and lack of liquidity in the banking system - both of which seem to be more than a short-term "blip"...

mummytofour

AND????

The point is everybody needs a roof over their head so, negative equity does not matter as much as many would scaremonger.

I personally worry more about mortgage rates and my roof costing more than I can afford.

IveSeenTheLight

I wonder what effect the higher house priced properties have on the lower priced properties

I posted this on another thread

IveSeenThelight wrote:

Be careful when looking at average figures, these do not break down into specific areas and can be skewed by other properties.

As an example, if there are 1 off 100k property, 5 off 200k properties and 1 off 1,000k property, then the average of these 7 properties is 300k.
6 out of 7 properties suddenly seem far more expensive (or unaffordable) while 1 becomes extremely cheap (affordable)

The same works in reverse. If the 1,000k property drops to 600k, the 200k to 180k and the 100k to 90k.
Then the "average" drops from 300k to 227k (approx 25% drop) when the 1 off expensive property dropped 40% and the 6 off average or low priced properties only dropped 10%.

Property types do not fall uniformly in a region and each region falls will be different from the other.

Please do not fall into the hype that what happens to the UK average price is what is happening locally. It may be true, but it could be less or more depending on the type and location of the property

IveSeenTheLight

Rabiddog wrote: »

It says nothing of the ability of buy to letters to pay down their mortgages if they need or wish to.

Like mine are. My LTV's are approx 36% and 56%.
Maybe not efficient tax wise but extremely low risk wise.

You discuss tax efficiency, however BTL is supposed to be a profit making investment.
If you make profit then you have to pay the tax man, if you have a LTV, you pay less to the tax man but more to the lender.
The difference is 20 or 40% tax on profit against say 6% of mortgage interest

If you have 200k LTV then you pay the lender 12,000 mortgage interest at 6%. At 20% tax, you would have to earn 60,000 profit to pay out the same 1,200k in tax or 60,000 at 40%. I doubt that you would be making that high a profit with a 250k valued property

I think it is only efficient to have a high LTV if there is an appreciating capital and an expanding portfolio, else (as an "amateur landlord" I choose to reduce the risk and pay less to the taxman than I would to the lender.

carolt

Very interesting - clearly lots of terrified BTL landlords posting on this thread!

I found the statistic re BTL mortgages most interesting. Maybe they are all doing it for tax reasons? Or maybe, just maybe, some of them over-geared their 'investments'? Will be interesting to see what unfolds as prices fall.

Premier - as you dispute a hypothesis that prices will fall by 20% - far below what financial markets, ie people who actually put their money where their mouth is - are predicting - I'm sure we'd all love to hear you tell us exactly how much prices will DEFINITELY rise or fall, with your nice, shiny crystal ball.

20% falls are well below what most analysts have been predicting. Rather than clinging to the ONLY report published in recent months suggesting prices might rise like a life raft, could you please tell us exactly how YOU have come to the conclusion that prices will not fall.

And 'because I'll be sunk if they do'. is not a good enough answer. :rolleyes:

Premier_2

tomstickland wrote:

Premier wrote:

tomstickland wrote:

They've analysed data to show the risk status. It seems very clear to me...

Perhaps you could point me in the direction of this analysis, please?

The big graphs that are based on 2m mortages.

How do those graphs clearly indicate "that house prices, already 7 per cent below their peak, will fall a further 17 per cent, increasing the numbers in negative equity from just 70,000 households today to 1.7m, or 14 per cent of borrowers."


One shows the spread of LTV that exists and the second shows what I said the report is doing. i.e.

If prices fall by x%, then the amount of people in negative equity will be y.

Perhaps the report is not as clear as you first thought. Even carolt agrees its based on an hypothesis

Premier_2

carolt wrote: »

Very interesting - clearly lots of terrified BTL landlords posting on this thread!

I found the statistic re BTL mortgages most interesting. Maybe they are all doing it for tax reasons? Or maybe, just maybe, some of them over-geared their 'investments'? Will be interesting to see what unfolds as prices fall.

Premier - as you dispute a hypothesis that prices will fall by 20% - far below what financial markets, ie people who actually put their money where their mouth is - are predicting - I'm sure we'd all love to hear you tell us exactly how much prices will DEFINITELY rise or fall, with your nice, shiny crystal ball.

20% falls are well below what most analysts have been predicting. Rather than clinging to the ONLY report published in recent months suggesting prices might rise like a life raft, could you please tell us exactly how YOU have come to the conclusion that prices will not fall.

And 'because I'll be sunk if they do'. is not a good enough answer. :rolleyes:

OMG, you are stalking me! :eek:

Btw, I don't disagree with the hypotheis. I disagree with the assumption by some that the hypothesis reflects reality. This is not even the implication of the report itself, but I knew some people would think this is what the report implies.

Any other reports you'd like to draw my attention to that suggest what house prices will be in 2013 (or beyond)?

carolt

The hypothesis can't reflect reality - it's about the future direction of house prices. As the future hasn't happened yet, there is, obviously no 'real' figure, whatever you may like to claim. The real figure will only be known in retrospect.

That said, most predictions for house price falls go well beyond 20%; it's actually a pretty conservative figure, as you well know. So their predictions for 1.7 million in negative equity is pretty conservative too.

Unless you're going to claim that your crystal ball says different.....

Premier_2

carolt wrote: »

The hypothesis can't reflect reality ...

Of course it can , or are you disputing S+P report as well now.

It clearly uses the hypothesis that "if prices fall by x%, then the amount of people in negative equity will be y." and I have no reason to doubt their results either.

What I don't agree with is the assumption (by some) that prices will fall by that x%, but nothing wrong with the hypothesis itself.