Irresponsible Borrowers

darkblue_2

Excellent evaluation! Mervyn King, step aside.

ViolaLass

darkblue wrote: »

Previous sale prices and how the media are reporting the market's health, as far as I can see.

Nope, buyers. Something is only worth what someone is prepared to pay for it.

MegaMiniMouse

darkblue wrote: »

Previous sale prices and how the media are reporting the market's health, as far as I can see.

One person lowers the price of their house on a street for an easy sale and all of a sudden you can't get what you want for it because potential buyers think "that one went for £x - why isn't this one?".

The Mail runs a story that the stock markets have been served with an ASBO because of immigrants and swine flu - and equally people feel they should be expecting a bargain.

I'm still not sure what the 'irresponsible borrower' contributes to the fluctuation in property prices

darkblue_2

Nope, buyers. Something is only worth what someone is prepared to pay for it.

Absolutely, but I do feel that other things influence people's decisions on how much they are prepared to pay.

I'm still not sure what the 'irresponsible borrower' contributes to the fluctuation in property prices

The more foreclosures there are, the more the banks lose. A repo doesn't always give back the debt. The properties can be sold at a third of their value. Losses like that can't be sustained by banks. Banks therefore give out less mortgages as lending criteria stricken. Less mortgages means less potential buyers. Less buyers means a less competitive market which could affect house prices.

treliac

MegaMiniMouse wrote: »

So who 'profits' from such a poor deal?

People who sold their houses at inflated prices I guess.

Ultimately, we could all pay the cost of supporting people who bankrupt themselves.

Not everyone will end up in such an extreme situation of course. Probably depends on the point someone decides they can no longer afford their mortgage and how sensibly they address the situation / their income level, etc.

MegaMiniMouse

ViolaLass wrote: »

Nope, buyers. Something is only worth what someone is prepared to pay for it.

Generally, that may be true, but in the case of property prices, the 'value' is equal to whatever a mortgagor will lend etc etc - that's why property prices have slumped - the lenders have moved out of the property market...

If you know where they have gone, then escape now, they will milk it dry, and move on again...

MegaMiniMouse

darkblue wrote: »

The more foreclosures there are, the more the banks lose. A repo doesn't always give back the debt. The properties can be sold at a third of their value. Losses like that can't be sustained by banks. Banks therefore give out less mortgages as lending criteria stricken. Less mortgages means less potential buyers. Less buyers means a less competitive market which could affect house prices.

Losses like that can't be sustained, as you say, which is why the banks have abandoned 'housing' as a guaranteed money-spinner.

PasturesNew

MegaMiniMouse wrote: »

So who decides what a property is worth?

The cash buyer at the repo auction.

MegaMiniMouse

PasturesNew wrote: »

The cash buyer at the repo auction.

It's all a bit of a lottery then, YEAH?

So what's the difference between the cash buyer at the repo auction, and the multi-billion mega world wide banking system which suddenly decided to walk away from the gambling table?

PasturesNew

MegaMiniMouse wrote: »

It's all a bit of a lottery then, YEAH?

So what's the difference between the cash buyer at the repo auction, and the multi-billion mega world wide banking system which suddenly decided to walk away from the gambling table?

It's actually our money. Our real pound notes .... that we can keep in our pockets if we want.

The banking system has to do something, has to do a volume of something, to keep it rolling.

As a cash buyer, I can scan down a catalogue and think "Nah, won't bother today". When it is YOUR actual hard cash you're putting down ... it is soooo different to putting your name onto paperwork and promising to pay £X every month for 300-400 months.