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

Thrugelmir

whathavewedone wrote: »

I don't see banks doing negative equity mortgages while house prices are still falling.

At some point, however a bottom will be reached - no one knows when that will be in terms of time but it will probably start to happen when prices become attractive to cash buyers initially. I think the next stage will be that the banks will be more confident to lend, first time buyers will start returning to the market and at that point we may well see negative equity mortgages being offered again.

As to whether they will be available in 2 years I have no idea. It really depends on how quickly house prices fall.

At some point, however a bottom will be reached - no one knows when that will be in terms of time but it will probably start to happen when prices become attractive to cash buyers initially. I think the next stage will be that the banks will be more confident to lend, first time buyers will start returning to the market and at that point we may well see negative equity mortgages being offered again.

A fair bet will be that mortgages will be regulated in some way in the future perhaps by means of a fixed % cash deposit.

Also as the availability of funds has disappeared ( probably for ever), lenders won't feel the neccessity to advance high % LTV mortgages. Demand will ensure that they can again lend at rates which guarantee good profits without taking excessive risk.

Really2

housesitter wrote: »

That would have been much funnier if you'd been female.
Opportunity wasted


As a side. I was talking to my father about his last house purchase which was in the 80's. Historically he'd always borrowed little, however house prices were closer to salary.

1986:
16K wage, 80K house with 60K equity and a 20K mortgage.

House on the same street of same style sold in 2007 for 400K.
Wage inflation puts us about the same wage betwen now and then.


I'd say that house prices are a little over the top.

Agree, they are but sounds like a good area and a good earner. Thats nearly £50K wages in todays money.

housesitter

b0rker wrote: »

Well as someone who spent pretty much all of his adult life (was 30 in 2007) watching hose prices rise I am not sure I would be expected to think much other than house prices rise.

I'm also 30. We were brought up differently.

I have been close one and very close once to buying a house.
I'm thankful at both occassions I have not. Regardless that I probably would have done fairly well out of both situations. However it has taken me a while to settle down and stop moving around the country.

First would have been sharing with a girlfriend at the time, but we aint together any more.
Possibility to buy the house we were renting plus shop below it. It's doubled in value and has a long term tennant.
Second, chance to buy a 10yr old house, current own had DIY disastered it, was going cheap, chance to make profit from fixing it. Got gazzumped, 2months later took another job 180miles away.

So no regrets.
After the second time I looks as where things were going, watched the news, read forums and decided most people buying had taken leave of their senses. Continued renting.

My sister is 27, lives with fiancee and they struggle to pay the monthly's even with a mortgage starting in 2004 because they stretched themselves.


I still wonder if renting is the future.
What do I do with the house I own and no savings when I'm old, verses lots of savings and nothing in bricks and mortar.
If I'm senile the council will take my house anyway to sell to pay for me in a home.
Cash is easier to pass on to children if I have them, and easier to stash away.

But I would like a place I can live in to suit me, not the wishes of the landlord who owns the house.
It's a tricky decision.

olly300

whathavewedone wrote: »

I don't see banks doing negative equity mortgages while house prices are still falling.

At some point, however a bottom will be reached - no one knows when that will be in terms of time but it will probably start to happen when prices become attractive to cash buyers initially. I think the next stage will be that the banks will be more confident to lend, first time buyers will start returning to the market and at that point we may well see negative equity mortgages being offered again.

As to whether they will be available in 2 years I have no idea. It really depends on how quickly house prices fall.

People will start returning to the market when they don't face the threat of redundancy/work drying up and don't know anyone in their immediate circle who has been made redundant.

housesitter

Really2 wrote: »

Agree, they are but sounds like a good area and a good earner. Thats nearly £50K wages in todays money.

Is it? I'd calculated substantially lower than that. I guess it matters which calculator you use then.
Nice area yeah. But I'd say only beause the other areas have gotten worse.

Really2

housesitter wrote: »

I still wonder if renting is the future.
What do I do with the house I own and no savings when I'm old, verses lots of savings and nothing in bricks and mortar.

One thing for sure if you done buy you will be renting all the way through your retirement (Could be a lot of money)

The other points are not really relevent as you dont know they will happen.
You could live to 120 and pay 55 years rent, you would regret it then, but like your points it is a possibly but not fact.

b0rker

Cannon_Fodder wrote: »

To be fair, I think there is probably a big chunk of the younger population that had never heard of NE before this crash happened.

Education, education, education - now, where have I heard that before?

I would say that as I was still in secondary school during the last crash that I was aware of the term but not the seriousness of its affects. To be entirely honest you could consider my lack of education on these points my own fault and therefore not properly educating myself in such issues before making such a large purchase as a serious lack of judgement. I would go as far as to say I would agree with you.

The point being that okay yes if I had known more about the housing market and the economy as whole then I probably would not have bought in at £100k on a 100% mortgage in 2007. That is not to say that I would definately not have bought then. No one knew what the prices were going to stop going up.

Some people seem to be assuming that I am in trouble because I bought at an unaffordable level. I/we may be in trouble because of how quickly the house values are dropping. If they had not dropped or at least had stabelised then we would not be in any trouble at all.

I agree that the UK has been living outwith its means for the past 10 years or so. That does not mean that I/we were not unlucky to buy into the housing market just at the exact point that the bubble burst. No one knew when that would occur. So to blame the US sub-prime market is not to blame the US. It is to blame the timing of the collapse. We have no debt other than our home.

Really2

housesitter wrote: »

Is it? I'd calculated substantially lower than that. I guess it matters which calculator you use then.
Nice area yeah. But I'd say only beause the other areas have gotten worse.

http://www.measuringworth.com/ppoweruk/?redirurl=calculators/ppoweruk/

Nearly £47K in 07, so around £48-49K for 08 I would say.

whathavewedone

Your father had a 60k deposit in the 1980s. If you took into account wage inflation on 16k and assumed someone had a 300k deposit they could probably afford that 400k house just as easily as your father could afford his 80k one.

It was nice for your father that he had a big deposit but back in the 1980s he could easily have got a mortgage for 4 times his salary with a 10% deposit provided he had a good credit history.

It simply isn't true that prior to the most recent boom banks absolutely didn't lend more than 3.5 single or 2.5 times joint income. Back in the 80s there were plenty of bent IFAs about who could get you a mortgage that you couldn't really afford but even high street banks were prepared to lend at 4 times your salary if they thought you were a safe bet eg you didn't have debts, you could provide 3 months' payslips etc.

Personally I don't think it's necessary for banks to be completely rigid about only lending 3.5x one person's salary. The problems stemmed mainly from 125% mortgages, people getting loans out to cover deposits, lending to people with poor credit ratings etc etc. And lending ridiculous multiples of people's salaries. I don't consider 4 or 4.5 x someone's salary to be ridiculous - anything northwards of 5 clearly is. These are the things which should never be allowed to happen again.

b0rker

housesitter wrote: »

I'm also 30. We were brought up differently.

That is very good to hear. I have had little financial education from anyone and have now had to educate myself. It will I am sure serve me well in the future.

I still however feel that we acted fairly prudently and if it were not for the massive house value fall in the past year then we would be sitting pretty. Like many people who bought in say 2002/2003 under similar circumstances and just happend to get lucky. I wonder how many of them are the very people on this thread telling me how irresponsible I was to borrow at under 3x our salary with no other debts between us and the ability to save £30K between us in 2 years.

Okay if you bought in with a 125% mortgage you shouldn't really expect any security but not if you are initially prudent. This is not the stock market. This is home purchasing on a small and very personal scale where there should be no gambling involved. This should not come down to luck. You are not told that the long term ownership of your home is based on luck when you go to an IFA or MA as a first time buyer. In my opinion you really should be.