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

housesitter

carolt wrote: »

More than 1.5 million homeowners with big mortgages will be facing "a disaster" if — as expected — house prices fall by another 15% this year

and how many FTB's are there waiting in the wings to take advantage, plus all the other people who will be utterly annoyed if the govt props up these people for their poor judgement.

More or less than 1.5 million?
I assume there are no figures to count potential FTB's, so our voices will go unheard.

b0rker

housesitter wrote: »

and how many FTB's are there waiting in the wings to take advantage, plus all the other people who will be utterly annoyed if the govt props up these people for their poor judgement.

What has poor judgement got to do with it? You're assuming an awful lot there. If it were not for the sub-prime lending bubble bursting in the US we would not be seeing house prices dropping so quickly in the UK and many people would not be becomming part of this 1.5m statistic. You are talking as if everyone in that 1.5m went out and got a 125% mortgage at 7x their income. I would be very surprised if it was not a small percentage of of the 1.5m stated there were in such unrelatistic positions. Is there any way of seeing some stats on this?

I would be surprised if myself and my partner were not in those stats. We borrowed 100% at less than 3x our joint income. As above we could easily be facing £20K of NE. As the people who are responsible for these stats will not be aware of our savings or our specific potential to save they will not be aware that we could well just pull through this. I am sure we look very risky on paper as we will look like we are going to be £20K (or there abouts) in NE. We have to be part of those 1.5m stats.

I do not consider it to have been poor judgement to buy a home at less than 3x our joint income in September 2007. I consider it bad luck that the housing maket crashed straihgt after we did. We could and should have saved for a deposit but we have pretty much done that now in reverse and saved £10K in a year after purchasing the property. This in itself proves that it is an affordable mortgage, What is not affordable is having to find £28K in 2 years due to bad luck/the housing market crashing.

nickmason

b0rker wrote: »

What has poor judgement got to do with it? You're assuming an awful lot there. If it were not for the sub-prime lending bubble bursting in the US we would not be seeing house prices dropping so quickly in the UK and many people would not be becomming part of this 1.5m statistic. You are talking as if everyone in that 1.5m went out and got a 125% mortgage at 7x their income. I would be very surprised if it was not a small percentage of of the 1.5m stated there were in such unrelatistic positions. Is there any way of seeing some stats on this?

I would be surprised if myself and my partner were not in those stats. We borrowed 100% at less than 3x our joint income. As above we could easily be facing £20K of NE. As the people who are responsible for these stats will not be aware of our savings or our specific potential to save they will not be aware that we could well just pull through this. I am sure we look very risky on paper as we will look like we are going to be £20K (or there abouts) in NE. We have to be part of those 1.5m stats.

I do not consider it to have been poor judgement to buy a home at less than 3x our joint income in September 2007. I consider it bad luck that the housing maket crashed straihgt after we did. We could and should have saved for a deposit but we have pretty much done that now in reverse and saved £10K in a year after purchasing the property. This in itself proves that it is an affordable mortgage, What is not affordable is having to find £28K in 2 years due to bad luck/the housing market crashing.

Sorry, but poor judgement has a lot to do with it.
If people showed greater judgement, greater awareness that economic cycles (Tory, Labour, or any hue) were unavoidable, didn't believe the illogical "prices can only go up", then this bubble would have been smaller. Of course you can blame all sorts of external influences, and you can also blame the government for not cooling the fire. But....
prices don't go up without buyers
sensible buyers don't buy at clearly unsustainable prices

Prices now are still above the long term average. So forget all the excuses - this correction was going to happen come what may.

Those who have bought recently have fuelled the very bubble that they are now complaining about. There might be all sorts of reasons why it was still good for them; security, etc. and the wise among them will have discounted the imminent downturn against those benefits, and will be happy with their position now. But those that showed the judgement of withstanding those other pressures and got or stayed out of the bubble effectively acted to deflate it.

If you don't like property boom and bust, then reward those that acted rationally. If the poor judgement of those jumping on the band wagon is rewarded, then we'll only repeat it all over again, but worse.

Really2

nickmason wrote: »

If you don't like property boom and bust, then reward those that acted rationally. If the poor judgement of those jumping on the band wagon is rewarded, then we'll only repeat it all over again, but worse.

So would now be a good time to buy if you are not looking for reward as it is A lot cheaper than renting.
Surely trying to buy at the bottom is fueling the next cycle anyway.
buying at the bottom must mean you want prices to go up otherwise the bottom would not matter

housesitter

b0rker wrote: »

I do not consider it to have been poor judgement to buy a home at less than 3x our joint income in September 2007.

I consider it bad luck that the housing maket crashed straihgt after we did.

I consider it poor judgemnet.
Especially to take a 100% mortgage out.

If it were less than 3x your joint income then you quite honestly suck at saving and are sub prime.

We could and should have saved for a deposit but we have pretty much done that now in reverse and saved £10K in a year after purchasing the property.

I congratulate you on doing that, but why not do it in the first place?
I'd say that you were not ready to buy a house without a deposit ie: an inability to maintain savings. Financial acumen if you will.
You'd say that it's your right to have a 100% mortgage.
We wont agree.

This in itself proves that it is an affordable mortgage, What is not affordable is having to find £28K in 2 years due to bad luck/the housing market crashing.

Like having a deposit in the first place to protect your aginst aginst the terms that the bank would enforce on your mortgage renewal in case of NE ?
That shows that you cannot afford the mortage. By your own admission. You now need to have a buffer to avoid NE. Blame yourself! :rolleyes:


Like I said. Poor judgement, maskerading as kidding yourself that you made all the right choices.



Really2: Now is a lot cheaper than renting. If you play the short term game. Which is probably wnat those who got on the ladder at the last minute didn't consider.

Long term savings on buying suggest to wait a fair bit longer.
It's a 25 year long purchase. Prudance would wait a few more months.

WTF?_2

Really2 wrote: »

Well untill the next crash.:rolleyes:

Probably not for another 18 years or so though. It's no coincidence that these sorts of things seem to occur at periods roughly coincidental with one new generation coming onto the scene.

Really2

!!!!!!? wrote: »

Probably not for another 18 years or so though. It's no coincidence that these sorts of things seem to occur at periods roughly coincidental with one new generation coming onto the scene.

But if I am 32 and someone is 25 what generation am I?

I always think of a generation as around 10 years myself.
1-10 and 10-20 are big jumps (the differences in behaviour music etc).
1-18 is a big jump but 18-36 is not

But in a purist view generation = offspring would it not be around 30 years now

nickmason

Really2 wrote: »

So would now be a good time to buy if you are not looking for reward as it is A lot cheaper than renting.
Surely trying to buy at the bottom is fueling the next cycle anyway.
buying at the bottom must mean you want prices to go up otherwise the bottom would not matter

Long term it seems buying now is poor value. Rational behaviour suggest to continue to rent. (And yes, I know all about the "home" argument, but rationally that can be "accounted" for. If law on letting changes, then it might change the non-numeric elements of the housing decision).

Buying at the bottom isn't fuelling the "next cycle" - it's stopping the downward trajectory of the cycle. The reason this is painful is because it is swings so madly.

Absolutely I want prices to go up "before the bottom" - obviously that is absurd, but it would effectively flatten the rollercoaster. Prices going up when below long term average is a good thing. Prices going down when above long term average is a good thing.

People jumping on a bandwagon when prices are supposed to be dropping is neither rational, nor helpful to anyone.



Actually it is helpful to a few people - the very rich (who can move fluidly in and out of assets), those that want to MEW then BR their way out of debt, the BTL kings, Estate Agents, TV !!!!!! barons - but I don't find too many people on here wishing them the best....

chucky

!!!!!!? wrote: »

Probably not for another 18 years or so though. It's no coincidence that these sorts of things seem to occur at periods roughly coincidental with one new generation coming onto the scene.

it's an interesting point but maybe far too much of a generalisation; much more to it.

whathavewedone

As I mentioned on another thread being in negative equity for a while does not necessarily mean that you are doomed, even if you want to trade up.

My sister bought a one bedroom flat in an unglamorous part of South London during the 80s boom (Gypsy Hill) and sold it in the 90s for 20k less. She was able to bring her NE with her to buy a 4 bedroom house in Tunbridge Wells (90k) and borrow additional money to carry out improvements to it. She sold it in 2000 for 250k.

During the recession she had been made redundant once and rented her flat out and lived at home for a while while she paid off credit card debts. She had about 50k (yes 50K in 1990!) of credit card debts which she reduced while living at home and paying a small amount for her keep.

I know people are saying it's different this time blah blah blah. However those that keep their jobs/businesses and can service their mortgages over the next 2-3 years are likely to be seen as low risk by banks particularly if they have no debts and some savings.

If unemployment reaches the levels that are predicted that's still around 90% of the population who are employed. Not all of those people will have mortgages.

Also, it's all very well to say that anyone who gets into trouble with their mortgage should not receive any help as it's their own fault for buying at the top of the market but where do you propose these people are going to be housed? No government is going to want to be remembered for separating families, leaving parents to look after themselves and putting their children into homes because there was nowhere to house them. There simply aren't enough council houses and even if there were, taxpayers would still be paying for these people to receive housing benefit, possibly at higher levels than the repayments on an interest only mortgage.

I don't agree with most of the things that the government are doing but I don't have a problem with temporarily paying the interest on people's mortgages where they've been made redundant. If this happened when you were privately renting you would get housing benefit. It seems a bit daft to chuck people out of their homes when they might just need a few months to get themselves straight if they are going to be dependent on taxpayer's money whatever happens.

Of course for some people repossession and/bankruptcy is the only realistic option and each case should be judged on its own merits.

As for previous council house tenants I understood that provided they still had some equity in their homes some councils would buy them back. So not exactly a disaster for them as most will have plenty of equity because they will have bought at bmv.