Tonight with Trevor McDonald

PoorDave

dunstonh wrote:

Its not a case of when a crash may or will happen. Its a case of people assuming that prices will rise like they have done over the last 10 years and there is nothing going to stop that from happening.

There could be price crash, there may not be. There could be a period of no change. Nobody knows. However, with most indicators getting back to the gaps of 1991 when the last crash happened, it does make sense to budget for the worst.

The lack of understanding about the level of risk being taken on mortgaged buy to lets is amazing. Someone mentioned endowments earlier in the thread. Well, an endowment was a scheme where you paid the interest on the mortgage and contributed to an asset regularly in the hope the investment part would pay off. A mortgage buy to let is not too different. You are paying an interest only mortgage in the hope that the asset rises in value and that the income remains. Many endowments have failed and you can get redress and blame the insurance companies. When the mortgage buy to let fails, who is going to get the blame then and who is going to pay for it?

The stupidity of people who think that a second property will be their pension when its being purchased on an interest only basis is amazing.

A few years ago it was possible to see how BTL'ing would work, in that prices were low enough compared to rental income (where i live at least) that you could make money each month, and get a capital gain.

It has taken a few years for this information to filter through society from the comparatively small number of people doing BTL'ing then, to people wishing to do it now. The problem is that in the time it's taken for this info to sink in and for people to think "we should do this too" the market has completely changed.

A specific example is a 1 bed house i used to rent from a BTL LL. Bought for 50k about seven years ago, now worth around 110k. Rent when bought approx 350pcm, rent now 450pcm.

On an interest only 85% BTL mortgage (42500) this costs (at 5% say) £177 a month, so the old rent is roughly double the mortgage cost.

Fast forward to the fictitious case of somebody trying to do the same with the same house at today's prices, cost 110k, 93500 mortgage at 5%. So it costs £389 a month. £60 a month isn't really worth the hassle, i don't think.

PoorDave

noyk wrote:

I think the problem is banks, bs, builders and ea's encouraging higher prices to the detriment of everybody accept themselves (with the help of bad or intentional goverment policy on planning).

Wanting a home of your own is prefectly fine - but the media built it up into something it is not - the answer to all ill's.

Why is it not possible to buy or build a home for an affordable amount? That is the real question we should be asking. It is a fundamental need for everybody - it should be possible.

It is possible, but if i've built a house that's cost me 200k say, and i can sell it at an "affordable" price of 250k, or at realistic market value of 300k, what am i going to do?

A home is fundamental. Owning it isn't.

noyk

I see where your coming from (owning doesn't need to be a fundamental right) but my point really is that why couldn't it be?
People like owning things, it makes them feel secure. I'm fine with that and we have plenty of land in this country, it's just land prices are so expensive for no good reason.

BTL etc buying up properties is correct in the current context that it pushes prices higher, but if were to build more homes then it would become inconsequential and it would possible for people to buy and own their own homes cheaply (why not have cheap houses?).

People could then get on with thinking and doing things that really mean something to them, like for instance spending time with their friends and familiy and bringing up kids or building and producing new ideas and technologies and so on.

All this they could do with their own money, because 90% of their money wouldn't be taken up with paying a !!!!!!! mortgage for no good reason.

I'm trying to look at the big picture perhaps, but it makes me feel a certain injustice when all people want to do is live their lives. Maybe i just want a utopia but why can't cheap homes be achievable?

gelato_cat

Anyone notice that the girl on last night's prog with £25/week disposable income was sitting on a leather sofa?!

Suze

ginger_nuts wrote:

Just my view but there is not much difference between interest only and the options used in the 1980's & 1990's when we where sold useless endowment policys . I just wonder how many FTB's buy there furniture on credit .I wonder how many FTB's have seen a council tax ,phone ,or electric bill before they ever bought .Did there family ever show them how to budget for essential bills .
Do they realise sky TV is not essential .

gelato_cat

The only thing they're thinking about is how much more their property will be worth in a few years' time because "property prices always go up"...

Suze

david29dpo wrote:

i found the whole program quite amusing, the short sighted,ness of the buyers and lenders makes me wonder if they have thought about tomorrow.

gelato_cat

Ditto. I think the advisor should have said "so don't you think it might be about time for another one then?"

Suze

wibble68 wrote:

The bit that cracked me up was when the advisor told the young women that the housing market has crashed in the past. The reply was "Ye but that was years ago" lol

Xbigman

As far as a crash is concerned...
I saw a story in the paper that another lender has increased the multiple it will lend from 4 to 4.5 times income, which is becoming standard. It also said northern rock is already up to 4.8 times income. If the lenders simply lend more and more money it will put off the crash but make it worse when it does happen.
Regards



X

noyk

Suzey wrote:

Anyone notice that the girl on last night's prog with £25/week disposable income was sitting on a leather sofa?!

Suze

Yea my GF notices and said something along the lines of, bet she didn't take into account the 80pm from DFS for new leather sofa's! Well spotted :beer:

noyk

Xbigman wrote:

As far as a crash is concerned...
I saw a story in the paper that another lender has increased the multiple it will lend from 4 to 4.5 times income, which is becoming standard. It also said northern rock is already up to 4.8 times income. If the lenders simply lend more and more money it will put off the crash but make it worse when it does happen.

They had a piece in this programme about it too, though it was quite short. The clip was of a girl walking along the street - her and her boyfriend earned in the region of 60k combined and the voice over said they had been offered up to 5.5 times earnings if i remember correctly!

A_Nice_Englishman

PoorDave wrote:

A few years ago it was possible to see how BTL'ing would work, in that prices were low enough compared to rental income (where i live at least) that you could make money each month, and get a capital gain.

It has taken a few years for this information to filter through society from the comparatively small number of people doing BTL'ing then, to people wishing to do it now. The problem is that in the time it's taken for this info to sink in and for people to think "we should do this too" the market has completely changed.

A specific example is a 1 bed house i used to rent from a BTL LL. Bought for 50k about seven years ago, now worth around 110k. Rent when bought approx 350pcm, rent now 450pcm.

On an interest only 85% BTL mortgage (42500) this costs (at 5% say) £177 a month, so the old rent is roughly double the mortgage cost.

Fast forward to the fictitious case of somebody trying to do the same with the same house at today's prices, cost 110k, 93500 mortgage at 5%. So it costs £389 a month. £60 a month isn't really worth the hassle, i don't think.

And definitely not worth it for a loss of £17pm if interest rates went up to 6% which is not unlikely.