50% drops by 2011

Dithering_Dad

neverdespairgirl wrote: »

I put it badly.

What I mean is that we are fairly sensible with our cash, and choose not to spend more than we have. We are also in the fortunate position of having a lump sum as well.

In those circumstances, we are pretty risk-adverse because we don't want to go from a financial situation we don't worry about to one we do worry about.

That's not risk adverse, that really is just being sensible. I'm probably at the same level as you, I'm happy to invest but wouldn't invest so much or in such risky stocks that it'd impact my finances to the point that I was worried.

I probably won't be rich with this approach, but hopefully I'll not be poor either.

GDB2222

slipthru wrote: »

There will be those that stick surely, because they have not overstretched themselves and are financially secure. If i had a job i felt was secure and had money in the bank to cover any shortfall and bought a modest place with a mortgage i could easily afford in the last two years that is what i would do.

I agree with that, but what happens is that people run into 'life-events' like sickness, redundancy or divorce/partnership breaking down, and they can't meet their mortgage payments. At that point, a comparison gets made between the mortgage and the house value.

To get some idea of what the numbers are:
Number of homes in the UK: 22 mill
Number of transactions a year: 2 mill (except in the last year)

So, if house prices return to 2003 levels (say), all the homes bought in 2004 to 2008 will be worth less than purchase price: roughly 40% of the homes in the country.

Some of those will be ok because the purchase was made with a very substantial deposit, but the rest will be at danger of repossession if one of those life-events occurs. That could easily be a third of the homes in the country, so a third of people getting divorced will get their homes repossessed, etc.

stevetodd

Yoshua wrote: »

OK you were quoting from Halifax, well I was quoting from Moneyweek-

http://www.moneyweek.com/investments/property/why-house-prices-will-keep-falling-fast-13775.aspx
2nd to last paragraph.

I never made any scenario and I'm not trying to have a debate with you. I do see your point, but do you really think someone who bought a house about 2 years ago could have sold it for more 10 months later last August? The so called `profit` wouldn't even cover expenses.

If that's all you pick out to disagree with in my post does that mean you agree with the rest of it?

Yes that's a rather bad obvious error by Moneyweek.

Well the thing is that that error makes the predicament far less painful for the person in your scenario, I think most would ride the storm out if they can as they obviously prefer to own, so it would be silly to sell now with a view of buying back in 2/3 years because of the solicitors fees (twice), stamp duty, estate agents fees, valuation fees, mortgage arrangement fees, MIG fees and moving costs. For those that cannot then yes those few would have to sell, but I think they would be tempted to see where the mortgage variable rate is going as interest rates are falling and EVENTUALLY this will bring mortgage rates down when lenders pass on the rate drops.

Yoshua

GDB2222 wrote: »

I agree with that, but what happens is that people run into 'life-events' like sickness, redundancy or divorce/partnership breaking down, and they can't meet their mortgage payments. At that point, a comparison gets made between the mortgage and the house value.

To get some idea of what the numbers are:
Number of homes in the UK: 22 mill
Number of transactions a year: 2 mill (except in the last year)

So, if house prices return to 2003 levels (say), all the homes bought in 2004 to 2008 will be worth less than purchase price: roughly 40% of the homes in the country.

Some of those will be ok because the purchase was made with a very substantial deposit, but the rest will be at danger of repossession if one of those life-events occurs. That could easily be a third of the homes in the country, so a third of people getting divorced will get their homes repossessed, etc.

Couldn't agree with you more.

And out of the "'life-events' like sickness, redundancy or divorce/partnership breaking down," I`d say redundancy numbers will be the biggest, and I think it will be more than a third of these will have problems meeting payments.

GDB2222

One big change the govt has made since the last crash is that they have brought forward the date when benefits will start to pay mortgage interest. It used to be 39 weeks, and it's now 13 weeks. I think that could turn out to be a very effective measure at keeping repo numbers down.

Yoshua

GDB2222 wrote: »

One big change the govt has made since the last crash is that they have brought forward the date when benefits will start to pay mortgage interest. It used to be 39 weeks, and it's now 13 weeks. I think that could turn out to be a very effective measure at keeping repo numbers down.

Very interesting but thinking about it I cant see it making much difference. The change in real terms is 26 weeks of `interest payments` not the capital. Whats that a couple of grand for an average house. Will it be enough to keep the average family above water?

hethmar

Yes, I think quite a lot of us have overlooked the provisions the government is making to avoid repos. Hopefully that will keep families in their homes. I do wonder if aswell as nationalising banks, we may find councils owning a lot of houses at the end of this period.

slipthru

GDB2222 wrote: »

I agree with that, but what happens is that people run into 'life-events' like sickness, redundancy or divorce/partnership breaking down, and they can't meet their mortgage payments. At that point, a comparison gets made between the mortgage and the house value.

To get some idea of what the numbers are:
Number of homes in the UK: 22 mill
Number of transactions a year: 2 mill (except in the last year)

So, if house prices return to 2003 levels (say), all the homes bought in 2004 to 2008 will be worth less than purchase price: roughly 40% of the homes in the country.

Some of those will be ok because the purchase was made with a very substantial deposit, but the rest will be at danger of repossession if one of those life-events occurs. That could easily be a third of the homes in the country, so a third of people getting divorced will get their homes repossessed, etc.

Of course these are possiblities that can and will happen to some, but there will still be those who manage to survive without these things happening.

it sounds like everybody who bought in the last 2 years is completely doomed and i really don't think that is the case at all.

hethmar

I think those figures may be skewed by the number of remortgages rather than purchases made in those years.

novazombie

GDB2222 wrote: »

One big change the govt has made since the last crash is that they have brought forward the date when benefits will start to pay mortgage interest. It used to be 39 weeks, and it's now 13 weeks. I think that could turn out to be a very effective measure at keeping repo numbers down.

Please forgive me but I dont understand.

Is the government offering to pay off the interest of the mortgages of everyone who becomes unemployed? Its almost worth becoming unemployed