Homes could fall 40%

baby_boomer

torontoboy45 wrote: »

I failed my economics 'o' level so can someone explain why the health of the UK economy is so dependant on a return to big HP increases?

I don't think anyone's suggesting it would be a good idea to return to "boom" as we now know that it leads to "bust".

But there will be hazards on the way down.
Unemployment in housing related industries - building, estate agents, mortgage brokers
Some increased risk to banks & building societies if unemployment combines with negative equity for force repossessions at a loss.
On the way up Mortgage Equity Withdrawal put 6% extra on average into our pockets and fuelled the consumer economy but as we redraw our expectations and fears, we are now going to pay off our debts if we have spare money.

There has got to be pain if we are going to learn our collective lesson.

RobertoMoir

Wookster wrote: »

Exactly - what Crash needs to do is keep his powder dry to help people who's lives are shattered. That and improving education to that we have a more skilled/ efficient workforce.

Signing himself up to MSE here wouldn't hurt.
Seriously, what he's trying to do is borrow his way out of debt, just on a bigger scale, and there are plenty of people here who know all too well how that ends up.
If you've got a problem with something happening then causing more of it to happen is rarely the answer.

MissMoneypenny

whathavewedone wrote: »

I don't think 125% mortgages will be making a comeback but if banks can start lending to people with 10% deposits on good terms it would be a good thing.

Someone was saying on the mortgages board that some lenders are now refusing to count benefits (tax credits) as income for a mortgage . If the lenders go back to multiples of earnings instead of multiple of income, then that will have a downward pressure on the house prices too.

Wookster

torontoboy45 wrote: »

I failed my economics 'o' level so can someone explain why the health of the UK economy is so dependant on a return to big HP increases?

Simply put, UK consumer spending is quite unhealthily tied to the value of one's property. Many people withdraw "equity" from their property to fund a holiday home in Bulgaria, new car, holiday etc etc. Having a good deal of equity gives a feel good factor to go out and spend (recklessly) with scant regard to planning for the future.

The housing bubble has funded our living beyond our means for at least 10 years now.

Wookster

RobertoMoir wrote: »

Signing himself up to MSE here wouldn't hurt.
Seriously, what he's trying to do is borrow his way out of debt, just on a bigger scale, and there are plenty of people here who know all too well how that ends up.
If you've got a problem with something happening then causing more of it to happen is rarely the answer.

Its sheer madness. I never thought I'd see the day when I couldn't wait to see the Tories in and Labour out.

Shame on you Crash.

pandamonia

MissMoneypenny wrote: »

Someone was saying on the mortgages board that some lenders are now refusing to count benefits (tax credits) as income for a mortgage . If the lenders go back to multiples of earnings instead of multiple of income, then that will have a downward pressure on the house prices too.

benefits should not be counted any way. - makes me sick to think some parents out there get 1-1.5k per month in free money

carolt

MissMoneypenny wrote: »

Someone was saying on the mortgages board that some lenders are now refusing to count benefits (tax credits) as income for a mortgage . If the lenders go back to multiples of earnings instead of multiple of income, then that will have a downward pressure on the house prices too.

Shocked - I'm a parent - does that mean I could have been putting my benefits (albeit not very great) down on the mortgage form?

What about the fact that an incoming Tory govt will almost certainly get rid of them, at least in their current form?

ad44downey

baby_boomer wrote: »

Telegraph - generation fears negative equity trap

House prices could be at 2003 levels in 2013

Independent

"House prices could drop by a total of 40 per cent unless the Government steps in to boost lending , a report says today. The extreme scenario painted by the Centre for Economics and Business Research (CEBR) would see prices plunge by a record 25 per cent this year after last year's 16 per cent slide.

If the Government's banking bailout is able to boost mortgage approvals to 50,000 a month from the current level of about 32,000, the price fall from peak to trough could be limited to 32 per cent with values bottoming out in the first quarter of 2010, CEBR said. But without effective intervention to increase lending, the total fall would be 40 per cent with prices stagnating until 2012 and not getting above 2003 levels until the following year....."

The government's intervention in the banking sector is huge and will have far-reaching implications. To go further, and prevent the housing market finding its true level would be a fiscal risk and also deprive first time buyers of getting their own homes without a lifetime millstone around their necks.

I say let them fall!

BTW CEBR were predicting falls of only 14% as late as August 2008 :rotfl:

Click on this MSE link to see a table of different house price predictions from the "experts"

40% is a conservative estimate. Falls of 50 or 60% are far more realistic. Bring it on, we need affordable houses for the masses.

MissMoneypenny

carolt wrote: »

Shocked - I'm a parent - does that mean I could have been putting my benefits (albeit not very great) down on the mortgage form?

What about the fact that an incoming Tory govt will almost certainly get rid of them, at least in their current form?

Yes those parents that get tax credits could have, but it seems it may be wiser not to rely on them for paying the mortgage.

I think that whatever party gets in next will be doing something about the huge cost of tax credits (came in in 2003?) to the country (financial and working). Crash Gordon won't want to do it before the election though.