House Price Crash 3

Guy_Montag

dougk wrote:

Thats still means the most likely case is them not falling eg.. 33% chance of them falling and 66% chance they won't.

Torygraph puts it at 50% taking inflation into account.

westernpromise

olly300 wrote:

Due to endownment and pension misselling,

Personally I don't think there really was any misselling of either of these. The idea behind an endowment was that stock market returns always exceed cash returns over any 25 years you want to look at, so therefore it makes more sense (and still does) to put capital into an investment vehicle rather than just paying off the loan. The logical next step is to put less into an endowment because the higher returns will produce the same outcome.

This remained true when interest rates came down, because what people should have been doing was taking the savings from lower interest payments and putting those into the endowment too. Instead, people just spent it, apparently assuming their house had spontaneously got cheaper, and then complained. As a result, they got compensation paid to them out of the exact same pot the financial institutions use to pay endowment bonuses to people who've stayed with it, thus reducing thise people's bonuses and ensuring even more people lose out.

I would like to sue my financial adviser in 1988 for not putting me into an endowment. If he had, by about 12 years later I would have had the choice of keeping the endowment if it was in the money, or complaining about it and being retrospectively given a repayment mortgage. By putting me straight into the latter, he ensured that I missed out on an unearned windfall.

Pensions likewise were always an excellent investment, right up to the point where ACT was abolished and knackered the returns. Government leaflets said exactly that, and the Ombusdman recently damned the way pensions were promoted by the Government itself - which, unprecedently, the Government dismissed. So I don't see how that's the banks' fault.

I think what we will find, starting in about 10 years' time, is people claiming they were mis-sold their remortgage - i.e. they remortgaged every 2 years to get a better deal but added £10,000 on each time to go on holiday, fit a new kitchen, buy a new car, pay off their credit card debts, etc.

25 years on, they will find that despite 25 years of mortgage repayments their outstanding balance is now higher than it was to begin with, and of course the cars have all long since been scrapped and the credit cards are still as maxed out as ever. This of course will be anybody's fault but their own and everyone else will have to pay to bail them out, just like with endowments.

Alan_M_2

westernpromise wrote:

Personally I don't think there really was any misselling of either of these. The idea behind an endowment was that stock market returns always exceed cash returns over any 25 years you want to look at, so therefore it makes more sense (and still does) to put capital into an investment vehicle rather than just paying off the loan. The logical next step is to put less into an endowment because the higher returns will produce the same outcome.

This remained true when interest rates came down, because what people should have been doing was taking the savings from lower interest payments and putting those into the endowment too. Instead, people just spent it, apparently assuming their house had spontaneously got cheaper, and then complained. As a result, they got compensation paid to them out of the exact same pot the financial institutions use to pay endowment bonuses to people who've stayed with it, thus reducing thise people's bonuses and ensuring even more people lose out.

I would like to sue my financial adviser in 1988 for not putting me into an endowment. If he had, by about 12 years later I would have had the choice of keeping the endowment if it was in the money, or complaining about it and being retrospectively given a repayment mortgage. By putting me straight into the latter, he ensured that I missed out on an unearned windfall.

Pensions likewise were always an excellent investment, right up to the point where ACT was abolished and knackered the returns. Government leaflets said exactly that, and the Ombusdman recently damned the way pensions were promoted by the Government itself - which, unprecedently, the Government dismissed. So I don't see how that's the banks' fault.

I think what we will find, starting in about 10 years' time, is people claiming they were mis-sold their remortgage - i.e. they remortgaged every 2 years to get a better deal but added £10,000 on each time to go on holiday, fit a new kitchen, buy a new car, pay off their credit card debts, etc.

25 years on, they will find that despite 25 years of mortgage repayments their outstanding balance is now higher than it was to begin with, and of course the cars have all long since been scrapped and the credit cards are still as maxed out as ever. This of course will be anybody's fault but their own and everyone else will have to pay to bail them out, just like with endowments.

Personally I blame Carol Vorderman, it's all her fault.

dunstonh

May as well as Carol Smilie in there for her AXA cashsaver plans. Must be something to do with the name Carol. (runs now in case any Carols are reading )

Personally I don't think there really was any misselling of either of these.

I think there was some but nowhere near the scale of what has happened. It is mainly the lack of documentation stored and using current regulatory requirements against things which were not required back then which has caused this to happen. Then you have the unscrupulous claims companies who have nothing to lose in making fraudulent complaints and earning out of it.

We have seen on the forums in the past people showing disappointment because they have got no redress or just a tiny amount because their endowment is doing well. Excuse me, you were sold something that is doing what you were told it could do and yet you are complaining about it!!

SERPS/S2P is the thing the claims companies have got their eyes on currently and if they are allowed to get away with seeing that through it will be a disgrace. One option contains govt risk, the other contains investment risk. There is no risk free option. In 1996, the SIB reported that everyone that contracted out was financially better off. in 2001/2002 we had a stockmarket crash which probably put most people slightly worse off. Then we have a recovery period which has probably made it break even for most. In that time we have had a Govt slash the rebates as well as tax pension funds. In todays financial press, you have a Labour minister saying that a single state pension is still a possibility, in which case anyone contracted out would be financially better off.

There are many things in this life which are not clear cut and you will only know what option is best when you get to the end point. If you have picked the wrong one then you shouldn't be able to claim compensation. Especially in things that swing back and forth between being best and not on a frequent basis.

Guy_Montag

westernpromise wrote:

Personally I don't think there really was any misselling of either of these....

Just the rant I always want to make.

People need to take responsiblity for their actions. Throughout life we get good advice & bad advice & we must make judgements on which to follow.

If we continually bail out people too stupid or incompetent to understand what they are letting themselves into, then it discourages people from thinking about what they are doing - they can't lose after all.

It genuinely crossed my mind to get the biggest IO, self-certified mortgage I can find; live it up for a few years & when it goes tits up, find someone to sue, becuase they gave me bad advice.

Chrysalis

I remember itv coveraing this last week and 2 girsl were interviewed one of them was in a probation period for her job and took on a mortgage.

Unless she lied to the bank I think that was very irresponsible lending.

Guy_Montag

Chrysalis wrote:

I remember itv coveraing this last week and 2 girsl were interviewed one of them was in a probation period for her job and took on a mortgage.

Unless she lied to the bank I think that was very irresponsible lending.

& irresponsible borrowing too. She knows she's in a precarious position better than the bank does.

In an environment of HPI, the bank can afford to take this risk. If she stops paying they kick her out, sell the house, take the costs out the equity &, if she's lucky, she gets a few extra quid to supplement her dole money.

In an evironment of static or falling house prices, the bank lends her the money, she loses her job, kick her out, sell the house & keep chasing her for the money to cover expenses & negative equity. Can the bank afford to take the risk then?

westernpromise

dunstonh wrote:

...in 2001/2002 we had a stockmarket crash which probably put most people slightly worse off.

Good post and good points, the only area where I'd disagree is in pointing out that the UK stock market has persistently underperformed every other major index since, well, 1997 actually. This is a consequence of the UK's having become a less attractive place to invest generally, and of course the removal by taxation of £5,000,000,000 pounds a year that pension funds can no longer invest.

I find it astounding that the government should raid pensioners' pockets through pension erosion and the council tax in order to pay GPs £200,000 a year instead of £100,000.

gallygirl

westernpromise wrote:

Good post and good points, the only area where I'd disagree is in pointing out that the UK stock market has persistently underperformed every other major index since, well, 1997 actually. This is a consequence of the UK's having become a less attractive place to invest generally, and of course the removal by taxation of £5,000,000,000 pounds a year that pension funds can no longer invest.

I find it astounding that the government should raid pensioners' pockets through pension erosion and the council tax in order to pay GPs £200,000 a year instead of £100,000.

Nooooo, don't start this line of arguing please!!!!!! It could go on for ever!!!!!

The main reason I prefer houses over stocks & shares is one of security. Houses can drop in value but they don't go bankrupt. If (sorry, when!!!!) house prices fall, assuming I can afford to hold on say 5 years, I've lost nothing. If a company goes bust I can hang on to the share certificate but it will never be worth anything.

abaxas

ali007 wrote:

Nooooo, don't start this line of arguing please!!!!!! It could go on for ever!!!!!

The main reason I prefer houses over stocks & shares is one of security. Houses can drop in value but they don't go bankrupt. If (sorry, when!!!!) house prices fall, assuming I can afford to hold on say 5 years, I've lost nothing. If a company goes bust I can hang on to the share certificate but it will never be worth anything.

A few points..

In the last crash there were properties which had negative value, it cost more to keep the worthless house than it was worth. eg rates, upkeep etc.

Houses also depreciate in value without wear and tear input.

You probably own the houses, however you can still go bankrupt if the 'charge' on the property is greater then the outstanding mortgage and you default on the loan secured on the property.

Also you forget about 'acts of god'. Crime etc. Lots of things can put your property into a state where it cannot be sold or is not covered by insurance. Remember that insurance is NOT a right.

I know I'm nitpicking a little, but people have to understand that property has it's downsides. Sometimes they come up from the depths to bite you.