1.5m homeowners face 'disaster' if house prices keep falling, MPs warned

michaels

chewmylegoff wrote: »

do they really face "disaster"? all 1.5 million of them?

unless all 1.5 million of these particular homeowners get made redundant or suffer a significant cut in income, then no, they don't.

unless of course either (i) everything they ever did was funded by MEWing based on the constant rise of property prices; or (ii) they took out mortgages that they couldn't afford in the first place, which isn't anyone's problem but their own.

Supose they had a mortgage they could easily afford on a 2 year special offer. Given falls in prices a reduction in mortgage market competitivemess at the end of the specail rate period they are unable to remortgage on to another competitive rate as they had anticipated. They might then be trapped on a very uncompetiitve svr considerably higher than the rate they were previosuly paying. Add in to the mix may be something like a reduction in overtime and suddenly even purchases that looked sensible might become unaffordable.

b0rker

Depending on how far the house values fall in Inverness in Scotland my girlfriend and I will be facing a large amount of negative equity. In fact the only good thing about us having a £100,000 mortgage is that fact that it is very easy to work out how much negative equity we will have!

If the prices drop by 25% we are looking at £25K.

Assuming house prices here drop 20%. We need to get £20K to cover the NE and then another £8,000 to get our £80,000 down to £72,000 so we can get a 90% LTV (assuming they still exist then). So we are looking at needing £28K assuming a drop of 20%. We could of course stay of the SVR if it is nice and low (Northern Rock, who else?). Hoping of course that the prices do not drop further whilst we are on the SVR and then making it more difficult to secure another fixed.

Our fixed deal ends in September so we have about 8 months to save £18K (already have £10K saved). Assuming we keep our jobs we can probably do this with maybe a small amount of help from our parents. I am sure we can save £24K between us if we both stay employed so may need help with the other £4K. As we have no kids I would consider us to be some of the lucky ones. If we lose our jobs we are screwed... It all really depends on the value of our house in 8 months time and our employment status between now and then.

chewmylegoff

michaels wrote: »

Supose they had a mortgage they could easily afford on a 2 year special offer. Given falls in prices a reduction in mortgage market competitivemess at the end of the specail rate period they are unable to remortgage on to another competitive rate as they had anticipated. They might then be trapped on a very uncompetiitve svr considerably higher than the rate they were previosuly paying. Add in to the mix may be something like a reduction in overtime and suddenly even purchases that looked sensible might become unaffordable.

i don't agree that a purchase that was affordable only if the discounted rate available in such deals could always be achieved in the future could ever be described as "sensible".

a mortgage being affordable means that you could afford to still pay it if the interest rate increased. any muppet knows that interest rates go up and down.

skap7309

chewmylegoff wrote: »

last time round, prices were essentially stagnant at the bottom for about 4 years, so unless you're really bloody slow, it's unlikely that you could miss the bottom.

of course what you would miss out on is the end of the panic before the bottom, where you could have overshot the bottom, but it's obviously impossible to accurately judge when that time is until some time after it happened.

So much use of the word 'bottom', my mind began to wander then.........

Oh well, i am male i suppose.

Squish_21

Well I've just started saving for house deposit no2, spose I should also be saving to pay for a HUGE amount of negative equity.

Cant see me getting out alive?!
Currently unable to progress my life in a 1 bed flat!

skap7309

MissMoneypenny wrote: »

That's what the Wilsons seem to have thought. They started buying their properties at the bottom of a crash and thought a crash would never happen again....yet here we are in a bust again. Boom and Bust seems to be part of our culture.

OK i understand but i think you are missing the point. The Wilsons bought seemingly entire towns whereas i am after just one home. Also, say for arguments sake that it is 15 years until the next crash. The bottom of that will surely not go as low as the 'noughties' crash. In the same way that the peak will be even higher than 2007.

Really2

skap7309 wrote: »

OK i understand but i think you are missing the point. The Wilsons bought seemingly entire towns whereas i am after just one home. Also, say for arguments sake that it is 15 years until the next crash. The bottom of that will surely not go as low as the 'noughties' crash. In the same way that the peak will be even higher than 2007.

No need for anyone (homeowner) to worry then.:T

Thrugelmir

MissMoneypenny wrote: »

That's what the Wilsons seem to have thought. They started buying their properties at the bottom of a crash and thought a crash would never happen again....yet here we are in a bust again. Boom and Bust seems to be part of our culture.

The correct terminology is economic cycles not boom and bust. Something that the man who saved the world thought he had eradicated.

Really2

Thrugelmir wrote: »

The correct terminology is economic cycles not boom and bust. Something that the man who saved the world thought he had eradicated.

Somthing we never will unless the whole world does.

chewmylegoff

Thrugelmir wrote: »

The correct terminology is economic cycles not boom and bust. Something that the man who saved the world thought he had eradicated.

let's be clear, he said "no return to tory boom and bust"

so that's alright then.