One in five homes for sale because owners unable to afford mortgage repayments

mystic_trev

More than one in five homes on the market are there because their owners cannot afford the mortgage repayments, The Times has learnt.

A survey of estate agents suggests that at least 5,000 properties a week are being put up for sale by “forced downsizers” – people who are in financial difficulties.

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5202124.ece

abaxas

mystic_trev wrote: »

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5202124.ece

Hmmm,

2008 - the starter
2009 - the main course.


:<

JayZed

Well, yes, but the Times seems to think that this is because people have been forced onto SVRs at high rates (quoting an average SVR of 6.36% in September). Base rates have fallen dramatically since then, the SVRs of most major lenders have followed, and more rate cuts are probably on the way.

So the trend has reversed: mortgages are now becoming more affordable, not less, even for those who don't have sufficient equity to get on a deal. Of course this may be offset to some extent by people losing their jobs in the current economic climate, but overall I wouldn't expect there to be a substantial increase in forced sales in Q1 or Q2 2009.

abaxas

JayZed wrote: »

Well, yes, but the Times seems to think that this is because people have been forced onto SVRs at high rates (quoting an average SVR of 6.36% in September). Base rates have fallen dramatically since then, the SVRs of most major lenders have followed, and more rate cuts are probably on the way.

So the trend has reversed: mortgages are now becoming more affordable, not less, even for those who don't have sufficient equity to get on a deal. Of course this may be offset to some extent by people losing their jobs in the current economic climate, but overall I wouldn't expect there to be a substantial increase in forced sales in Q1 or Q2 2009.

Yes, the people who can pay will.

However 60pw on the dole doesnt pay much of a mortgage.

Cannon_Fodder

JayZed wrote: »

Well, yes, but the Times seems to think that this is because people have been forced onto SVRs at high rates (quoting an average SVR of 6.36% in September). Base rates have fallen dramatically since then, the SVRs of most major lenders have followed, and more rate cuts are probably on the way.

So the trend has reversed: mortgages are now becoming more affordable, not less, even for those who don't have sufficient equity to get on a deal. Of course this may be offset to some extent by people losing their jobs in the current economic climate, but overall I wouldn't expect there to be a substantial increase in forced sales in Q1 or Q2 2009.

That's fine for tracker/variable mortgage-holders.

The rest? I would have thought most mortgage-holders, faced with a more expensive mortgage than they planned for, will have done rounds trying to change deal.

"even for those who don't have sufficient equity to get on a deal."

If you can't get on the deal, you can't get the better rate, its no use to you that other people are getting a cheaper mortgage...?!?

Once upon a time mortgage products were so numerous, diverse and discounted with cashback etc, that it was often more affordable to take a big hit in exit fees and change arcoss to the latest fixed deal or whatever.

I wonder what happened to make those attractive deals go away?

Heyman_2

JayZed wrote: »

Well, yes, but the Times seems to think that this is because people have been forced onto SVRs at high rates (quoting an average SVR of 6.36% in September). Base rates have fallen dramatically since then, the SVRs of most major lenders have followed, and more rate cuts are probably on the way.

So the trend has reversed: mortgages are now becoming more affordable, not less, even for those who don't have sufficient equity to get on a deal. Of course this may be offset to some extent by people losing their jobs in the current economic climate, but overall I wouldn't expect there to be a substantial increase in forced sales in Q1 or Q2 2009.

This is a very good point.

Most of the major lenders have passed on the full cut to their SVR, which will bring people's mortgage rate closer to the level that they might have signed up for a couple of years ago on a fix.

Northern Rock is a prime example, whereby people signed up for an initial fixed rate around the 5%ish mark, and were then finding themselves stuck on the high SVR rate (7.34% or 7.49% a few months ago) when the deal ended.

This SVR in particular will be 5.84% from 1st December, which on a typical 150K mortgage will claw back around £150 a month for those in this situation. My own provider, Nationwide's SVR is dropping to 4.69% - my current fixed rate is 5.28%!

Might be cause for a rethink for some.

WTF?_2

Heyman wrote: »

This is a very good point.

Most of the major lenders have passed on the full cut to their SVR, which will bring people's mortgage rate closer to the level that they might have signed up for a couple of years ago on a fix.

Northern Rock is a prime example, whereby people signed up for an initial fixed rate around the 5%ish mark, and were then finding themselves stuck on the high SVR rate (7.34% or 7.49% a few months ago) when the deal ended.

This SVR in particular will be 5.84% from 1st December, which on a typical 150K mortgage will claw back around £150 a month for those in this situation. My own provider, Nationwide's SVR is dropping to 4.69% - my current fixed rate is 5.28%!

Might be cause for a rethink for some.

The root of the problem is the massive capital debt which they took on when buying the house.

Servicing the mortgage has become a little easier because the government have made unprecedented cuts in baseline interest rates (which has caused a sharp devaulation of the pound) and nationalised practically half of the banking system (at massive cost to the taxpayer). The longer term effects of those actions are yet to manifest themselves so this relief in interest rates may well turn out to have been bought at a very heavy price and be subject to the law of unintended consequences.

Once a household loses an income (and there are lots of households depending on a dual income, making them twice as vulnerable) then no matter how low the government has made the mortgage rate, if the amount they borrowed was reckless they are in trouble - period.


This is precisely why a lot of us here have been complaining long and loud about the deviation from sensible lending and calling for a return to it. If lending (and therefore ultimately prices) had stayed in line with 3.5x single, 2.5x joint salary max .. and 90% LTV max, it would have meant a lot less people drastically affected.

But when you have borrowed 5x a joint income at maybe 95-100% LTV then you are very quickly in dire straits when job losses or reduced incomes loom.

That's the real problem here and no amount of desperate interest-rate reducing measures is going to make it go away.

fatpig_2

!!!!!!? wrote: »

But when you have borrowed 5x a joint income at maybe 95-100% LTV then you are very quickly in dire straits when job losses or reduced incomes loom.

.

Quite a few borrowed 10 times their income. :eek: Absolute madness

luvpump

Thank you .. A Post about House prices !! :j

Max_Headroom_3

!!!!!!? wrote: »

Once a household loses an income (and there are lots of households depending on a dual income, making them twice as vulnerable) ....

Twice as vulnerable, or half as vulnerable?

If a single income household suffers a job loss then that's 100% of income gone. If a dual income household suffers a job loss it's only half the income stream gone.

I agree with your post though, it's not (just) about interest rates, it's about the sheer mind boggling amount of debt that's out there and how that will be repaid, especially now incomes are dropping.

Cannon_Fodder

I think the "double" vulnerability can be seen like the lottery - two tickets gives you double the chance of winning...

If there is a finite number of redundancies during a recession, having two jobs in the same household makes that household twice as likely to be hit...

The problem of course, is that so many households have max'd out the dual-income to the point where "only" losing half is still a disaster.

Not to belittle the single income household that is hit, of course. Because they have max'd out too, probably.