2.5 million people facing negative equity

Rochdale_Pioneers

I'm heading towards negative equity. Won't be massive but it'll be there? But why should I care? I'm not selling any year soon anyway and prices will recover as my mortgage decreases.

IveSeenTheLight

mower5 wrote: »

Do you have BTLs?

Yes, 2 of them. Both with under 50% LTV and an average of 3.36 void days per property per year

What I don't undertand is how some people concentrate on BTL LL's as being so exposed, yet ignore that there are for more OO's that would be affected than BTL LL's

IveSeenTheLight

Snooze wrote: »

LOL - he's LL for about half of the properties in the whole of Aberdeen.

Rob

LOL, not quite, only 2 of them.
Are you living in cuckoo land?

IveSeenTheLight

Cannon_Fodder wrote: »

FRO link at; http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/025.shtml
opens http://www.fsa.gov.uk/pubs/plan/financial_risk_outlook_2009.pdf

page 40;

"For some borrowers, falling house prices will lead to negative equity.
There are a number of ways to estimate negative equity; we have used the
methodology originally developed by Hometrack to estimate the impact of
various falls in house prices on the number of households which might move
into negative equity.If house prices were to fall by 30% from the end of
2007, it is estimated that over 2 million residential mortgage holders and

500,000 buy-to-let mortgage holders would be in negative equity. "

Thanks.
This is responsible reporting.
It states the potential figures but places no emphasis between one type of property (OO) or another (BTL LL) as to which is more at risk, unlike the journalist in the OP's link

IveSeenTheLight

Cannon_Fodder wrote: »

http://www.fsa.gov.uk/pubs/plan/financial_risk_outlook_2009.pdf page 40 also mentions;

"The presence of buy-to-let partly explains the rapid fall in house prices"

"The steeper decline in residential property prices in this downturn
may in part, be explained by the increased importance of the number
of buy-to-let properties, as investment properties are more sensitive to
expectations of property prices and rental yields than residential purchases.
Weaknesses in the buy-to-let market, in turn, may have tended to reinforce
the weaknesses in the wider residential market, and expectations of future
house price falls could in turn become self-fulfilling."

Interesting...

Yep it is interesting.
While the report says it may happen, people on here turn that into gospel fact

whathavewedone

It's a bit of a non story really. We're in a recession, prices have already dropped quite a bit and people who bought recently with small deposits are probably already in NE.

The main issue is whether people can pay their mortgages not whether they're in negative equity.

Of course if you're in negative equity in a one bedroom flat and you desperately want to move then it's not good news but surely if you bought that recently you would be prepared to live where you are for at least 5 years?

In the last recession my sister hung on to her one bedroom flat until 1995 (bought in 1989) because she was pregnant. She was able to bring her NE with her to purchase a 4 bedroom house, also borrow additional money to renovate the house and she sold it in 2000 for just under 250k. It had cost 90k in 1995, her flat sold for around 40k having been bought for over 60k.

Of course things were getting better by 1995 and the banks knew prices would only go up from in the short to medium term - I imagine 5 or 6 years from now banks will be offering negative equity mortgages to those with no other debts and immaculate credit ratings.

What this means of course is that even people who got stung by HPI can also do well out of HPC provided they have kept their jobs and not got into debt.

Jobs really are the most relevant thing. Without them no one get a mortgage or service a mortgage.

vivatifosi

geoffky wrote: »

One homeowner in every five could become ensnared in negative equity as the recession bites, the City watchdog has warned.

Is it one in five home owners or one in five mortgage holders potentially entering NE? If it is the first, that's terrible, but the number of home owners sound a little low so hopefully it is the latter. I can't remember what percentage of home owners have finished paying their mortgage, but I seem to remember it being pretty high (lucky sods)...

Dithering_Dad

IveSeenTheLight wrote: »

LOL, not quite, only 2 of them.
Are you living in cuckoo land?

yes, I'm afraid snooze is out there with the faeries. He's one of those sad cases that is content to sit back and hate anyone who is doing better than him, rather than simply getting off his backside and bettering himself. Poor thing .

Cannon_Fodder

Can anyone find the way to paste Chart B5 from page 40 of http://www.fsa.gov.uk/pubs/plan/financial_risk_outlook_2009.pdf into here?

thanks,

Could be of interest, having the Tradition futures index prediction for house price falls on it...



On BTL , which is around 9% of the market, any industry that was not growing by a few % every year would be considered in decline.

Had that 9% demand not been there, each year;

- developers would not have started so many sites, employed so many people, attracted the cheap labour from EU states;
- so would have not increased the population, further reducing demand;
- dented the rental market, hitting yields, thereby discouraging unprofessional LLs;
- more of the developments they did start would be homes instead of transient rentals;
- types of developments would fit the customer demographic better, especially at FTB, where BTLs are sometimes reported as 90% of the market = less unwanted flats.

Just some possible effects.

Our GDP has switched from +3 to -3, a 6% shift, and a nasty recession has occured...but the loss of 9% of the housing market, each year, is not considered to have an impact? That's just wishful thinking from VIs who know we cannot go back in time and prove differently/measure it accurately.

barrooo

Quick question for those who've looked at this data closely, I must admit I haven't cause I can't be bothered.

I noticed that it says that potentially 2.5 mill people facing negative equity on their current mortgage. Now if they were all FTBs then that would be some stark figures, but how many of these people have had previous houses and therefore have accumulated capital growth on that property, and are only in overall negative equity if prices fall below those of the first property purchased?

Answers on a postcard to.....