MSE News: First-time buyer mortgage famine gets worse

brit1234

tek-monkey wrote: »

Unless I'm missing something here, how is this different to anyone purchasing a house at 100k and then trading up in 5 years? Other than I get a 165k house to live in while I wait? What do you expect prices to be in 5 years, compared to now?

EDIT: Forgot to say, my share of this house is around 3.7 times my salary.

That's 3.7 X salary for a 60% share then. With lending criteria depicting prices and returning to normal you are talking of a 40% drop in price. So that equals a little over £65,000 reduction. Without a deposit that puts you around £40,000 negative equity.

Now if you could purchase a house for £100,000 it can't be as overvalued as the property above and you wouldn't be in so much negative equity. Surely you have just proved how over valued your £165,000 property is.

Prices are going to come down to normal, the banks have a huge amount of loses and these are continuing. By giving these loses a value simply doesn't make them go away. All other the world banks are still failing and the rest are reliant on state aid.

tek-monkey

You've completely lost me there, how is the 165k house obviously overvalued compared to the 100k house? These are open market houses, not set price new builds. And your example of a 40% drop meaning 40% negative equity would equate to exactly the same on the 100k house, so I'm still lost.

Your post, in its simplist form, just seems to say "I think house prices will drop" without any actual reason/proof/justification. The % loss on one of my theoretical houses is the same as the other, the ownersship value is steady (100k) and your only justification seems to be that my £165k house is over valued despite absolutely no evidence/reasoning/past trends to back it up.

Besides which I gather you are a potential FTB, just like myself? In which case what makes you right and anyone who disagrees wrong? Perhaps you have more to learn than you would like to believe, and may well miss the boat this time round too? I don't pretend I know whats happening with house prices, I just know my maths work to me. If you can quantify your predictions along with valid reasoning I'll be interested in the information, as I'm always open to better ideas than my own.

EDIT: And why did you lose the signature about 50% price drops by xmas, unless you no longer believe your own views? Although the rightmove one is also incorrect, and TBH the first one is also a bit misleading as its harder to get a mortgage now, the lowered interest rates merely serve those who purchased already and are on trackers. So it should say "Low interest rates save thousands from repossesion they would otherwise face". If that means extending the crash to ypu so be it, I'd rather they had homes.

transgenic

MSE_Guy wrote: »

"The number of mortgages available to those with a small deposit has fallen by 17% since the beginning of the year, research reveals.

I managed to get mine sorted in April this year and looking at this I am so glad I did (managed to get a 90% loan). I doubt anyone would give me a mortgage if I was to apply now.

Sooler

tek-monkey wrote: »

My plan is to sell at year 5, and use the equity I should have built up to fund my second house.

Unless I'm missing something here, how is this different to anyone purchasing a house at 100k and then trading up in 5 years? Other than I get a 165k house to live in while I wait?

EDIT: Forgot to say, my share of this house is around 3.7 times my salary.

I'm no expert and never looked into SE/SO ...

Is the difference that if you start with a 100K house in 5 years you have no enforced costs occuring - just carry on as you are.

Start with 60% of a 165K house in 5 years you either have to start paying rent, increase your mortgage to buy the other 40% or move, incurring selling, moving, buying costs ... and you'll be moving down to a 100K house.

brit1234

tek-monkey wrote: »

You've completely lost me there, how is the 165k house obviously overvalued compared to the 100k house? These are open market houses, not set price new builds. And your example of a 40% drop meaning 40% negative equity would equate to exactly the same on the 100k house, so I'm still lost.

Possibly but it still confusses me that you are compairing a £100K house with a £165K one. Does this mythical £100k house exist in your area with the other property. And why buy the £165K one with all the extra costs?

tek-monkey wrote: »

Your post, in its simplist form, just seems to say "I think house prices will drop" without any actual reason/proof/justification. The % loss on one of my theoretical houses is the same as the other, the ownersship value is steady (100k) and your only justification seems to be that my £165k house is over valued despite absolutely no evidence/reasoning/past trends to back it up.

There is a lot of factual proof. For one house prices typically and sustainably rise with inflation unless you add value. For example adding a extention or a complete refurb on a crumbling property. However in the last decade all properties rose at double digit percentages year on year far greater then inflation which was at all time low. The reason was overlending of risky cheap credit, mass fraud, land registry manipulation etc. This popped the bubbl resulting in the credit crunch.

Now the banks still have all these loses despite giving them some value today (reason for the panic or uncertainty), however these loses have to be compensated and the loses are still growing.

How can prices not fall if the funds are not there to support todays prices?

tek-monkey wrote: »

Besides which I gather you are a potential FTB, just like myself? In which case what makes you right and anyone who disagrees wrong? Perhaps you have more to learn than you would like to believe, and may well miss the boat this time round too?

I studied risk and sustainabilty at Uni in a big way. Thats why I know the growth over the last decade was not sustainable. The market is going to simply rebalance itself, low interest rates just delay it. Sustainable developement was the big buz word in the late 90s, shame banks, builders and government forgot about it or didn't understand it.

Sorry I don't think there is much chance of missing the boat, there are no funds available to allow significant price rises, infact it is the direct opposite. If you follow the accepted 18 year property cycle you will know we have a long way to go down yet then years of stagnation followed by gentle rises and a crazy period before the next crash. So far the 18 year cycle has been correct over 100's of years

tek-monkey wrote: »

I don't pretend I know whats happening with house prices, I just know my maths work to me. If you can quantify your predictions along with valid reasoning I'll be interested in the information, as I'm always open to better ideas than my own.

As said above,too low interest rates, mass fraud, land registry manipulation, very risky lending and goverment fueling ever more expensive homes with dogy schemes.

Look up bubble economics.

Good sources to read or watch are Peter Schiff, Money Week, The Economist and such like also the Comodity watch podcasts.

http://commoditywatch.podbean.com/

In the latest program they discuss the idea of the repeated W recesion, ie WWWW with lots of mini peaks and dips but in a genral downward direction.

tek-monkey wrote: »

EDIT: And why did you lose the signature about 50% price drops by xmas, unless you no longer believe your own views? Although the rightmove one is also incorrect, and TBH the first one is also a bit misleading as its harder to get a mortgage now, the lowered interest rates merely serve those who purchased already and are on trackers. So it should say "Low interest rates save thousands from repossesion they would otherwise face". If that means extending the crash to ypu so be it, I'd rather they had homes.

Yes well they cut interest rates to stupidly low levels which is drawing things out longer.

tek-monkey

Sooler wrote: »

I'm no expert and never looked into SE/SO ...

Is the difference that if you start with a 100K house in 5 years you have no enforced costs occuring - just carry on as you are.

Start with 60% of a 165K house in 5 years you either have to start paying rent, increase your mortgage to buy the other 40% or move, incurring selling, moving, buying costs ... and you'll be moving down to a 100K house.

You are assuming I'll stay at year 5 (I doubt I will). Also why will I move to a 100k house? I'll do as all people do, buy a first house to live in for a few years then trade up. It just means I'll be 'moving up' to a similar property to the one I'm already in, as releasing the equity in mine should give me a better deposit on the next place. Again, this will be no different to someone buying a 100k house today and trading up in 5 years.

In pure money terms I'd have purchased at 100k and sold at (100k x house price rises), in both instances. The only difference is one house is worth more, just not to me as I would own the same amount of both - 100k at purchase time.

EDIT: Also for years 5-10 I'd have to spend 1.75% on rent, that would be about 1k a year so easily manageable should I wish to.

tek-monkey

brit1234 wrote: »

Possibly but it still confusses me that you are compairing a £100K house with a £165K one. Does this mythical £100k house exist in your area with the other property. And why buy the £165K one with all the extra costs?

Of course the mythical 100k house exists, I can buy at 80k if I want. I just don't fancy the places, I want somewhere nicer. I also get to use the SE part as deposit, to boost my own position on getting a cheaper mortgage which I have a decent fix on. I'm not actually buying at 165k either, I just used that figure to make the 100k comparison easier. I'm buying at 132k.

brit1234 wrote: »

There is a lot of factual proof. For one house prices typically and sustainably rise with inflation unless you add value. For example adding a extention or a complete refurb on a crumbling property. However in the last decade all properties rose at double digit percentages year on year far greater then inflation which was at all time low. The reason was overlending of risky cheap credit, mass fraud, land registry manipulation etc. This popped the bubbl resulting in the credit crunch.

If I'm wrong, I'm wrong, but my house still has to lose the equivalent of renting over the first 5 years to make me actually lose. Therefore my house must drop to 100k in 5 years before I lose a penny, otherwise I have gained. I also have the stability of my own place, rather than rentals like I've had for a dozen years.

brit1234 wrote: »

Now the banks still have all these loses despite giving them some value today (reason for the panic or uncertainty), however these loses have to be compensated and the loses are still growing.

How can prices not fall if the funds are not there to support todays prices?

Maybe I'm being stupid here, but what does it actually matter what house prices do? This is a home, not an investment. I've got a long term fixed rate that I can easily afford, I can actually afford to go a further 8% than I'm paying should I need to, although I don't want to hence the fixed rate. I have a 10 year fixed rate at 5.3%, for 10 years my outgoings are sorted, and I can afford them happily. In 10 years if everything has gone wrong, I'll bail and rent again. What can I lose realisticly? Do you honestly believe in 10 years house prices will be 40% below what they are now?

Even people who purchased at the height of the last boom are better off than people trying to purchase now. I can afford to buy now, yes it may cost me more than I would have spent if I'd waited, but it will cost me less than renting. I am saving money by purchasing, I don't really care that I could have saved more by waiting and hoping. My outgoings will drop, from now rather than waiting for the bottom.

brit1234 wrote: »

I studied risk and sustainabilty at Uni in a big way. Thats why I know the growth over the last decade was not sustainable. The market is going to simply rebalance itself, low interest rates just delay it. Sustainable developement was the big buz word in the late 90s, shame banks, builders and government forgot about it or didn't understand it.

Sorry I don't think there is much chance of missing the boat, there are no funds available to allow significant price rises, infact it is the direct opposite. If you follow the accepted 18 year property cycle you will know we have a long way to go down yet then years of stagnation followed by gentle rises and a crazy period before the next crash. So far the 18 year cycle has been correct over 100's of years

Do you have a graph of this, showing avaerage house prices over the last hundred years, as I'd be interested in comparing it to other figures I've seen.

brit1234 wrote: »

As said above,too low interest rates, mass fraud, land registry manipulation, very risky lending and goverment fueling ever more expensive homes with dogy schemes.

Look up bubble economics.

Good sources to read or watch are Peter Schiff, Money Week, The Economist and such like also the Comodity watch podcasts.

http://commoditywatch.podbean.com/

In the latest program they discuss the idea of the repeated W recesion, ie WWWW with lots of mini peaks and dips but in a genral downward direction.

Why should I care, I am saving money. My payments are fixed, the bank can't raise them to help recoup losses. The fraud is irrelevant, I wasn't involved and it can't touch me. I know about bubble economics, I'm not stupid, I just work out my place in things and what is best for me. I don't really care what happens to everyone else, as long as my own situation works out its of no consequence. I say again, prices need to be more than 40% lower than todays prices in 10 years time before I'll worry.

Don't worry, you can buy once the interest rates are higher again. Then your house price may be lower but you'll pay more for it, something the doom mongers always seem to ignore. I'd rather buy now at 150k/5% than get at 100k but pay 9% interest. At least I have a home in the meantime.

brit1234 wrote: »

Yes well they cut interest rates to stupidly low levels which is drawing things out longer.

So your prediction was wrong, which proves you can't second guess these things. Nobody knows what will happen, they just guess or in some cases hope. You are hoping for a crash, that much is obvious. If anything I'd like a crash in 5 years time, as I can revalue the house and drop a lot more of the rental part of my SE scheme