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Debate House Prices
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I can't see a house price crash comming
iinvestor
Posts: 70 Forumite
My reasons are :
1) Low interest rates has meant borrowers can easily service their debt, pay more of the capital and are under no pressure to sell. Buy-to-lets look attractive to cash rich investors, who are fed up by the measly 0.5% of by banks.
2) High immigration,
3) Lax lending by the banks. A lot of banks have been bankrupt but no major house price crash materialised. And banks have shown no major change to their generous lending criteria.
4)High inflation (most important). Government statistics show inflation around 3% over the last 3 years. But we all know inflation in the real world has been at least 6%. With food and fuel prices soaring, and the government quantitative easing program has meant the purchasing power of cash has greatly been reduced.
Now imagine house prices were overvalued by 25% in summer 2007.
In last last three years the value of cash has been reduced by at least 14% (2008;3%, 2009;5%, 2010;6%) in the real world,
Interest rate cut has meant borrowers receiving massive discounts, hence effectively paying less for the house then originally budgeted, by paying less interest and more of the capital.
if they only save 2.5% per year in interest on their mortgage, and interest rates stay low till 2012 they will have saved 10% ( a 10% discount on the borowing)
So 14% lost by savers and 10% gained by borrowers, has led me to conclude house prices won't fall,
Public sector job loses are unlikely to effect house prices, because interest rates are still low making house prices still affordable, and inflation is predicted to rise to 8% and when the value of money is falling people would rather keep their saving in a house then in the banks.
Yes house prices were overvalued in 2007 but government policy has meant their is unlikely to be a major crash.
*BTW i am not a home-owner, but someone with a deposit waiting for the house price crash to materialise.
1) Low interest rates has meant borrowers can easily service their debt, pay more of the capital and are under no pressure to sell. Buy-to-lets look attractive to cash rich investors, who are fed up by the measly 0.5% of by banks.
2) High immigration,
3) Lax lending by the banks. A lot of banks have been bankrupt but no major house price crash materialised. And banks have shown no major change to their generous lending criteria.
4)High inflation (most important). Government statistics show inflation around 3% over the last 3 years. But we all know inflation in the real world has been at least 6%. With food and fuel prices soaring, and the government quantitative easing program has meant the purchasing power of cash has greatly been reduced.
Now imagine house prices were overvalued by 25% in summer 2007.
In last last three years the value of cash has been reduced by at least 14% (2008;3%, 2009;5%, 2010;6%) in the real world,
Interest rate cut has meant borrowers receiving massive discounts, hence effectively paying less for the house then originally budgeted, by paying less interest and more of the capital.
if they only save 2.5% per year in interest on their mortgage, and interest rates stay low till 2012 they will have saved 10% ( a 10% discount on the borowing)
So 14% lost by savers and 10% gained by borrowers, has led me to conclude house prices won't fall,
Public sector job loses are unlikely to effect house prices, because interest rates are still low making house prices still affordable, and inflation is predicted to rise to 8% and when the value of money is falling people would rather keep their saving in a house then in the banks.
Yes house prices were overvalued in 2007 but government policy has meant their is unlikely to be a major crash.
*BTW i am not a home-owner, but someone with a deposit waiting for the house price crash to materialise.
0
Comments
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I have a slight problem with this comment. My OH and I earn in excess of £60k per year, have no debt or bad credit rating yet we've been told we need 20% deposit. I hardly call that Lax lendingMy reasons are :
3) Lax lending by the banks. A lot of banks have been bankrupt but no major house price crash materialised. And banks have shown no major change to their generous lending criteria.30th June 2021 completely debt free…. Downsized, reduced working hours and living the dream.0 -
I have a slight problem with this comment. My OH and I earn in excess of £60k per year, have no debt or bad credit rating yet we've been told we need 20% deposit. I hardly call that Lax lending
With an income in excess of £60k per year, you should be able to save quite a bit:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »With an income in excess of £60k per year, you should be able to save quite a bit
That has ignored his issue all together they picked up on the issue of slack lending...
that point is wrong yes ?? doesnt matter what he can and cant save ?0 -
careinthecommunity wrote: »That has ignored his issue all together they picked up on the issue of slack lending...
that point is wrong yes ?? doesnt matter what he can and cant save ?
I understand the credit has become tighter.
I do not argue against that.
Indeed I've said before that tighter credit requirements go to restrict potential buyers and thus is likely to reduce the opportunity to become owner occupiers.
My point being with a household income in excess of £60k, they should be well placed to have to opportunity to obtain the deposit required:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
I have a slight problem with this comment. My OH and I earn in excess of £60k per year, have no debt or bad credit rating yet we've been told we need 20% deposit. I hardly call that Lax lending
Why don't you go to someone that only requires a 10% deposit then?
http://www.moneysupermarket.com/mortgages/'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
IveSeenTheLight wrote: »I understand the credit has become tighter.
I do not argue against that.
Indeed I've said before that tighter credit requirements go to restrict potential buyers and thus is likely to reduce the opportunity to become owner occupiers.
My point being with a household income in excess of £60k, they should be well placed to have to opportunity to obtain the deposit required
Fair enough it just looked like you jumped on him to make a point.
So you agree at least no 3 of his post is rubbish0 -
careinthecommunity wrote: »Fair enough it just looked like you jumped on him to make a point.
So you agree at least no 3 of his post is rubbish
Ah a quick edit
It's not totally rubbish.
It's true there are still higher deposit requirements than at the peak, however if you check the mortgage rates, you can see they are contuing to fall.
I've been keeping my eye on mortgage rates as I'm on an SVR, but honestly, the SVR would be extremely hard to beat.
What I have seen is 5 year fixed rates contuing to lower.
HSBS was 5 year fix from 4.99%
Then the lowered to from 4.95%
I remember when they went to from 4.71%
Then from 4.2%
Now they are from 3.95%
https://mortgages.hsbc.co.uk/product/186-5-year-fixed-special
If lending criteria wastightening, surely we would have seen increasing rates.
Additionally, there was a period when it was a minimum 20% deposit required.
Now we are seeing more and more 10% products.
So lending did get extremely tigh, but there are signs that the noose strangling the market is loosening.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
I have a slight problem with this comment. My OH and I earn in excess of £60k per year, have no debt or bad credit rating yet we've been told we need 20% deposit. I hardly call that Lax lending
I pressume you earn between £60-70k between you, if so you are hardly the in the high income bracket are you?
I can see why the bank wouldn't lend to you as your salary to loan value is too low0 -
the quick edit was because i quoted the wrong number ... nothing to hide here ... [i am not a smiley person]
I agree that they are loosening the purse strings a little (is that english) but it isnt the slack lending that was pointed out,
also isnt the flip side of this that there are not enough people with the required deposits and the banks still need to entice business?
Banks are a business they need to be competetive and attract business so isnt this just a case of trying to attract what little business there is out there...0 -
IveSeenTheLight wrote: »Ah a quick edit
It's not totally rubbish.
It's true there are still higher deposit requirements than at the peak, however if you check the mortgage rates, you can see they are contuing to fall.
I've been keeping my eye on mortgage rates as I'm on an SVR, but honestly, the SVR would be extremely hard to beat.
What I have seen is 5 year fixed rates contuing to lower.
HSBS was 5 year fix from 4.99%
Then the lowered to from 4.95%
I remember when they went to from 4.71%
Then from 4.2%
Now they are from 3.95%
https://mortgages.hsbc.co.uk/product/186-5-year-fixed-special
If lending criteria wastightening, surely we would have seen increasing rates.
Additionally, there was a period when it was a minimum 20% deposit required.
Now we are seeing more and more 10% products.
So lending did get extremely tigh, but there are signs that the noose strangling the market is loosening.
Lend is getting tighter and tougher, but rates are easing to help people afford more.
Still an advertised rate does not mean you'll get it0
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