When....

Baz_2

opinions4u wrote: »

If house prices continue to fall, you need to have a strategy where you either overpay the mortgage (terms and conditions allowing) or build up some savings in reserve. This needs to give you flexibility to pay negative equity, fund legal fees etc and a deposit on the next house.

Surely a longer fix period will give you longer to save, I really cant see the issue. Longer the time your fixed, the longer you have to save, the longer you have to bring the balance down, the longer the housing market has to recover, the longer you have to get a better job, the longer inflation has chance to make your repayments seem smaller and so on and so on.

And if you want a risk free mortgage before you buy then you will never buy.

Sometimes I think people just like to argue for the sake of it.

opinions4u

Baz wrote: »

Sometimes I think people just like to argue for the sake of it.

Not why I come on here but I have strong concerns about two things when it comes to mortgages.

1) There is a belief that house prices will always go up, even after a slump. That is not a given (especially in a post-crunch world where lending is constrained to the deposit base of the banks and not supported by wholesale funds, so lending is less likely to fuel house price inflation).

2) People assume interest rates will never go up again so take out mortgages without budgeting for exactly that eventuality.

Part of the reason for the sub-prime situation is a belief by lenders that they couldn't lose when they lent money. We're yet to see the true fallout here in the form of bad debts for British lenders - but keep watching the inevitable rounds of job losses followed by mortgage arrears and the eventual repossession numbers.

Equally, borrowers are nothing short of naive if they think today's historically low interest rates are sustainable post-recession.

Call it argumentative if you like. My view is that both lenders AND borrowers need to be realistic when entering in to mortgage commitments and when both parties are reckless everybody gets shafted.

Baz_2

opinions4u wrote: »

Not why I come on here but I have strong concerns about two things when it comes to mortgages.

1) There is a belief that house prices will always go up, even after a slump. That is not a given (especially in a post-crunch world where lending is constrained to the deposit base of the banks and not supported by wholesale funds, so lending is less likely to fuel house price inflation).

2) People assume interest rates will never go up again so take out mortgages without budgeting for exactly that eventuality.

Part of the reason for the sub-prime situation is a belief by lenders that they couldn't lose when they lent money. We're yet to see the true fallout here in the form of bad debts for British lenders - but keep watching the inevitable rounds of job losses followed by mortgage arrears and the eventual repossession numbers.

Equally, borrowers are nothing short of naive if they think today's historically low interest rates are sustainable post-recession.

Call it argumentative if you like. My view is that both lenders AND borrowers need to be realistic when entering in to mortgage commitments and when both parties are reckless everybody gets shafted.

Its just the more you say the more you confirm that the longer term fix would be the best option.

If you think he should not buy at all then thats a different matter but to say that a longer fix, in his situation, would not help fight against negative equity more than a two year fix would is just plain wrong.

opinions4u

Baz wrote: »

Its just the more you say the more you confirm that the longer term fix would be the best option.

If you think he should not buy at all then thats a different matter but to say that a longer fix, in his situation, would not help fight against negative equity more than a two year fix would is just plain wrong.

In post 11 I stated: "A longer term fix with a competitive rate and portability option may well be the answer". I have no issue with the choice of product.

But the choice of product does not "fight" negative equity. The value of the house and mortgage debt at a set point in time is what determines negative equity. That would be the same if somebody when on an SVR, took out a fixed rate or had a Cracker Jacker Tracker mortgage.

beecher

Baz wrote: »

Its just the more you say the more you confirm that the longer term fix would be the best option.

If you think he should not buy at all then thats a different matter but to say that a longer fix, in his situation, would not help fight against negative equity more than a two year fix would is just plain wrong.

It is probably just because of the way I worded my first response, which might look as if I was saying that after 5 years it'll all be okay and no-one will be in negative equity. I don't think that at all, but my phrasing might've made the rest of the thread go off on a tangent.

I think we're all saying the same thing really - the OP has to think seriously about giving up a rental in a HA property when she's thinking of buying a 75% share in a property, with a new baby on the way and a partner facing a potential loss of job.

Baz_2

opinions4u wrote: »

But the choice of product does not "fight" negative equity. The value of the house and mortgage debt at a set point in time is what determines negative equity. That would be the same if somebody when on an SVR, took out a fixed rate or had a Cracker Jacker Tracker mortgage.

If those SVR or trackers were lifetime products then I disagree. If any of them had a end period in which you would be compelled to re mortgage, like you do at the end of a fix, then your right.

You even quoted yourself agreeing so I really don't understand what you are arguing about. Negative equity only exists when you need to sell or re-mortgage. Its just common sense the longer that time between now and having to sell or re mortgage the more chance you have of not being in negative equity at that time. The reasons for that are the 6 or so already given.

So if your happy to go on the SVR or tracker and dont have a end period and are happy to stay on it until the end of the term you will never have negative equity so how could that be the same as going on a finite term fix?

Last post on the matter. Youre clearly batty.

opinions4u

Sorry Baz, but I can't leave a lot of that unchallenged.

Baz wrote: »

If those SVR or trackers were lifetime products then I agree. If any of them had a end period in which you would be compelled to re mortgage, like you do at the end of a fix, then your wrong.
Nobody is compelled to remortgage. It is a choice usually based on the difference between SVR and other products at a point in time. While that may be triggered by a mortgage product expiring, it isn't the only reason.

Negative equity only exists when you need to sell or re-mortgage.
No it doesn't. It exists when your house is worth less than the loans and mortgages secured against it. It becomes a specific problem if you wish to remortgage or sell.

Its just common sense the longer that time between now and having to sell or re mortgage the more chance you have of not being in negative equity at that time.
Which assumes the specific belief that house prices will always go up in the medium term. While there may be historical precedent for this it is not guaranteed. Over the past 40 years British mortgage lending has more or less increased year on year with the occasional short-lived contraction. With wholesale lenders less willing to lend to mortgage providers, and lenders themselves somewhat fearing the possibility of a future credit crunch, the only way I can see net mortgage lending going over the next few years is down. This will deflate the housing market and very possibly dampen any recovery in house prices. This is a genuine medium term risk to borrowers currently in or close to negative equity.

So if your happy to go on the SVR or tracker and dont have a end period and are happy to stay on it until the end of the term you will never have negative equity so how could that be the same as going on a finite term fix?
I think I answered this above.

Last post on the matter. Youre clearly batty.
No. Cautious in outlook perhaps, but not batty.

Baz_2

Arghhhhhh!!!! Just when I thought I had escaped your madness you go and pull me back in!

If the SVR is 7% and you can get a fix, discount or a tracker at 5% then thats compelling enough a reason to re mortgage for anyone.

Your house does not have a value until someone values it, either a buyer or a mortgage company. It cannot therefore have negative equity if it does not have a value established by a buyer or a mortage valuation. Simple. Until then it does not exist. If you never sell or re mortgage you will never have negative equity. Its a notional paper figure only until it crystalises.

I am not assuming your house will go up I am assumeing that your mortgage balance will go down the more you pay off it, it assumes your income might increase, it assumes your ssavings might increase, it assumes inflation may make the mortgage balance seem lower in the future and many other things. You can't get past that fact can you.

Lanz81

to be honest you've all just confused me now!

opinions4u

Lanz81 wrote: »

do you think banks will drop the fixed rates for FTB?

I have been offered 5.49% but want to know if they will drop after BOE meeting on Thursday.

What are your thoughts?

Possibly, slightly, probably not for a week or two afterwards.

Don't bank on it though.

(Sorry for taking the thread away from your question!).