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

WTF?_2

sb44 wrote: »

If you have negative equity and your mortgage payment is going down as they are at the minute and people aren't looking to buy another house what is the problem?

Sorry but I am not well up on the financial side of things so excuse the ignorance.

The problem is that should you lose your income stream and get repossessed you will end up not only out of a house but also many thousands of pounds in debt. Quite probably, in double-digit amounts of thousands.

Also, you will have problems obtaining a remortgage deal so you can't take advantage of better products. And if you want to move house, forget it.

Whether that is something for you to worry about in the teeth of a ferocious recession is up to your approach to your personal finances.

Surely their mortgage payments are still less than they would be paying to rent somewhere in most areas.

Quite a few people who bought in recent years will still be paying more for their mortgage than they would for rental of a similar property. About half of mortgages out there are fixed rate and such were the huge amounts borrowed to buy overpriced property, even low interest rates mean big repayments.

sb44

!!!!!!? wrote: »

The problem is that should you lose your income stream and get repossessed you will end up not only out of a house but also many thousands of pounds in debt. Quite probably, in double-digit amounts of thousands.

Also, you will have problems obtaining a remortgage deal so you can't take advantage of better products. And if you want to move house, forget it.

Whether that is something for you to worry about in the teeth of a ferocious recession is up to your approach to your personal finances.



Quite a few people who bought in recent years will still be paying more for their mortgage than they would for rental of a similar property. About half of mortgages out there are fixed rate and such were the huge amounts borrowed to buy overpriced property, even low interest rates mean big repayments.

Thanks !!!!!!.

I know the score should people lose their jobs, that is obvious even to a numpty like me :rolleyes: but was just thinking of the mortgage versus rental payments.

Luckily I decided against remortgaging, glad I did now. We are in dire need of new windows and a front door but I consider us lucky to be able to afford the mortgage, pay the bills etc on one wage (without benefits I might add - except working tax and child tax credits ie £70 a week). I suppose in the league of things we are pond life as we must have the cra**iest windows and door in the street but we are pond life that can survive on the lily pad.

housesitter

sb44 wrote: »

was just thinking of the mortgage versus rental payments.

If I bought the house I'm in now rather than renting it at todays interest rates with 2007 lending levels ie: 100%, and 2004 prices, I'd still be paying 200 quid a more every month to live here than I am by renting.

(not taking into account the fact that I'd be paying the mortgage off, nor the fact that prices are going to fall further. Allegedly )

unitedwestand

carolt wrote: »

http://www.guardian.co.uk/money/2009/jan/14/houseprices-property

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, leading figures for the consumer organisation Which? and Citizens Advice warned MPs today.

Big mortgages those are keywords.

Many of those 1.5 million, will be the people who were unnecessarily living out with their means in the first place.

Instead of relocating or downsizing, keeping their mortgages at a sensible and realistic level, they've probably opted to try and live the high life with money that just isn’t theirs.

There will be a few genuine sad cases in there, but for many it will be down to their own stupidity and greed.

Sorry, no sympathy.

cheeky_lil_monkey

It's very easy for those who have been holding out on this happening to say we all should have read the signs. I wonder if you'd be saying that if you were in the same position to us.

We bought a simple place 3yrs ago now on a 5yr fixed mortgage, so hopefully things will be a little more stable when we have to remortgage in 2yrs.
We looked at renting vs buying, but renting would have cost about £200pm than we currently pay to own our own home. We put down a healthy deposit of 15% (over £23K) which had been saved hard for a number of years (we're in our mid-20's). We did not buy thinking our home would only increase in price, we bought to give us a bit of security, we bought cos that's what we felt ready to do. We could afford our mortgage when we took it out and in this past 3yrs our income has almost doubled, we're more than comfortable in our humble little abode.

However, looking at the price these places are selling at now, we could just about sell for the amount our mortgage currently stands at. We've lost about £30K in value. This is only a problem as we'd like to move. We'd like a family home. But it looks like we'll be stuck here for some time. We're paying our mortgage, we're making overpayments each month but our mortgage provider has said they will not let a sale progress on our home if we are in neg equity.

Sure, we'd get a better deal on a bigger house if the prices continue to fall and hopefully afford a 25% deposit. If we were FTBs this would all be a matter of getting the mortgage. However as we're the FTBs of yesterday and not only have to pay the deposit but perhaps another £20K or so to take us out of neg equity in the first place....we get kinda screwed.

Yeah, we could have sat there paying an extra £200pm which would have cost us about £7000 rather than losing the huge amount we have. However, things could have continued to go up for another couple of years, and renting would have had us worse off. There's always risk involved - we were aware of that. At some point we're sure the market will go back up and ya never know, some day we might benefit from it, but that's not why we got into it. Are you still going to judge and call us stupid? Should we have seen this happening just at the very time we were trying to sell to move up to a family home???

We have no debt - student loans paid off, we don't buy on credit, we only spend when we have the money to spend. Are we stupid with money? No, I don't think so. Are we in a sucky situation, like many others, where through no fault of our own we're unable to move and being insulted by people on forums like this? Yes.

Don't tarr us all with the same stick. It's bad enough that we feel stuck and unable to move which limits our ability to start a family - but on top of that there's always people spouting about how wonderful they are that they did the sensible thing and are in now way going to be close to negative equity or who have been renting waiting to pick up a bargain.

When you do manage to get your bargain, will you wonder who lived there before and why got the house now rather than them!? Did they move, or where they kicked out for no fault of their own other than they bought inside this past 3yrs??

If prices keep falling and we're stuck here, we'll cope, we'll keep paying our mortgage and overpaying as much as we're allowed each month. Some day we'll be able to move up. But if we get asked to pay a lumpsum of what our neg.equity would be - we'd be in trouble.

It's not just those who IMO have taken far too big a risk by borrowing stupid multiples and having 95-110% mortgages etc. who are being hurt by this. Some of us are ordinary, hardworking people who are now suffering.

dopester

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.
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.

My story is similar to yours. I was really in a position to buy a house for the first time in 2003/04... but was spooked by the major HPI which had really pushed up year-on-year. Then HPI really goes crazy and I just switched off to any thoughts of buying, turned off the TV, and put more mind in to some video-game projects I was involved with.

Also I understand what you've outlined above. It is a thought which sometimes runs through my mind - perhaps much to the delight of some here who've already suggested some of us bears we'll never buy and that we will be here on the forum ranting away at the top of the next boom/peak. (thinking of Chucky)

I'm thinking rents in many areas are set to fall during the next 12 to 36 months, as well as house prices, so having the freedom to move might be important - if having to follow work (regions of opportunity). That shouldn't be too much of an issue for me as I can really cut costs to the survival minimum for quite some time, but may be for others.

I don't think I'm being overly paranoid about that. Migration is quite a fascinating area of study. I've got a great paper about it,... Why People Move In Times Of Depression.

Those motives had to be powerful in the centuries before our own, because the rigours of travel and the challenge of living on the frontier were great.

The desire to escape persecution and live in freedom was a powerful motive.

Another was a desire to escape poverty and ruin; conditions that are more acutely felt in times of depression.

When opportunity is cut off in one direction, people will move in another. Where there is freedom to move, the process is practically as automatic as that which inclines plants toward sunshine. It is all part of the mechanism through which individuals actively seek their happiness and societies maintain their balance.

Neither Migrations Nor Depressions End in A Year

The fact that depressions are associated with major migrations, while recessions during bull phases are not, is a distinction that should not be ignored.

The Californian dream is turning sour for increasing numbers of West Coast residents who are abandoning the Golden State and heading east in search of a better life.

Last Updated: 5:35AM GMT 13 Jan 2009

For the fourth year running, more residents left California than moved there from other states. In the year ending July 1, 2008, the state lost 144,000 people, more than any other US state, according to census estimates.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4225988/Soaring-cost-of-living-drives-residents-from-California.html

dopester

b0rker wrote: »

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.

You also have another asset of significant value if I recall correctly, so two houses, where I have none.

I've read the thread, and do have quite some sympathy for you.

I'm not a monster, even though I sometimes act like it (think Peter Parker/Dopester and the Symbiote/HPI - but without all the super-powers), and regret what seeing ridiculous levels of HPI has played out on me and others.... who both stayed out of the market, or like you, bought in.

However, I stayed out of the market, because I wasn't prepared to take on massive debt, or compromise by spending/borrowing vast sums at perhaps a level I could afford, but to buy in a troublesome area.

whathavewedone

Cheeky Lil Monkey, you may well find that in 2 years time some mortgage companies are offering negative equity mortgages which enable you to move up the ladder taking your negative equity with you.

These mortgages were available towards the end of the last recession and I see no reason why they shouldn't be available again once prices have hit rock bottom as the bank's risk is then minimised as prices will be on the rise.

Even if things are still grim in 2 years and you have to stay put for a while and stick on the SVR I'm sure you'll be able to move after a further year or two provided you have a perfect credit rating

There will probably be even more people in negative equity this time round than there were in the last recession. It's in the interests of the economy for people to be able to move and therefore once house prices stop falling I'm sure banks will be competing to offer people products which enable them to move.

mbga9pgf

Because NE mortages got us into this mess!!! What else do you call a 125% Northern Rock mortgage!!!??

The last thing the banks will want is any extra risk for a very long time. Last time we had a recession, the banks were well capitalized. Hardly the case this time. They will be looking to replenish their cash reserves for quite a while imo.

carolt

dopester wrote: »

You also have another asset of significant value if I recall correctly, so two houses, where I have none.

I've read the thread, and do have quite some sympathy for you.

I'm not a monster, even though I sometimes act like it (think Peter Parker/Dopester and the Symbiote/HPI - but without all the super-powers), and regret what seeing ridiculous levels of HPI has played out on me and others.... who both stayed out of the market, or like you, bought in.

However, I stayed out of the market, because I wasn't prepared to take on massive debt, or compromise by spending/borrowing vast sums at perhaps a level I could afford, but to buy in a troublesome area.

Thanks for the link dopester.

Astonished, having read your link, at b0rker's sob story - he wants to scarper, leaving the British taxpayer to pick up the debt!

Sorry, but ANYONE buying in Sept 2007 must have had their ears and eyes defiantly closed to not notice that house prices were about to crash. It's exactly the attitude of people like that - it wasn't my fault, how could I have known, someone else should bail me out for my stupidity, - that I most dislike.

This chap isn't in negative equity at all - he has £65K in a Polish property, but wants to run away and escape his £30K debt here rather than sell or remortgage his Polish property to pay off his NE here. :mad:

NO sympathy. :mad: