The 70% club

Cannon_Fodder

Does anyone know the validity of the RRPI index http://www.rentright.co.uk/rrpi.aspx ? Seems a bit less than £1000 average.




Maybe in London its £1000 a month for rent, but outside the capital you can pick up a nice detached house around £800. And there are squillions of flats/terraces/semis under £800.

Which makes the difference £200 or so - not so great if you're struggling to save deposit, stamp duty, fees etc...

I've always wondered why the the landlord should get his business premises paid for upfront by the customer plus a £200 profit, anyway?

Shouldn't renters be cannier and decline to pay rents equal to, let alone above purchasing levels?

I know, "its market forces" !

MrDT

beinerts wrote: »

Don't venture onto here much. I've got to say that average prices of £103,000 (as was alluded to in an earlier post) are highly unlikely. Why?

The average rent is around £1000 a month

A FTB can get a 90%LTV mortgage at 6.5%. So on a repayments mortgage would be paying roughly £620 a month.

Do you not think FTBs would say, why do I not save myself £400 a month and get to own my own home? At least be free to do what they want and own it outright after 25 years.

Even if the mortgage rates shoot up, they have some way to go before they are paying as much for their mortgage as they were to rent. Frankly, I think a lot of buyers would pile in a lot sooner than that. Even at an average price of £160,000 FTBs would be paying the same on a 90% repayment mortgage as they were in rent. A very tempting level indeed to jump in, I'd say.

We all know prices are falling, but let's keep it realistic!

Rents are falling too. They'll be falling harder as unemployment rises and rises.

Still, I find 70% hard to swallow. Then again, what do I know - I thought 25% was as far as things could possibly go a few short months back. I think that's a VERY conservative estimate now...

Edit - Why don't I ever refresh a thread before replying? Beaten to it, beaten by a country mile.

Cannon_Fodder

beinerts wrote: »

A FTB can get a 90%LTV mortgage at 6.5%. So on a repayments mortgage would be paying roughly £620 a month.

http://newsvote.bbc.co.uk/1/hi/business/7729291.stm
Low-deposit mortgages evaporate




Mortgage deals for people offering a 10% deposit have almost evaporated from the market, according to figures obtained by the BBC. Only 66 deals of this kind are still available, compared with 586 three months ago and 1,197 in February.



Not for much longer, they can't...

StevieJ

Cannon_Fodder wrote: »

http://newsvote.bbc.co.uk/1/hi/business/7729291.stm
Low-deposit mortgages evaporate



Mortgage deals for people offering a 10% deposit have almost evaporated from the market, according to figures obtained by the BBC. Only 66 deals of this kind are still available, compared with 586 three months ago and 1,197 in February.



Not for much longer, they can't...

I think they only need one.

MrDT

Cannon_Fodder wrote: »

Does anyone know the validity of the RRPI index http://www.rentright.co.uk/rrpi.aspx ? Seems a bit less than £1000 average.




Maybe in London its £1000 a month for rent, but outside the capital you can pick up a nice detached house around £800. And there are squillions of flats/terraces/semis under £800.

Which makes the difference £200 or so - not so great if you're struggling to save deposit, stamp duty, fees etc...

I've always wondered why the the landlord should get his business premises paid for upfront by the customer plus a £200 profit, anyway?

Shouldn't renters be cannier and decline to pay rents equal to, let alone above purchasing levels?

I know, "its market forces" !

I'm looking to pay up to twice what I currently spend in rent on a repayment mortgage. The difference is that I rent a one bed flat, and intend to buy a three/four bed house. Don't strictly need the extra space yet, but I figure there will be some nice buying opportunities in the next couple of years that would set me up nicely for the years to come - and I'll eventually be needing somewhere bigger.

I'm worried I might be tempted over to the "dark side" too. There's a two bed house nearby that I reckon will sell cheaply, repayment mortgage would cost me little more than I pay in rent. It's not much bigger than the one bed flat I've lived in the past three years (two small rooms as opposed to one big one), but it's in a decent enough location that's in the heart of "student let land". Toying with the idea of buying it to use as an owner occupied replacement for the rented flat short term (say two years). I'd plan to keep saving near enough as much as I currently do towards a deposit for somewhere bigger (i.e. the aforementioned 3/4 bedder) in that time, and when the time to move to a bigger place came along, rent the little two bedder out to a couple of students (should more than cover the mortgage, and when the mortgage is all paid off it's an additional income stream). Oh God, I've not even bought my own place and am already considering the possibility of becoming a big bad nasty BTL type Is it buy to let if you buy it to live in, then rent it out later on? Bearing in mind that'd be my plan all along so I wouldn't really be a 'reluctant' or 'accidental' landlord.

I need to think about it a little (lot) more. There's a glut of tiny two bed properties on the market here at the moment, I'm putting it down to panicked BTLers, and the fact that the university is spending millions on trendy student apartments. Maybe there's no market for the little student houses of old these days.

Cannon_Fodder

StevieJ wrote: »

I think they only need one.

http://www.fool.co.uk/news/property-home/mortgages/2008/10/01/mortgage-borrowers-are-doomed.aspx

"A massive two-thirds of brokers have been unable to source a mortgage for clients in the past two months, according to the Intermediary Mortgage Lenders Association"


I think the Mortgage Brokers might prefer to have some more options to offer their potential clients...


Wonder if there is a UK version of http://www.thetruthaboutmortgage.com/a-list-of-recent-mortgage-closures-mergers-and-layoffs/

Doesn't read well for some https://secure.mortgagestrategy.co.uk/cgi-bin/item.cgi?id=175815&d=pndpr&h=pnhpr&f=pnfpr

dopester

Cannon_Fodder wrote: »

Not for much longer, they can't...

Yes; that is the other side of the coin. For every action kind of thing...

BoE slashing interest rates and pressurising lenders to pass it on will just feed back in to that other thread today where the OP is complaining Nationwide have just pulled his mortgage before completion.... saying they've revalued it £30K less.

Also it will feedback in to the requirement for greater deposits, and for borrowers having to satisfy ever stricter lending criteria - until house prices begin to match realistic economic conditions, which in themselves are worsening every month.

No stop to the HPC. If anything, it is accelerating.

dopester

MrDT wrote: »

and when the time to move to a bigger place came along, rent the little two bedder out to a couple of students (should more than cover the mortgage, and when the mortgage is all paid off it's an additional income stream).

Just be careful in my opinion. I think some universities might be forced to close, or where all the educational stuff can be merged with another university in another area. Certainly I expect Gov to cut back the funds to education. Don't underestimate the stress on the public purse. There might even be less students going to Uni in the future.

And even if you can get it cheap... keep in mind stresses on income to come, especially with deflation fears. What might look cheap now may very not much be in 2 or 3 years, with a whole new mindset of value and lower general incomes.

Didn't this sort of happen 8 months ago around Wales... a University or Polytechnic suddenly announced they were closing and merging with another about 30 miles away, leaving loads of BTL-ers with empty properties and no demand?

Heyman_2

Cannon_Fodder wrote: »

http://www.fool.co.uk/news/property-home/mortgages/2008/10/01/mortgage-borrowers-are-doomed.aspx

"A massive two-thirds of brokers have been unable to source a mortgage for clients in the past two months, according to the Intermediary Mortgage Lenders Association"


I think the Mortgage Brokers might prefer to have some more options to offer their potential clients...

Lack of Mortgage lending is definitely the root cause of the scarcity of buyers at the moment.

Until banks return to offering 90% and 95% deals on a widespread, accessible and affordable basis, the MoM drops will continue in the housing market.

To buy a £100k property in the current climate, FTBs are in the main being asked to stump up £25K deposit plus all the other fees etc. Compare that to the situation a couple of years ago where (rightly or wrongly) you could pretty much walk in to see a broker and buy a house without stumping up any initial cash at all (not even fees).

sdooley

Ewarwoowar2 wrote: »

If you look at that graph, the bottom of the troughs appear to be:

1978 - £58k
1983 - £65k
1996 - £69k

Based soley on this graph, if this crash follows the same trends as the previous crashes, I'd predict a bottom of about £75 - 80k. Which is a drop of approximately 60%.

Given that we're being told that this could be the worst economic crash since WW1, the crash in property prices could be worse than the 1970's, 1980's and 1990's. Therefore, the above logic would suggest that a crash of 70% is not a foolish perdiction.

Anyone care to point out why the above is incorrect?

It is incorrect because the graph shows real (in the sense of 'the cost in today's money') house prices. Average house prices in the late 70s were not £58k, that would have bought a mansion - more like an average of £10,000.

So from the 78 low to the 96 bottom house prices increased in real terms by 20%. In nominal terms they would have increased by 220% (allowing for 200% (under 7%p.a.) inflation over the 18 years). Actual inflation was higher than 7% over the period.

Inflation has been lower since 1996 - if we expect house prices to next increase in real terms in 2014, assume a low inflation rate over the period of 4% we still get 110% inflationary increase, add the 20% trend increase and you might expect a nominal (though not a real) house price drop of 30-35%.

To put it another way - house prices have trebled during the boom (trough to peak) - but the price of everything will have doubled from 1996 to 2014 - so for house prices to fall 70% in nominal terms means they would be worth less than half what they were at the low point in 1996.