House prices to fall by 40% from peak, 3-4 million in neg. equity

mystic_trev

baby_boomer wrote: »

MEWing + lousy endowment / interest only mortgage + HPC = big issue at the end of 25 years.

The iroic thing about the Endowment fiasco, is that many of those who claimed for mis-selling, pocketed their compensation and spent it. Instead of using the money for what they were supposed to i.e. pay off part of the mortgage, many will find at the end of the term they've no money to pay off the principal sum!

baby_boomer

C&G are one company who are refusing to allow borrowers with less than a 25% deposit or 25% LTV to have an interest only mortgage .

:idea: Why oh why didn't the mortgage lending ijuts insist on this before. :idea:

Not so long ago you had to produce all the evidence of the investment vehicle which was paying off the loan.

But with house prices going up & up, and mortgages being securitised and sold to someone else, this little detail :rotfl: somehow got discarded by the lenders. It's as if the people with economics degrees were listening to Krusty who left school at 18, rather than common sense or their own knowledge.

I wonder how executive bonuses have already been paid out as a result of this catastrophic mistake ? Or will be still be paid out in 2008 :eek: ?

baby_boomer

Reuters

In the US 1/5 mortgage borrowers are in negative equity and it's shortly to become 1/4.

mikelivingstone

baileysbattlebus wrote: »

We lost almost 40% of the "value" of our house in the last crash - we live in the south east which was hit quite hard then. Other parts of the country saw much smaller drops, but didn't have the huge price increases that we saw here.

Where we are prices peaked in 1989 and the first falls were also in 1989 prices fell until 1993 when there was a slight rise, they continued rising reaching pre crash prices again in the middle of 1998, so the cycle for us was 9 years.

Prices could easily fall 40%+, they certainly did in our area, although the figures would have you believe that the falls were less than that - it depended on where you lived.

According to the Halifax prices in the south east fell by 31% and the north east by 9.5%, though my sister who lives there saw her own area increase in value slightly during the same period.

The north east didn't see any falls until 1991 - prices there started to fall later and were still falling slightly when the south east had started to recover, but the north east was still up to 1991 level prices by 1998.

Personally, I don't think prices will fall in a uniform manner across the country, I could be wrong, but I would be surprised if they did.
Some areas will fall further than others - some people are saying prices have risen slightly in areas where they live - that wouldn't surprise me either - but they could just be be lagging a bit.

I think this crash is rather different. This time it is centred on London and will ripple out.

I already have plenty of evidence of what were +£1m houses in the South East plunging in value. Mostly the over indebted and unemployed financial services people, this is going to get pretty ugly.

sabretoothtigger

Pobby wrote: »

The area I live in is known for very low wages yet it is only just below the property prices found in the South East, our area is in fact the 3rd highest for property in the UK

Can I ask how much the properties are for sale on the street/house you mentioned earlier

Realy

Cannon_Fodder wrote: »

Some context on the size of MEwing...old article, but lovely one-liner;
http://www.independent.co.uk/news/business/news/record-equity-withdrawal-by-homeowners-triggers-fears-of-early-interest-rate-rise-558582.html
"It took the total for 2003 to £53bn, outstripping the entire economic output of Ireland."


Official MEW, now renamed HEW figures;

2005 - £44BN http://www.bankofengland.co.uk/statistics/mew/2005/dec/index.htm
2006 - £60BN http://www.bankofengland.co.uk/statistics/mew/2006/dec/index.htm
2007 - £55BN http://www.bankofengland.co.uk/statistics/hew/2007/dec/index.htm
2008 - half-year figure - £2.5BN http://www.bankofengland.co.uk/statistics/hew/2008/jun/index.htm


So, that's been an extra £50BN of spending in the economy, each year, that would otherwise not have occured...that's £2,000 for every single household in the UK. Say only 5% of people MEW (can't find an official %) that would be £40,000 per MEW household...suddenly not allowed/not affordable/not being spent - that on its own would cause a recession!


Oh, and just re-read the 2008 figure, again...£2.5BN. Demonstrates the current liquidity problem nicely.

So the Economy MUST shrink by £50BN, JUST because of the disappearance of MEWing. Forget lost tax revenue from company failures, the cost of unemployment, reduced stamp duty takings, and who knows what else...

£50,000,000,000 gone.

So, GB/AD will have to commit - on top of Northern Rock billions, on top of Bank bail-out billions, on top of lost tax revenues - to spending ANOTHER £50BN just to counteract the recessionary effect of the missing MEW funds.

And store up that debt for future generations to pay off...very prudent.

Around £4,000 per mortgage holder.
Cheaper than a personal loan?
Who can say that was not just going to borrowed anyway.
How much have non mortgage holders borrowed?

Not defending it but if you needed a loan mewing is cheaper than a personal loan if you pay it off over the same time frame.

Realy

ad9898 wrote: »

I disagree Steve, If the BoE are too aggressive with the rate cuts, the pound will indeed crumble. The Fed Reserve can pretty much do what they like with dollar, its the currency of last resort, we do not have that luxury.

If the pound does tank then the CPI is sure to go in the opposite direction, we import nearly everything, manufacture nearly nothing.

The pound has tanked already because the rest of the world think our interest rates are to high going in to a recession.

IveSeenTheLight

baileysbattlebus wrote: »

We lost almost 40% of the "value" of our house in the last crash - we live in the south east which was hit quite hard then. Other parts of the country saw much smaller drops, but didn't have the huge price increases that we saw here.

Where we are prices peaked in 1989 and the first falls were also in 1989 prices fell until 1993 when there was a slight rise, they continued rising reaching pre crash prices again in the middle of 1998, so the cycle for us was 9 years.

Prices could easily fall 40%+, they certainly did in our area, although the figures would have you believe that the falls were less than that - it depended on where you lived.

According to the Halifax prices in the south east fell by 31% and the north east by 9.5%, though my sister who lives there saw her own area increase in value slightly during the same period.

The north east didn't see any falls until 1991 - prices there started to fall later and were still falling slightly when the south east had started to recover, but the north east was still up to 1991 level prices by 1998.

Personally, I don't think prices will fall in a uniform manner across the country, I could be wrong, but I would be surprised if they did.
Some areas will fall further than others - some people are saying prices have risen slightly in areas where they live - that wouldn't surprise me either - but they could just be be lagging a bit.

100% spot on.
It's amazing how many on here believe in uniform drops accross the whole of the UK

StevieJ

Cannon_Fodder wrote: »

Some context on the size of MEwing...old article, but lovely one-liner;
http://www.independent.co.uk/news/business/news/record-equity-withdrawal-by-homeowners-triggers-fears-of-early-interest-rate-rise-558582.html
"It took the total for 2003 to £53bn, outstripping the entire economic output of Ireland."


Official MEW, now renamed HEW figures;

2005 - £44BN http://www.bankofengland.co.uk/statistics/mew/2005/dec/index.htm
2006 - £60BN http://www.bankofengland.co.uk/statistics/mew/2006/dec/index.htm
2007 - £55BN http://www.bankofengland.co.uk/statistics/hew/2007/dec/index.htm
2008 - half-year figure - £2.5BN http://www.bankofengland.co.uk/statistics/hew/2008/jun/index.htm


So, that's been an extra £50BN of spending in the economy, each year, that would otherwise not have occured...that's £2,000 for every single household in the UK. Say only 5% of people MEW (can't find an official %) that would be £40,000 per MEW household...suddenly not allowed/not affordable/not being spent - that on its own would cause a recession!


Oh, and just re-read the 2008 figure, again...£2.5BN. Demonstrates the current liquidity problem nicely.

So the Economy MUST shrink by £50BN, JUST because of the disappearance of MEWing. Forget lost tax revenue from company failures, the cost of unemployment, reduced stamp duty takings, and who knows what else...

£50,000,000,000 gone.

So, GB/AD will have to commit - on top of Northern Rock billions, on top of Bank bail-out billions, on top of lost tax revenues - to spending ANOTHER £50BN just to counteract the recessionary effect of the missing MEW funds.

And store up that debt for future generations to pay off...very prudent.

What about those people that paid their mortgage down, like me.

mr.broderick

mewbie wrote: »

But Mr. B. Take your point about moving up the ladder, but is it possible to sell a house if you are in negative equity and move the mortgage to a different house? Not sure that makes sense so here in plain English.

Buy house 200k. Mortgage 175k
Sell house 150k. Shortfall 25k.

What happens? Can I buy that better house for 200k with a mortgage of 225k?

My brain hurts. Help me someone clever.

Not sure mewbie.
I was thinking if my house was worth £180k and i had a £90k mortgage and
i wanted to buy a house for £300k i would have to borrow £210k.
If my house halved it would be worth 90k and i would owe the same. The house i wanted to buy would be £150k so i would get a £150k mortgage. In other words i could buy a house £120k more expensive for a £60k mortage increase. Is that right? My head hurts now. (Mortgage would have to be interest only with no payment vehicle for me to cope )