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

Chris2685

tomstickland wrote: »

Why would the equity loan amount fall?

Because that is the way the scheme works, they take any increase in value, and also any loss in value. So if prices went up double, the loan repayable would then be 170k!

Chris2685

!!!!!!? wrote: »

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.

I agree, they are overpriced, but we can't wait around forever for houses to stop changing in value... As I said, we either need to buy or need to rent somewhere, and buying this place, even with falling values, makes more sense to me as a long term home.

WTF?_2

Chris2685 wrote: »

I agree, they are overpriced, but we can't wait around forever for houses to stop changing in value... As I said, we either need to buy or need to rent somewhere, and buying this place, even with falling values, makes more sense to me as a long term home.

What's wrong with renting for a while first (saving some more cash in the process, you've managed a fair bit already - about 6k a year and making >6% interest on your savings) and then buying down the line when prices have dropped by tens of thousands of pounds more?

As I have grown fond of saying of late, every pound borrowed on a mortgage is more than two to repay and more than three pounds extra of your gross earnings sucked up.

Even 10k less to pay for the house means 30k less to earn. Given that the gross average salary is 25k, that means a whole year less of having a mortgage around your neck or a lower mortgage payment every month for 20 years.

If you save another 6k before you buy even if prices don't come down that's 18k less you'll have to earn to pay it back,

Chris2685

It will be 18k less that we have to pay back, true. In real terms though, we would still be paying a mortgage of around £800 per month to live in a smaller place, which isn't ours and we could be evicted from at any time, so the savings aren't that huge. Plus we have fallen in love with this property as I keep repeating

I know you're talking sense !!!!!!?, but my heart has spoken, and my head somehow justifies the costs! I am pretty certain that after 10 years, the value of the property will have risen above what we paid for it anyway, of course anything could happen. I also hope to be earning much more by then, and be able to pay off the mortgage more quickly and pay less interest, but of course that is also uncertain!

I've got to thank the people of this board for opening up my eyes to the potentials of renting though. I used to be one of those people who would say 'renting is dead money', but I can certainly see that it isn't always thanks to you guys!

Balls_Of_Steel

mr.broderick wrote: »

Eh? Haven't you been listening/reading the news today?

Er, no...care to share what you have heard or read mr.broderick?

Incisor

Chris2685 wrote: »

I agree, they are overpriced, but we can't wait around forever for houses to stop changing in value... As I said, we either need to buy or need to rent somewhere, and buying this place, even with falling values, makes more sense to me as a long term home.

Given that it is shared equity and what neverdespairgirl's figures indicate, I would rather have the hole in the head.

You are just making yourself a slave to the developer if you buy a half share in 50% overpriced property. You will be throwing away 1/3 of your savings and 1/3 of what you pay in mortgage. And that is before any property price cuts, after which you are going to feel truly sore.

Chris2685

If you take properties in the area at current value, it is not overvalued... Of course it IS, because all properties are over-valued right now..

Slave to the developer? It isn't a new build, it was built in 1959.

Do a search of 3 bedroomed houses in Wooburn Green if you don't believe me... The cheapest one (at asking price) is £219,500

moggylover

Chris2685 wrote: »

I agree, they are overpriced, but we can't wait around forever for houses to stop changing in value... As I said, we either need to buy or need to rent somewhere, and buying this place, even with falling values, makes more sense to me as a long term home.

Chris, is it actually in Wooburn Green? I know the Slough area well, vastly over-populated, but never short of work (even in the last recession) I grew up there.

Reason I ask, is that Slough as an area suffered last time, but not as badly as many areas because it has so much work. I lost about £10K on a £100K house (St Andrews Way, Cippenham) in 1990 - but it did not go much further down from there in the next couple of years.

Wooburn Green has always been a quite desirable outlying area - and was less damaged than Slough central at the time.

I can't make your mind up for you - and would not want to. But see if you can beat them down some more on the price and then make your mind up dependant upon that.

I do know, however, that trying to rent anything worth living in in the Slough area is dreadfully hard and horribly expensive - if it is any consolation it was even back in 1984, which is why I borrowed nearly five times income (plus a good deposit) to buy instead of rent.

Having just paid off my mortgage (at 50) I can now look back over all the scary times (and there were a few) when I was looking at negative equity in my current house, or only just managing to meet the 15% mortgage rate payments - and think thank God I did it whilst I was still young - cos I now no longer need to pay rent/mortgage from a young age.

There were people "waiting" for houses to bottom out long after they had ceased to fall and had started to rise last time. Many of them will still be waiting and giving out their "expert knowledge" again this time, and many of them will never have the courage to go for it.

Buying ones own home is always a gamble. Just make sure you stack a fair few odds in your own favour, don't take on any additional debts or loans (make do with second hand furniture and car and so forth until you can buy cash instead of HP) and you stand your best chance of it not turning into a dissaster.

The UK is desperately short of housing - thus whatever house prices go down to - demand will be high once the market improves, and whatever people think or say - the prices will go up again. That's what a market driven, free economy does. I'm not saying it is right or sensible - but it is the way it goes!

Chris2685

Hi moggylover, thanks for taking the time to write such a thoughtful post.

We currently live in Slough (well, Slough post code, it is actually the area of Fulmer) with my girlfriends parents. I really wouldn't want to live in Slough, although Cippenham is not so bad. I would be quite happy to live anywhere with decent access to the M40/A40 for commuting purposes.

The house is in Wooburn Green itself, and it is a very nice area and one of the reasons we would be happy to pay slightly over the odds to bring up a family here, rather than some Slough hell hole

I doubt I could beat them down any more on the price as the sale has been agreed, and I don't morally agree with gazundering (or gazumping for that matter!), although I should really as the house was bought by the old woman who lived there through right to buy and she bought it for 117k in 2005 according to houseprices.co.uk!!

As someone who obviously understands the rental situation in this area, I am glad you input to this topic

alared

obsessed_saver wrote: »

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.

It was the BTLetters that caused house prices to keep on rising.
They didn`t buy the properties to LIVE in but as a "pension",thus pricing out the FTBuyers.

When people saw the way Brown had wrecked their pension schemes, by his obsessive taxation,they gave up on their pensions and sought an alternative,hence the BTL brigade.

But it was also your older people that had paid their mortgages off,had seen the stock market crash,and crap interest rates for their savings,who decided to jump on the BTL bandwagon,driving prices even higher.

If prices have risen 100% in the past 6/7 years,then a 50% drop seems quite reasonable in the course of the cycle.