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Debate House Prices


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The real question is why house prices aren't falling faster?

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Comments

  • WTF?_2
    WTF?_2 Posts: 4,592 Forumite
    Well, that's where the BTL brigade came into play to fill in the gap. In my opinion, FTBs were realistically priced out by 2005. BTL came in and plugged the hole and caused an unsustainable bubble.

    I concur, that's exactly what I saw where I live when I started looking in 2006. A very small number of FTBs and lots of 'specuvestors' and BTLers with existing properties remortgaging to buy even more.

    But there was a boost given by the BoE rate cut in Aug 2005 to take into account too. The house market was coming off the boil, things looked set for a price decline but maybe, just maybe a 'soft landing'.

    Then what do the MPC do? Cut bloody interest rates and kick off one last round of partying because plenty of people now thought the cycle of rates had peaked at 4.75%. That suckered in more than a few FTBs who really overstretched themselves at 4.75% with a 2 year discount fix. They are now royally rogered.


    That must have been one of the most moronic actions of recent financial history. :mad:
    --
    Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.
  • geoffky
    geoffky Posts: 6,835 Forumite
    IS THE FASTEST FALLING HOUSE MARKET EVER NOT FAST ENOUGH FOR YOU? THE LAST CRASH WAS NEVER MORE THAN 1% A MONTH FALLS AND THIS IS EARLY DAYS..WAIT UNTIL THE RECCESSION KICKS IN ITS GOING TO BE A BLOOD BATH THAT MAKES THE LAST CRASH LOOK LIKE A SUMMER BALL...:rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:
    It is nice to see the value of your house going up'' Why ?
    Unless you are planning to sell up and not live anywhere, I can;t see the advantage.
    If you are planning to upsize the new house will cost more.
    If you are planning to downsize your new house will cost more than it should
    If you are trying to buy your first house its almost impossible.
  • Chris2685
    Chris2685 Posts: 1,212 Forumite
    Incisor wrote: »
    You pays half the price of the property to bear ALL the losses on a property which is already heavily overvalued at twice what you could afford to buy under your own steam. This is not salvation for you, it is madness. You will do far better to rent in the short to med term and buy the whole of a humble terrace later. Provided you keep saving, you will come to the top of the pile to be able to buy.

    And if everyone in your position stuck 2 fingers up at the shared ownership schemes, it would be those promoting the schemes who would be nursing burnt fingers shortly, rather than the buyers suffering a total meltdown in their equity over the next 3 to 5 years. Destroying the marketability of shared ownership ASAP is, believe me, in the very best interests of everyone in your position. Beware of Developers bearing gifts.

    The equity loan is actually a shared loss, so if prices go down, I still only pay for the same percentage. (Borrow 100k towards it now, the property halves, I only have to pay 50k to buy the rest of the property) However, I see your point... I am actually becoming more and more uneasy about going ahead with this purchase... I have just fallen in love with the property, that's the trouble!!
  • Incisor
    Incisor Posts: 2,271 Forumite
    1,000 Posts Combo Breaker
    Chris2685 wrote: »
    The equity loan is actually a shared loss, so if prices go down, I still only pay for the same percentage. (Borrow 100k towards it now, the property halves, I only have to pay 50k to buy the rest of the property)
    So you will only have paid £150K to own it outright at the point when it is worth £100K
    However, I see your point...
    ;) Thought you might.

    But it is probably only really worth £150K now, so you are already paying £100K for £75K of equity.
    After the uprising of the 17th June The Secretary of the Writers Union
    Had leaflets distributed in the Stalinallee Stating that the people
    Had forfeited the confidence of the government And could win it back only
    By redoubled efforts. Would it not be easier In that case for the government
    To dissolve the people
    And elect another?
  • sympatex wrote: »
    I've only seen 3 really nice ones and they didn't change in price and were sold pretty quickly.

    But that assumes some universal definition of what a "nice" house / flat is.

    My idea of housing hell - a desperately respectable, washing-the-car-on-Sunday, tree-line 30s semi in Bromley.

    On the other hand, I'd adore a narrow, tall townhouse in Bloomsbury, with no garden, built 200 years ago.
    ...much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.
  • Chris2685 wrote: »
    (Borrow 100k towards it now, the property halves, I only have to pay 50k to buy the rest of the property)

    Then you have paid £150k for a place worth £100k , which doesn't sound so good.

    You buy now, pay £25k deposit, get a mortgage for £75k. Nice loan to value.

    Then if prices halve, you would need another £50k mortgage to buy the other half -except, that would be a mortgage of £125k on a house worth £100k. I don't think a bank would lend it?
    ...much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.
  • Chris2685
    Chris2685 Posts: 1,212 Forumite
    Hmm.. I am not sure people are understanding the way this works.

    Take my rough example:
    Buying a 210k property.
    I can get myself a mortgage of £110,000 (that is the maximum the bank will lend me based on my affordability criteria)
    I have £15,000 to put towards a deposit (based on keeping back 10k for fees, fallback fund, etc).
    So thats 125k traditionally that I could afford to buy somewhere outright. Nothing in this area is even available for that anyway, not even the worst places! However, I digress.

    The shortfall of 85k is made up of the equity loan from the housing scheme. This equity loan is repaid as and when I can afford it, and until that time I pay back a very low rate of interest of 1.5% (rising slightly each year, which is the part that makes it stink a bit!).

    In my opinion, having an equity loan is even better than having a mortgage, because to get a mortgage for 210k, you're talking roughly £1300 a month on a 7% mortgage, whereas with this smaller mortgage and equity loan, you're talking around £800 per month in total.

    £800 a month for a 3 bedroom house in Wooburn Green is not achievable even by renting, so it makes more sense for me to buy than to rent.


    So, to say if prices halved (pretty unlikely to have a 50% drop, we already knocked the price down 12% off the asking price, and the house over the road sold for 250k just a few months ago - exactly the same layout) and the property ended up being worth £125k, we would now have a 42.5k equity loan to repay instead of an 85k loan to repay, but the mortgage amount will remain the same.

    So as you can see, we are better off buying in this case, even if prices do drop, because it is cheaper than renting a similar property, and much of the value of the house lost is absorbed by the equity loan loss. No wonder they are saying funding has dried up!

    Add that to the fact that if we got this place, we could really see it being the family home for at least 10 years, if not indefinitely. I know that is quite a thing to say at 22 years old, but I really like it and the area!

    However, having said all that, if we can't get this equity loan then it looks like the sensible thing will certainly be to rent somewhere smaller for a while!
  • mr.broderick
    mr.broderick Posts: 3,778 Forumite
    1,000 Posts Combo Breaker
    Many people are still on low fixed rates so are not feeling the pinch via their mortgage yet. Also lots of people who want to sell but are not in a hurry are either sticking with the price they want or just not bothering to move and taking their houses off.

    I don't think people can actually believe what's taking place, they think it's just a blip.


    Eh? Haven't you been listening/reading the news today?
  • tomstickland
    tomstickland Posts: 19,538 Forumite
    10,000 Posts Combo Breaker
    Chris2685 wrote: »
    Hmm.. I am not sure people are understanding the way this works.
    ....

    The shortfall of 85k is made up of the equity loan from the housing scheme. This equity loan is repaid as and when I can afford it, and until that time I pay back a very low rate of interest of 1.5% (rising slightly each year, which is the part that makes it stink a bit!).

    So, to say if prices halved ...
    , we would now have a 42.5k equity loan to repay instead of an 85k loan to repay, but the mortgage amount will remain the same.
    Why would the equity loan amount fall?

    Anyway, regarding the OP, prices haven't fallen that quickly because only a proportion of people need to sell. The others will sit round waiting until they need to.
    Happy chappy
  • WTF?_2
    WTF?_2 Posts: 4,592 Forumite
    The real point Chris is that you shouldn't have to be borrowing that much to buy a house in the first place - they are ridiculously overpriced.

    The market is starting to reflect this - around 10% drops in the last year and more to come.
    --
    Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.
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