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

b0rker

housesitter wrote: »

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

No. I fully admit that we should have saved a deposit. I did so in my previous post. Although in saying that if we had saved for say a £10K deposit we would still be looking at £18 of negative equity. Who is to say with that £10K net we may have felt secure enough (even with house prices dropping) not so save between September 2007 and now. We would be in the very same boat that we are in now. Needing to save £18K.

I would have to suggest that the reason we are in this situation is due to poor circumstance as opposed to poor judgement.

Cannon_Fodder

chewmylegoff wrote: »

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.

Agreed, but not every one is a muppet - there are lemmings, ostriches and bears to consider - who went ahead blindly, stuck their head in the sand, and believed that things would only ever go up (prices) or down (interest rates)...

Thrugelmir

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

At some point the property bubble was going to burst in the UK blaming the US for the woes here is passing the blame. Lack of regulation, uncontrolled lending, greed and lack of financial understanding all contributed to the current position of the UK housing market.

b0rker

nickmason wrote: »

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.

I would not say that was so much poor judgement as poor education. I approached a mortgage advisor before I bought the house. He arranged it all for us. I put complete faith in the system and the MA and did not relaise the risk I was taking. I agree it was entirely stupid considering the circustances but with the information at hand I would still not consider it as poor judgement.

Information at hand: house prices have been going up and up in my city for the past 10 years. My partner and I have an income that should enable us to buy at £100K easily. 100% mortagages are available at reasonable interest rates. Where is the risk? One of us may lose our jobs. Okay that may happen anytime. We woudl in fact afford the mortgage on one wage at a stretch. Still seems affordbale. So purchase.

Next month the US goes bust and it has been downhill from there.

b0rker

Thrugelmir wrote: »

At some point the property bubble was going to burst in the UK blaming the US for the woes here is passing the blame. Lack of regulation, uncontrolled lending, greed and lack of financial understanding all contributed to the current position of the UK housing market.

Agreed and I do acknowledge my previous lack of knowledge in this field. if only I had known then what I know now. My point is that I do not consider myself to have used poor judgment to have bought how and when I did given the information in front of me at the time. I may have been slightly hasty in that I did not save for a deposit but as I have said in this thread even if I had a deposit I could still easily be in the same position I am in now.

whathavewedone

I think if you would be unable to afford your mortgage if it went up a couple of points from a relatively "normal" rate eg from 5 to 7% that is a concern.

However, if everyone considering getting a mortgage worried about whether they would be able to afford it if interest rates went up to between 15 and 20% say, not many people would get a mortgage at all.

This is why more people go for fixed rate mortgages.

We are fixed until the end of 2011. Even though we had a reasonable deposit at the time we bought (25%) and added to that figure in October to account for the amount that the surveyor believed our house had dropped by since we bought in order to maintain our LTV, there is clearly a risk that we will be in negative equity by the time we need to remortgage in which case we will have to go on the SVR.

We've already got substantial savings and will continue to save until our mortgage comes up for renewal. It will be a bummer if that money has to go on our mortgage if interest rates are in double figures but at least we're prepared.

I'm sure that a lot of people are doing likewise.

Really2

nickmason wrote: »

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.
...

If everyone waits for the bottom there is not a bottom .
Thats not true at all Look at every cycle people wait to buy untill below the average trend. When Historicaly cheap more people buy the next boom as started.

if you think buying at the bottom is stoping the next cycle take a look at the last busts.
It's slightly delutional, To end boom and bust the only way is a boom followed by gentel deflation in real terms not a bust.
A bust attracts future investors (Like any business) as opertunitys can be taken.

WTF?_2

b0rker wrote: »

I would not say that was so much poor judgement as poor education. I approached a mortgage advisor before I bought the house. He arranged it all for us. I put complete faith in the system and the MA and did not relaise the risk I was taking. I agree it was entirely stupid considering the circustances but with the information at hand I would still not consider it as poor judgement.

Information at hand: house prices have been going up and up in my city for the past 10 years. My partner and I have an income that should enable us to buy at £100K easily. 100% mortagages are available at reasonable interest rates. Where is the risk? One of us may lose our jobs. Okay that may happen anytime. We woudl in fact afford the mortgage on one wage at a stretch. Still seems affordbale. So purchase.

So because 'you could lose your job at any time anyway' that wasn't a factor in your deliberations as to how much debt you would take on ?

Because "house prices have been going up and up in my city for the past 10 years" it was therefore OK to assume that they would never fall ??

You were taking on an eye-watering amount of debt and you didn't give the matter much more than cursory thought because you "...put complete faith in the system and the MA and did not relaise the risk I was taking" ???


Just because people were lending irresponsibly is no reason to borrow irresponsibly yourselves.

b0rker wrote: »

Next month the US goes bust and it has been downhill from there.

No - the brutal truth is that it was downhill from the moment you bit off more secured debt than you could chew with no equity buffer.

You were leaving yourself horribly exposed to the risk of having to default and losing your home if conditions changed from the patently unsustainable state of ever rising prices and a perma-boom in the economy.

housesitter

Really2 wrote: »

I always think of a generation as around 10 years myself.

So it's you that is responsible for all the teenage pregnancy?
Shame on you... :cool:

b0rker

whathavewedone wrote: »

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.

Do you think that will still be an option these days?

I would very much like to sell the place we are in now once we get to the bottom for £20K less than we bought it for and buy up whilst carrying over the £20K NE.

Somehow as this time round what with credit being a crux of the issue I am not sure this will be an option.