House prices....

tight_arze

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.

These mortgages that offered 95 or 100% LTV worked back then because house prices were lower. Lower house prices = lower affordable repayments and lower loans from the banks.

Offering higher LTV mortgages at the current house price level would not solve anything. It will just temporarily prop up the current high prices, the banks will have to lend more which many will unlikely be able to pay back therefore landing us back in the same situation we are in now. The underlying problem in all of this is the price of houses.

pgilc1 wrote: »

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.

With the current high prices there wouldn't be many first time buyers paying £400 a month for a mortgage.

pgilc1 wrote: »

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

Again yes it will, lower house price = less money to save for a deposit. Anyone struggling to save a desposit will find it much easier with 25% knocked off the price.

motorguy

tight_arze wrote: »

Again yes it will, lower house price = less money to save for a deposit.

A 25% drop in house prices would represent a drop in deposit of £8K from £40K to £32K as per my example earlier.

Still prohibitive is it not?

motorguy

tight_arze wrote: »

With the current high prices there wouldn't be many first time buyers paying £400 a month for a mortgage.

A £100,000 interest only mortgage at 5% will cost £416 a month. Assuming an £8K deposit and a meagre £2,000 discount, there are currently 11,053 properties under £110K on propertynews.com

x12yhp

pgilc1 wrote: »

A £100,000 interest only mortgage at 5% will cost £416 a month. Assuming an £8K deposit and a meagre £2,000 discount, there are currently 11,053 properties under £110K on propertynews.com

Oh come on... you cannot base things on interest only. The popularity of IO mortgages are one of the factors that has made the downturn so much of a problem for the housing market. IO mortgage means that you are assuming HPI. The last few years are absolute and certain proof that this assumption is flawed!

There are 1100 properties across Belfast at £100k or less. With a repayment mortgage and a sensible maximum of 1/3 or take-home pay on a mortgage, that means someone needs to be earning about £25k which is above NI average. Now, the IRs WILL have to rise eventually. If they go up a couple or three percent the person moves from paying £500-550 to paying £650-700... another couple of thousand pounds a year. But their pay wont have risen. They will now be paying 40-45% of their takehome pay to service a mortgage on a low end pile of bricks. At that level, there is the risk that they cannot pay it at all. It is all well and good here and now but this is someone's life. They should be trying to cover eventualities as best as is reasonable. If the central bank rate moving to 4 or 5% would be catastrophic, then the purchase should ring alarm bells. It might not happen but it very easily could. If it did, it would have the potential of ruining someone's life. You are suggesting someone gambles their life for a cheap, low end property.

vlad_the_impaler

pgilc1 wrote: »

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.

They just fulfilled a market need, no-one forced us to borrow what was on offer. Being grown-ups that make our own minds up, WE are responsible for this mess:

- the liars who bought their own 'corrected' wage slips to blag mortgage companies.
- Idiots that thought 125% IO mortgages were a good idea to commit to.
- Greedy get rich quick sheep thinking they could get something for nothing (at the expense of all the rest of us and society) though BTL and BTS.
- the 'lets build a rabbit hutch house in my garden' brigade cashing in.
- the endless property ramping programmes 'look how much x 'made' on this property because estate agents say it is 'worth' this now!
- every comment I used to hear from the televison presenters; "well you could just 'stretch to that surely!"
- the middle class professionals I used to argue with at parties who were (by 2007) all going to 'yah, work a few more years and flip properties to retire on'.
- the endless newpaper articles that never fail to get in comments about property values no matter how tasteless; try the Mail's coverage of that poor girl in Bristol:

Her body was found on Longwood Lane, which lies between two golf clubs and a quarry. The site is around three miles from the £200,000 rented flat they shared.


The party was held in a two-bedroom flat worth £300,000 in one of the Victorian houses opposite the home of Miss Yeates

Is nothing free our our obsession with property? We demand it, it would seem.

The banks are not responsible, we are all collectively responsible for the mess we are in through boundless personal greed, avarice, fraud and total disreagard for our community.

Irish-John_2

x12yhp wrote: »

Oh come on... you cannot base things on interest only. The popularity of IO mortgages are one of the factors that has made the downturn so much of a problem for the housing market. IO mortgage means that you are assuming HPI. The last few years are absolute and certain proof that this assumption is flawed!

There are 1100 properties across Belfast at £100k or less. With a repayment mortgage and a sensible maximum of 1/3 or take-home pay on a mortgage, that means someone needs to be earning about £25k which is above NI average. Now, the IRs WILL have to rise eventually. If they go up a couple or three percent the person moves from paying £500-550 to paying £650-700... another couple of thousand pounds a year. But their pay wont have risen. They will now be paying 40-45% of their takehome pay to service a mortgage on a low end pile of bricks. At that level, there is the risk that they cannot pay it at all. It is all well and good here and now but this is someone's life. They should be trying to cover eventualities as best as is reasonable. If the central bank rate moving to 4 or 5% would be catastrophic, then the purchase should ring alarm bells. It might not happen but it very easily could. If it did, it would have the potential of ruining someone's life. You are suggesting someone gambles their life for a cheap, low end property.

Isn't that example all the more reason for people to rent ?

tara747

Fast moving this thread, isn't it

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?

Can I go for Proposition 3? Prices drop to a *sensible* level, thereby FTBs require a smaller deposit (i.e. £15K is 17% of a £90K house but less than 10% of a £160K house. That seems to be what's happening anyway, and it's all to the good imho. And they have further to go.

pgilc1 wrote: »

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.

£400 a month eh? That would be around a £70K mortgage (25 years @ 5%). Sounds good to me.

£400 wouldn't pay the mortgage on that £160K house even with a 20% deposit.

p.s. the bank had their reasons for refusing to lend you £140K against your house. They want to ensure that people are able to pay so are (correctly) pricing risk into their lending. And not a moment too soon! (this is not to say that you can't repay this amount, just that their new risk models would not allow it)

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 have to agree. A house is not worth site price + build price. It's worth what a buyer is willing AND ABLE to pay at the time the seller wishes to sell. Full stop.

x12yhp

Irish-John wrote: »

Isn't that example all the more reason for people to rent ?

Yes, it is! But people seem so blind to reality and their minds so stuck on 'rent is lost money' that they were (and clearly, continue to be) willing to gamble financial armageddon instead of accepting a few more years of rent and saving.

I have heard arguments that this approach is useless because you cannot save. But if you cannot save whilst renting, then you almost certainly cannot afford a mortgage and all the incidentals which come with it.

So I am with you all the way!

tara747

vlad_the_impaler 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.

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.

I agree with just about everything in the above post, particularly the bit about low house prices and high % deposits in the past. My own parents had a similar experience, as did everyone at that time.

pgilc1 wrote: »

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.

But you *do* seem to care, that's the impression I get anyway.

Just out of interest, I would love to know:

How much did you pay for your first house and in what year?
How much did you pay for the house you were trying to sell and how high was the highest offer you received?

You can tell me to get lost of course

Also, you talk about the 'oh i'm simply NOT going to pay that for a house' attitude... but you say you're not prepared to 'give away' your house for peanuts'. Don't you think they're sort of similar attitudes?

I am genuinely interested in your views and this is a very interesting debate, so I hope you don't take offence at my questions.

tara747

pgilc1 wrote: »

A 25% drop in house prices would represent a drop in deposit of £8K from £40K to £32K as per my example earlier.

Still prohibitive is it not?

Not! Anyone who wants to borrow £130K should be able to save up £24K in 2-3 years. People used to have to save for deposits before instant gratification became the expectation. Why not again??? Saving is a good discipline for paying a mortgage.

pgilc1 wrote: »

A £100,000 interest only mortgage at 5% will cost £416 a month. Assuming an £8K deposit and a meagre £2,000 discount, there are currently 11,053 properties under £110K on propertynews.com

IO????

Dear God! :eek:

vlad_the_impaler wrote: »

They just fulfilled a market need, no-one forced us to borrow what was on offer. Being grown-ups that make our own minds up, WE are responsible for this mess:

- the liars who bought their own 'corrected' wage slips to blag mortgage companies.
- Idiots that thought 125% IO mortgages were a good idea to commit to.
- Greedy get rich quick sheep thinking they could get something for nothing (at the expense of all the rest of us and society) though BTL and BTS.
- the 'lets build a rabbit hutch house in my garden' brigade cashing in.
- the endless property ramping programmes 'look how much x 'made' on this property because estate agents say it is 'worth' this now!
- every comment I used to hear from the televison presenters; "well you could just 'stretch to that surely!"
- the middle class professionals I used to argue with at parties who were (by 2007) all going to 'yah, work a few more years and flip properties to retire on'.
- the endless newpaper articles that never fail to get in comments about property values no matter how tasteless; try the Mail's coverage of that poor girl in Bristol:

Her body was found on Longwood Lane, which lies between two golf clubs and a quarry. The site is around three miles from the £200,000 rented flat they shared.


The party was held in a two-bedroom flat worth £300,000 in one of the Victorian houses opposite the home of Miss Yeates

Is nothing free our our obsession with property? We demand it, it would seem.

The banks are not responsible, we are all collectively responsible for the mess we are in through boundless personal greed, avarice, fraud and total disreagard for our community.

Agree, agree, agree!