Time to Wake Up and smell the coffee...

smartn

Having spent rather a lot of time on these boards recently I find it amazing the wide variety of opinions people seem to have and how few people seem to sit in the middle ground. I think (hope) we can all agree that the Market has declined somewhat (I reckon a 10% drop so far, maybe more, maybe less).

To me it seems obvious that the market will have to decline further by another 15-20% to bring that thing called affordability back in to play. The reality is people still WANT to own there homes, but for many they just cant plain afford to (and shouldn't have been encouraged to think they can by the likes of Northern Crock et AL).

Banks want and need to lend, but having been badly burnt it will take a while before they start doing so to any serious degree again.

I read recent posts on the boards where people are asking questions such as, I have a big loan but want to buy a house, I am paying several hundred a month on existing debt repayment etc and all I can think is you are lucky this credit crunch is kicking in otherwise some bank would have leant you the money and you'd be stuffed for life.

I feel sorry for people who bought in the past few years, but the reality is keep up your repayments if you can and you will get through it, the market will eventually recover. For people who bought prior to this, OK so you have lost some equity in your house but it was NEVER REAL MONEY.

Bottom line is, this country has been living for too long on borrowed money and it had to stop. People need to understand that DEBT is not a good thing, a mortgage is a way to buy your house and is necessary, but get the DEBT cleared as quick as possible.

mewbie_2

smartn wrote: »

Bottom line is, this country has been living for too long on borrowed money and it had to stop. People need to understand that DEBT is not a good thing, a mortgage is a way to buy your house and is necessary, but get the DEBT cleared as quick as possible.

To my mind debt and mortage are the same - they are both debt. However, I believe the right action in these troubled times is to save a cash cushion of several months pay, then work on clearing non mortgage debts, and lastly, clear mortgage debt. If you clear some debts, but leave yourself zero cash, then it may be harder in future to borrow in case of emergency.

This may not be the most cost effective way of doing things, interest payments and so on, but it may be the safest.

Jonesya

smartn wrote: »

Banks want and need to lend, but having been badly burnt it will take a while before they start doing so to any serious degree again.

I thought a lot of banks neither wanted to lend nor had the ability to lend - their supply of funding had been cut off by the freeze in the credit markets, hence the Bank of England having to setup the Special Liquidity Scheme to buy the mortgage backed securities that couldn't be sold to the market.

PasturesNew

I don't want to own my own home, it's something you have to do.

There is no social housing for people like me (single), but I would like to be settled in an area and feel part of that area - something you can't do if you're renting because you're at the whim of the landlord.

I'd buy because I'd like to ploink down somewhere for life. To be able to shut my door and know nobody will come a-knocking. To feel that those around me are also mostly long-term residents, so there's a feeling of common values and community.

That is how I grew up, with people around me that were staying long-term where they were. You can only get that if you're in social housing or if you buy. I don't WANT to buy, I have to buy for the security of tenure. If social housing had kept up with need then council estates would be full of good people again, like they used to be, not just filled with the lowest level of life because they get more points than decent people. House buying should have been left to the middle classes.

I am a low-earning single; working class, but decent. I'd like to have lived a life where I worked and had money left over after putting a roof over my head, but when you're single it all goes on rent/bills. It'd be fantastic to live in cheap social housing at only about £70/week and know I could enjoy the rest of my money for life. Not to have to spend 20+ years stressing about trying to save to buy a house. Lack of social housing and no long-term private rentals enabling us to put down roots has forced people to buy houses.

smartn

Jonesya wrote: »

I thought a lot of banks neither wanted to lend nor had the ability to lend - their supply of funding had been cut off by the freeze in the credit markets, hence the Bank of England having to setup the Special Liquidity Scheme to buy the mortgage backed securities that couldn't be sold to the market.

Absolutely they are not rushing to lend at the moment, but once the CDO's, CDS and other toxic waste in the system is sorted out they will want to resume lending again, but hopefully never again in the same wreckless manner.

WTF?_2

smartn wrote: »

Absolutely they are not rushing to lend at the moment, but once the CDO's, CDS and other toxic waste in the system is sorted out they will want to resume lending again, but hopefully never again in the same wreckless manner.

Unfortunately, reckless lending was necessary to sustain the economy that 'we have become accustomed to' in the last decade. Everything was based on large numbers of people taking on silly amounts of debt in an environment of continuous economic expansion, low interest rates and low CPI (made possible by the deflationary effect of cheap, far-East produced consumer goods). Really cheap energy helped too, like there was always going to be enough to go around and it would last forever.

As pointed out by other posters, not only are we going to have to go back to living without easy credit as a crutch, there's the matter of paying back all the existing debt which has been accumulating over the last decade. Plus the interest on it.

Oh yeah, and everyone also gets to pay for all the toxic debt created by the bankers who irresponsibly made crazy loans that were unlikely to be honoured and now don't want to have to face the consequences themselves.

And that's the best case scenario.


But hey - I'm sure that the housing market and economy can recover against that background :rolleyes: We'll be back on course in no time, I'll be bound.

mewbie_2

!!!!!!? wrote: »

We'll be back on course in no time, I'll be bound.

You'll be bound and gagged mate. The evil face of doom mongering will be torched once a year on 'crash' day a la Mr. Fawkes.

WTF?_2

mewbie wrote: »

You'll be bound and gagged mate. The evil face of doom mongering will be torched once a year on 'crash' day a la Mr. Fawkes.

Doom......DOOM!

amcluesent

This is an opportunity to secure wealth for generations, in the chaos there will be ££. The bigger challenge is political opportunism - extremists from the left and right (& religious extremists) will exploit weakness for their own ends. I expect a wave of islamist attacks to further destabilise the West.

IveSeenTheLight

mewbie wrote: »

To my mind debt and mortage are the same - they are both debt. However, I believe the right action in these troubled times is to save a cash cushion of several months pay, then work on clearing non mortgage debts, and lastly, clear mortgage debt. If you clear some debts, but leave yourself zero cash, then it may be harder in future to borrow in case of emergency.

This may not be the most cost effective way of doing things, interest payments and so on, but it may be the safest.

I see you say your way is not the most cost effective.

To be the most cost effective you should pay off debts starting with the highest interest first.
i.e. if you have two loans, one for 1000 pounds at 7% and another for 2000 pounds at 19% (credit card) and you have 1000 pounds to put towards your debt, you are far better paying off half the higher interest than you are paying off all of the lower interest

£1000 at 7% = £5.84 per month
£1000 at 19% = £15.84 per month

Therefore at these figures / interest rates, you are £10 per month better off paying the higher interest first

Baz_2

IveSeenTheLight wrote: »

I see you say your way is not the most cost effective.

To be the most cost effective you should pay off debts starting with the highest interest first.
i.e. if you have two loans, one for 1000 pounds at 7% and another for 2000 pounds at 19% (credit card) and you have 1000 pounds to put towards your debt, you are far better paying off half the higher interest than you are paying off all of the lower interest

£1000 at 7% = £5.84 per month
£1000 at 19% = £15.84 per month

Therefore at these figures / interest rates, you are £10 per month better off paying the higher interest first

And then he loses his job and eventually his home because he spent all his money paying off debts and didn't save for an emergency fund.

£10 a month better of off or safety cash stuck away in an account in case of emergencies?

Its all down to personal circumstances though.