House prices....

x12yhp

pgilc1 wrote: »

Are you REALLY suggesting that the goverment should force up interest rates to the point that people HAVE to sell their family homes at a heavily discounted price?? :eek:

Brilliant idea - tens of thousands of homes repossessed and hundreds of thousands of others crippled with massive debts. Classic.

I am not suggesting that they do it out of spite of people who spent money that was not theirs. I am not suggesting that they do it for any other reason than it is necessary. At the moment we have a fairly stagnant market in terms of volume and a negative (albeit quite slow) market in terms of price. We also have high inflation, wage deflation and employment concerns. The economy is in trouble and the only thing that is happening is that we are praying for a miracle so that the buyers can suddenly afford to bail out the sellers who paid TOO MUCH.

The real problem is that first time buyers cant get on the property ladder because of the massive deposits being asked of them. Deposits of 20-30% are the norm, compared to 5% 10 or 20 years ago (note that that was the norm prior to this past 5 years). Thus you're asking first time buyers to raise £30-40K. That has a simple knock on effect up the market. If you look at the price comparison sites for mortgages, they arent offereing 95% mortgages, THEN valuing the houses low, theyre offering 70% mortgages. THATS where the problem lies.

Forget to 'norm'. What is the problem with asking someone to prove they are able to afford the repayments and prove that they have an ability to save money? The banks are not charities and they are hurting. This has happened because of many many years of people convincing themselves that a pile of bricks is an absolute essential. People have been unable to restrain themselves and have spent too much. The only reason that the house of cards has not collapsed is because of artificially low interest rates. Had we left them at the long term level, the market would have fallen apart. 10-20% deposits would not be half as bad if prices were not so high!! If you want to take your 'longer term' arguement, why don't you extrapolate average house prices and see where they would be?? I'll give you a hint, current levels are way above it (still) - so how can you you try and justify a the old economic approach when prices do not fit??

Quite where you are coming up with the idea that banks are valuing properties low, I do not know. Are you a conspiracy theorist?

So how come the market survived for decades with 95% mortgages? Or do you only know what you've read on the internet about this last five years?

Sorry but you cannot jump me here. I called this whole mess. I learnt about the market and I stayed out of it.

Banks simply dont have the money to lend because the bigger banks they have been borrowing off have stopped lending them so much. Simply put, they have less money to lend, therefore they are being incredibly choosy about who they lend it to and are lending it only to people who are cash rich.

So, yes, those thousands of analysts who have a relatively small pocket of money to lend, agree they shouldnt be taking any risks at all with it, however we need to get back to the previous situation whereby banks can provide 95% loans - and thats not a Halifax problem, or an Abbey problem - thats a problem affecting the world banks as a whole.

Once again you are thinking about this as if it is some human right. That is a horribly British mindset. Banks are businesses and you have had bargains out of them for too long. You have no right to own a home and the majority of those who would get hit by higher interest rates simply would never have been able to afford a home if they lived elsewhere in the world.

The banks of the world do not seem to be having a problem. They are making money and are, more or less, settled again. The problem is that YOU think they owe you something.

No one is suggesting that, but where are all the 95% mortgage offers that were freely available 5-25 years ago? Or as i said have you only been an internet analyst this past five years?

Again. Yet again. The banks are businesses. There is no obligation to offer you a 95% mortgage. The deals are not there. The market went insane, people got out of control and now the banks are making much more cautious judgements on everything. For all you know, the old practices may never return. Our government has no control over this. Our central bank has no control. Your whole argument about how to sort out the 'problem' is centred on forcing a business to do something that it presently considers too risky. That is so flawed it is unreal!!

x12yhp

pgilc1 wrote: »

OK, a question for all those advodates of the 'house prices are too high' brigade, WHICH of the following is likely to jump start the market?

Proposition 1
A 'forced' further price drop of 25% (possibly by higher interest rates forcing people to sell their homes because they cant afford them anymore). This would mean a £160K house repriced at £120K. Previous deposit of 20% = £32,000, new deposit = £24,000.

Proposition 2
A reintroduction of the 95% mortgage. This would mean a deposit of £8,000 on the £160K house.

Which is going to be easier to achieve for first time buyers - an £8K deposit or a £24K deposit?

**HINT** - what was working for 25+ years before the madness of the last five years?

Yes, clever cloggs. Lets for for (B). So now we have the market moving again and at a reasonably high level. We now have momentum and a lot of it. A large mass of money probably starting to move quickly. That equals BIG inflation. So rates rise. So now those 95% mortgages at 3-4% suddenly become 7-8% (or more if the momentum got out of hand). Now we have a bunch of people who have mortgaged themselves up to they eyes with a massive increase in their repayments. The fact that they needed these 95% mortgages demonstrates that they do not have money behind them and are likely pretty close to the breadline with the commitment they initially made.

Net result is that we have a massive crash.

You have achieved absolutely nothing except another wholesale ruination of the economy. Nice.

motorguy

x12yhp wrote: »

I am not suggesting that they do it out of spite of people who spent money that was not theirs. I am not suggesting that they do it for any other reason than it is necessary. At the moment we have a fairly stagnant market in terms of volume and a negative (albeit quite slow) market in terms of price. We also have high inflation, wage deflation and employment concerns. The economy is in trouble and the only thing that is happening is that we are praying for a miracle so that the buyers can suddenly afford to bail out the sellers who paid TOO MUCH.



Forget to 'norm'. What is the problem with asking someone to prove they are able to afford the repayments and prove that they have an ability to save money? The banks are not charities and they are hurting. This has happened because of many many years of people convincing themselves that a pile of bricks is an absolute essential. People have been unable to restrain themselves and have spent too much. The only reason that the house of cards has not collapsed is because of artificially low interest rates. Had we left them at the long term level, the market would have fallen apart. 10-20% deposits would not be half as bad if prices were not so high!! If you want to take your 'longer term' arguement, why don't you extrapolate average house prices and see where they would be?? I'll give you a hint, current levels are way above it (still) - so how can you you try and justify a the old economic approach when prices do not fit??

Quite where you are coming up with the idea that banks are valuing properties low, I do not know. Are you a conspiracy theorist?



Sorry but you cannot jump me here. I called this whole mess. I learnt about the market and I stayed out of it.



Once again you are thinking about this as if it is some human right. That is a horribly British mindset. Banks are businesses and you have had bargains out of them for too long. You have no right to own a home and the majority of those who would get hit by higher interest rates simply would never have been able to afford a home if they lived elsewhere in the world.

The banks of the world do not seem to be having a problem. They are making money and are, more or less, settled again. The problem is that YOU think they owe you something.




Again. Yet again. The banks are businesses. There is no obligation to offer you a 95% mortgage. The deals are not there. The market went insane, people got out of control and now the banks are making much more cautious judgements on everything. For all you know, the old practices may never return. Our government has no control over this. Our central bank has no control. Your whole argument about how to sort out the 'problem' is centred on forcing a business to do something that it presently considers too risky. That is so flawed it is unreal!!

I'm not going to respond to each individual point, as its getting a bit out of hand, other than to say that it was the BANKS that got us into this miss by over lending to people who clearly couldnt afford to pay it back, and therefore they should make some attempt to help get us out of it. Lets remember that most of the UK banks have had massive bailouts from taxpayers, so yes, there IS an obligation there for them to help the economy out of the mess.

In the very simple example i gave, there were banks turning us down for a mortgage of £140K on a house (bank) valued at £300K. The house physically cost £335K to build and we already owned the site. We both have strong credit rating and no other debt other than a loan on my wifes car (which is for half what its worth) Now how is there ANY risk there? Correct me if i'm wrong here but the deal basically is 'if we lend you £140K on your house we've undervalued at £300K and you miss a couple of payments, then we get your house.' Great work if you can get it, eh?

motorguy

x12yhp wrote: »

Yes, clever cloggs. Lets for for (B). So now we have the market moving again and at a reasonably high level. We now have momentum and a lot of it. A large mass of money probably starting to move quickly. That equals BIG inflation. So rates rise. So now those 95% mortgages at 3-4% suddenly become 7-8% (or more if the momentum got out of hand). Now we have a bunch of people who have mortgaged themselves up to they eyes with a massive increase in their repayments. The fact that they needed these 95% mortgages demonstrates that they do not have money behind them and are likely pretty close to the breadline with the commitment they initially made.

Net result is that we have a massive crash.

You have achieved absolutely nothing except another wholesale ruination of the economy. Nice.

Nicely adding to gather worst case scenarios onto worse case scenarios onto worse case scenarios to have the worst conclusion to make your point.

It could all be done very easily in a controlled manner. Maybe gradually introducing an 85% LTV mortgage, etc, etc.

And its nonsense about 'not being able to afford a mortgage'. a £400 a month payment is easily budgeted compared to currently having to gather up £40K of a deposit by most people and if it cant, then the banks make you take out an insurance policy to make sure they get their money if you fail to make payments.

A 25% drop in the value of houses wont matter a fiddlers if people cant get the deposits saved up.

I really cant see how you think banks arent key to all of this - banks were key to causing this, we as taxpayers had to bail them out to the tune of billions when it all went wrong, and now they need to release their grip on the mortgage market a little to promote growth.

motorguy

x12yhp wrote: »

Quite where you are coming up with the idea that banks are valuing properties low, I do not know. Are you a conspiracy theorist?

From talking to many estate agents and many contract builders. Oh and from practical experience.

Some Estate Agent friends of mine are near at wits end because on the rare house that they can get the buyer and seller to agree a price on, the bank valuers come along and say, no its worth £40,000 less than that. Why? because we say so. They then only offer a 75% LTV mortgage, leaving the buyer to find a massive deposit and the extra £40K.

And, again, personal experience. I have receipts for £335K (which would be +VAT if we werent able to claim it all back as a new build) for this house and the site was maybe worth £150K. Bank valuation, oh its worth £300K. !!!!!!?

vlad_the_impaler

Are you REALLY suggesting that the goverment should force up interest rates to the point that people HAVE to sell their family homes at a heavily discounted price?? :eek:

Brilliant idea - tens of thousands of homes repossessed and hundreds of thousands of others crippled with massive debts. Classic.

This is what happened during the last x number of housing crashes, and indeed every other bubble before that. Those who got caught holding when the music stopped get screwed, simple as that. The ONLY reason that has not happened is because of low interest rates. Instead of taking this breathing space to overpay their mortgages ASAP, and get theri debt down, what are most doing? Splurging on consumer goods....that was their last chance, nothing can save them from losing their homes now.

The real problem is that first time buyers cant get on the property ladder because of the massive deposits being asked of them. Deposits of 20-30% are the norm, compared to 5% 10 or 20 years ago (note that that was the norm prior to this past 5 years). Thus you're asking first time buyers to raise £30-40K. That has a simple knock on effect up the market. If you look at the price comparison sites for mortgages, they arent offereing 95% mortgages, THEN valuing the houses low, theyre offering 70% mortgages. THATS where the problem lies.

Rot. Prices are not 3.5x dual income, THAT is why first time buyers can't get onto the ladder. Property has ALWAYS gone back to 2.5-3.5x dual income as the baseline since records began, what makes this time any different? Maybe it is this 'new paradigm' aka 'this really ain't a bubble honest!' of property prices increasing forever and ever we used to hear about back in 2006?

Banks (unlike clearly you) seem to have learnt their lesson from the implosion in 2007-8, and have gone back to trying to ensure that those that they are lending money to maybe have a sporting chance of paying it back, nothing more. The public have demostrably shown that they cannot be trusted to make finacial decsions about loans themselves, and will borrow whatever they can get, feeding price rises. We have simply gone back to how things used to be up to the mid 90s. You may not like it, but this is the case.

So how come the market survived for decades with 95% mortgages? Or do you only know what you've read on the internet about this last five years?

Is that so? My parents borrowed £15k in 1970 to build a house. They had to put down a £4k deposit, and as they tell me nearly beg at the feet of the local bank manager to get it after being made to wait 6 weeks for the interview. I myself with my partner had to put down £10k against £70k in 2001 to get a mortgage. How quickly people forget....

No one is suggesting that, but where are all the 95% mortgage offers that were freely available 5-25 years ago? Or as i said have you only been an internet analyst this past five years?

They are gone, and the ain't returning for a long long time. Better get used to that.

You sound like you are in hock for a lot of money for the house you built, which may explian why you are so angry with the banks calling time on the madness:

How would you ever know what the house is worth? The bank valued it at at a very low £300K, and you're saying its worth £220K??? :rotfl: It cost £335K to build and the site was worth about £150K.

I am sorry that this is the case; you are about to learn a very painful lesson in bubbles, and markets. All OK to ride the bubble as long as you are lucky enough to bail at the right time!

-The market does not care what the house owes you.
-The house is only 'worth' what you can find someone else to pay for it, regardless of what you put into it.

vlad_the_impaler

pgilc1 wrote: »

From talking to many estate agents and many contract builders. Oh and from practical experience.

Some Estate Agent friends of mine are near at wits end because on the rare house that they can get the buyer and seller to agree a price on, the bank valuers come along and say, no its worth £40,000 less than that. Why? because we say so. They then only offer a 75% LTV mortgage, leaving the buyer to find a massive deposit and the extra £40K.

And, again, personal experience. I have receipts for £335K (which would be +VAT if we werent able to claim it all back as a new build) for this house and the site was maybe worth £150K. Bank valuation, oh its worth £300K. !!!!!!?

OMG!

You think that because you spent £335k, how can the property be worth £300k?? Seriously!

You spent the money with your eyes wide open! If you spent too much, that is no-one else's problem but yours. I am afraid to say that property development, like all other forms of business is a calculated gamble; sometimes it comes off, and sometimes it really does not, as you are finding out. The reason could be all sorts of things, but the result is the same; loss of money. Any sensible businessperson understands the risks they are taking; no use crying 'foul' because you got caught out!

motorguy

vlad_the_impaler wrote: »

OMG!

You think that because you spent £335k, how can the property be worth £300k?? Seriously!

You spent the money with your eyes wide open! If you spent too much, that is no-one else's problem but yours. I am afraid to say that property development, like all other forms of business is a calculated gamble; sometimes it comes off, and sometimes it really does not, as you are finding out. The reason could be all sorts of things, but the result is the same; loss of money. Any sensible businessperson understands the risks they are taking; no use crying 'foul' because you got caught out!

I dont particulary *care* what the valuation is by the bank as its not for sale. My point being that the house cost £335K to build, its on a site worth maybe £150K, yet some mortgage companies werent prepared to lend £140K against that.

I havent got caught out. I'm very comfortable with a £140K mortgage on a house that is worth even by the banks standards, several multiples of that. Its 4000sq ft house on a 1/2 acre site and A lot of the cost was spent on green credentials such as alternative fuels, because this is a house for life, not to make a quick buck on. I

Our previous house we kept. Simply because we would have had to sell it for peanuts (relatively speaking) to get it sold, and i wasnt prepared to do that, so we have it rented out. I dont intend to sell it any time soon - maybe not ever - but i'm definitely not prepared to give it away.

I'm not angry. I'm very happy. Just bemused by the 'oh i'm simply NOT going to pay that for a house' attitude on here as opposed to the reality of 'oh i cant pay that because of mortgage conditions'. Its THAT that needs resolved.

Not going to argue anymore - Yes, there is a percentage of sellers who need to get real, but the other side of that is, that there a lot of buyers who need to either get real or accept they arent going to own a house any time soon.

x12yhp

pgilc1 wrote: »

I'm not going to respond to each individual point, as its getting a bit out of hand, other than to say that it was the BANKS that got us into this miss by over lending to people who clearly couldnt afford to pay it back, and therefore they should make some attempt to help get us out of it. Lets remember that most of the UK banks have had massive bailouts from taxpayers, so yes, there IS an obligation there for them to help the economy out of the mess.

In the very simple example i gave, there were banks turning us down for a mortgage of £140K on a house (bank) valued at £300K. The house physically cost £335K to build and we already owned the site. We both have strong credit rating and no other debt other than a loan on my wifes car (which is for half what its worth) Now how is there ANY risk there? Correct me if i'm wrong here but the deal basically is 'if we lend you £140K on your house we've undervalued at £300K and you miss a couple of payments, then we get your house.' Great work if you can get it, eh?

The banks were involved and the banks are A key... but we have almost no control over them. Until it is profitable, they wont be changing. With volumes at record lows and no sign of change, the banks have absolutely no reason to change either. They do not feel the moral obligation you place upon them.

pgilc1 wrote: »

Nicely adding to gather worst case scenarios onto worse case scenarios onto worse case scenarios to have the worst conclusion to make your point.

It could all be done very easily in a controlled manner. Maybe gradually introducing an 85% LTV mortgage, etc, etc.

And its nonsense about 'not being able to afford a mortgage'. a £400 a month payment is easily budgeted compared to currently having to gather up £40K of a deposit by most people and if it cant, then the banks make you take out an insurance policy to make sure they get their money if you fail to make payments.

A 25% drop in the value of houses wont matter a fiddlers if people cant get the deposits saved up.

I really cant see how you think banks arent key to all of this - banks were key to causing this, we as taxpayers had to bail them out to the tune of billions when it all went wrong, and now they need to release their grip on the mortgage market a little to promote growth.

Again you are assuming that the banks want us to get what we want. They DO NOT CARE! They just want money. The money is not there at the moment. If your approach was profitable, they would be doing it.

You are persisting in suggesting that we should let people have access to hundreds of thousands of pounds without any real evidence that they will be able to pay it back.... the lack of a deposit actually suggests a person is unable to save or is making a quick decision... neither of which would make me confident in lending money to them!

pgilc1 wrote: »

From talking to many estate agents and many contract builders. Oh and from practical experience.

Some Estate Agent friends of mine are near at wits end because on the rare house that they can get the buyer and seller to agree a price on, the bank valuers come along and say, no its worth £40,000 less than that. Why? because we say so. They then only offer a 75% LTV mortgage, leaving the buyer to find a massive deposit and the extra £40K.

And, again, personal experience. I have receipts for £335K (which would be +VAT if we werent able to claim it all back as a new build) for this house and the site was maybe worth £150K. Bank valuation, oh its worth £300K. !!!!!!?

Hold on. So estate agents... would they have a vested interest? Contract builders... come to think of it, they have a vested interest too. Your own anecdote... well heck, it seems to me that you are rather biased as well! Hardly the sort of evidence someone accept without a barrel or two of salt!

As for your 335k property... !!!!!!!? The cost is irrelevant. You could spend a million on it but that means nothing when nobody wants to buy it! The value of something is not how much YOU paid for it! The reason we are in the mess is because so many people took the same view as you are!

pgilc1 wrote: »

Not going to argue anymore - Yes, there is a percentage of sellers who need to get real, but the other side of that is, that there a lot of buyers who need to either get real or accept they arent going to own a house any time soon.

If all the buyers cant afford then none of the sellers will ever get to move! They wont be happy at that!

motorguy

vlad_the_impaler wrote: »

comments

Bemusing how you see the banks as 'calling time on this madness' - they're responsible for it. What heros they are! They caused it, WE as tax payers bailed them out when it all crashed and burned.