2.5 million people facing negative equity

Cannon_Fodder

barrooo wrote: »

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.....

The predictions of NE are based on a predicted fall of house prices, 30% from peak.

Its the top "layer" of mortgages, not just FTBs, but of all mortgage-holders who were within 30% of the "value" of their house at the peak.

It could even include those who bought 10 years ago, but instead of having 300% capital growth as leeway to protect them, having been re-mortgaging to spend the "free money" (MEWing) thereby making their peak LTV in the 70%-80% range, bringing them into range of NE.

chucky

Cannon_Fodder wrote: »

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.

that's a bit of a long shot for you there CF or are you looking for a bite

do you think the lack of manufacturing or even the imbalance of GDP growth by the City may have had a bit more to do with that 6% shift in GDP?

silvercar

mower5 wrote: »

What % of btls are 1-2 bed flats and terrace houses that ftb would traditional have bought?
My guess 99%.
BTL RIP - subprime 40% plus LTV
FTB RIP - priced out via 25% LTV
Bottom rung of ladder has died.

Its the lenders that increased the deposit requirements. It wasn't done at the insistence of the BTLers trying to push out the competition.

Cannon_Fodder

chucky wrote: »

that's a bit of a long shot for you there CF or are you looking for a bite

do you think the lack of manufacturing or even the imbalance of GDP growth by the City may have had a bit more to do with that 6% shift in GDP?

No, you've taken my point a step too far !! Its not saying BTL is responsible for 6% loss of GDP. Heck, I know I won't get away with that.

What I was trying to do, was ask;

- if one "6% loss of market activity" i.e. the recession, can be serious,
- another "9% loss of market activity" i.e. had BTL been absent from the housing market, year on year, seems to be considered negligable.

It doesn't seem to add up, somehow.

Does that clarify?

mower5

chucky wrote: »

don't know - you tell me; link or source please??

You stated that that only 10% of housing was purchased by btl (which you did not provide a link or reference for). My arguement is that 10% btl is all crowded into the segment of the house market that was traditionally bought by ftb (small flats and terraces). Nothing in the least bit controvertial about that supposition, which i pointed out was my guess.



So chucky do you own BTLs?

chucky

Cannon_Fodder wrote: »

No, you've taken my point a step too far !! Its not saying BTL is responsible for 6% loss of GDP. Heck, I know I won't get away with that.

What I was trying to do, was ask;

- if one "6% loss of market activity" i.e. the recession, can be serious,
- another "9% loss of market activity" i.e. had BTL been absent from the housing market, year on year, seems to be considered negligable.

It doesn't seem to add up, somehow.

Does that clarify?

yes - i do see what you're saying now but i don't know the answer

WTF?_2

geoffky wrote: »

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

House prices may decline by 30 per cent from peaks reached at the end of 2007, the Financial Services Authority said, leaving 2.5 million people sitting on homes worth
less than their mortgage.

Some 500,000 of these would be holders of buy-to-let mortgages, which the FSA singled out as an area of major concern.

http://www.dailymail.co.uk/news/arti...-watchdog.html

Don't worry - negative equity isn't a problem and absolutely nothing to be concerned about, according to a few here...... Just as well none of us will ever lose our income stream or have to sell up because of personal circumstances. So breathe easy.....

pickles110564

!!!!!!? wrote: »

Don't worry - negative equity isn't a problem and absolutely nothing to be concerned about, according to a few here...... Just as well none of us will ever lose our income stream or have to sell up because of personal circumstances. So breathe easy.....

Nice to have you back.

chucky

mower5 wrote: »

You stated that that only 10% of housing was purchased by btl (which you did not provide a link or reference for). My arguement is that 10% btl is all crowded into the segment of the house market that was traditionally bought by ftb (small flats and terraces). Nothing in the least bit controvertial about that supposition, which i pointed out was my guess.



So chucky do you own BTLs?

here you go Mower - Owner Occupied vs Social Housing vs BTL it goes out to 2005.
http://news.bbc.co.uk/2/shared/spl/hi/guides/456900/456991/html/default.stm
You'll notice that there isn't a significant increase of BTL vs Social Housing

Cannon Fodder provided some figures the other day that helped us work out that if we did it take it to peak 2007 it could have been up to 8% or 9% of BTL I think it was.

And by the way it was the lenders that increased the deposit requirements not someone buying a property as an investment.

Yes I do own a few BTLs - do you own a property or are you one of those people that missed their opportunity to buy and is now blaming everyone and their brother for not being on the housing ladder?

WTF?_2

barrooo wrote: »

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.....

Negative equity is pretty simply defined - you owe more on the loan secured against your property than the property would fetch if sold. It doesn't have anything whatsoever to do with previous properties.


Now, if you have enough cash to your name that you can make up the negative equity then you are insulated against the worst effects if you should be unable to service the debt - if you don't have reserves, you are walking a tightrope with repossession and possible bankruptcy lurking below.