2 million homeowners and 500,000 BTL'rs in NE if price falls hit 30%

Dan:_4

What do the FSA know, anyway?

JonnyBravo

whathavewedone wrote: »

Well not necessarily.

A large number of people bought between 2004 and 2008. We had a 25% deposit when we bought in 2007 which seemed like a reasonable deposit at the time. We put more money in October 2008 when we came to remortgage in order to maintain our ltv to get a decent rate fixed mortgage (5.6% - if only we'd forseen interest rates falling as they have done, we could have gone on the SVR and overpaid like mad for a year:mad: ).

Luckily we have a good savings pot so if prices do only fall by 30% peak to trough we will still have a deposit and should be able to build it up to 25% again fairly quickly.

Don't forget the people who bought with 95% and 90% mortgages over the last 4 years either. And the people who bought with 100% mortgages.

Most of the people that I know who mewed did so to fund extensions, loft conversions etc which should in the long run increase the value of their properties but even in a rising market you would expect not to recover the amount spent for a few years. Again most people who borrow money to make these kind of improvements did not do so to make money but simply to accommodate a growing family. That being the case negative equity for a few years is not a problem so long as people can pay their mortgages.

I have mentioned this elsewhere but my older sister had negative equity for several years in the 1990s. She sold up in 1995 (at the end of the recession) and brought her negative equity with her to a house which she borrowed additional money to purchase and renovate. She bought it for 90k, lived there until 1999 and then sold it for just under 250k.

So negative equity doesn't have to be the end of the world.

Spot on.
Undoubtedly MEWing has played it's part but the very nature of mortgage repayment has added to this.
Taking a standard 25yr term mortgage, you've only paid 30% off after 11years! That's a long time.
Small deposits are as much a part of this statistic as MEWing.... but it's so much easier to have a rant about big 4x4's obtained by MEWing isn't it?

System

I wouldn't class myself as financially illiterate, I needed a home.

kennyboy66_2

whathavewedone wrote: »

Well I wasn't talking just about people like myself but I do think you underestimate the amount of people who bought for the first time or traded up over the last four years.

You are of course absolutly spot on.

Any first time buyers from the start of 2003 onwards will have paid at most 14% of their loan off if they are on a normal repayment mortgage and haven't made overpayments.
Thats the way repayment mortgages work, and people who have endowment mortgages (more fools them) would be much worse off.

There is a large portion of embittered people who want to think they are uniquely virtuous and everyone else is a spendthrift chav.
Their blood pressure must go through the roof whenever they see someone driving a 4 x 4 (particularly if its a woman - they really hate women!).

To my mind the only people who really should feel hard done by are pensioners who have modest savings and whose income has been decimated.
Even then, people do tend to forget that 50% of all pensioners in the UK have less than £6k in savings.

silvercar

Now, I can understand the BTL figure, as it is they who have proped the market up since 2004, but what I can't understand for the life of me is how 1 in 4 mortgage holders will be in NE if prices only fell 30% ??.

All in the definitions, most BTL will be mortgaged for the tax advantages, a lot of home owners won't have a mortgage and so 1 in 4 mortgage holders is possible only 1 in 8 or even 1 in 10 of all owner occupiers.

Add to that that most BTL mortgages were max 85% LTV, possible occasionally 90% and that max LTV on owner occupiers was 125% or even 130% and the capacity for NE must be greater for owner occupier mortgage holders.

Nail_Lad

ad9898 wrote: »

I guess it would depend on who is doing the valuation, or if any were done at all, and they were basing the 60% LTV on 2007 prices, after all, a look on Rightmove would seem to prove that a lot of people seem to have no idea that their house is worth less than it was in 2007.

This has the makings of a good thread but I find it nigh on impossible to read with that flickering gif jabbing away at my eyeballs.

kennyboy66_2

silvercar wrote: »

All in the definitions, most BTL will be mortgaged for the tax advantages, a lot of home owners won't have a mortgage and so 1 in 4 mortgage holders is possible only 1 in 8 or even 1 in 10 of all owner occupiers.

Add to that that most BTL mortgages were max 85% LTV, possible occasionally 90% and that max LTV on owner occupiers was 125% or even 130% and the capacity for NE must be greater for owner occupier mortgage holders.

I'd agree (and something like 40-45% of homeowners have no mortgage) but would say that BTL buyers will;

1) Suffer more from fraudulent over-valuations.
2) Be more exposed to flats, particularly new build, whose values will suffer more than most.
3) Will find that rents are falling and voids increasing.

bo_drinker

Not if they hit 30% but when surely ????? Only a matter of time, a thing they don't have on their side? Not long then.

MRSTITTLEMOUSE

I bought in 2006 and to be honest don't care how low my house drops.I bought it to live in.It's not just a house it's my home.The last one I bought I lived in for 26 years and in that time never ever thought of taking any equity from it.
Whatever it's worth does'nt matter,it's better than having to fork out rent money when we're retired.That's my main concern.

Kenny4315

The cause of this is continual 100% mortgages (or more) and a continual remortgage cycle, without the requirement to hold equity. This is the reason why mortgage deposits and the equity held should be increased and enforced. See my post below for my full thoughts.

http://forums.moneysavingexpert.com/showthread.html?t=1570041&page=3