Impact of House price crash..?

A_Fool_&_His_Borrowed_Mon

pollyanna24 wrote:

Does it go hand in hand that with a house price crash, interest rates will go to silly levels?

Not that it's silly Interest Rate levels, More silly size loans.

Look at how people were Sh1tting their load at a 0.25% rise last month. A 0.25% rise???. Gordon Bennett!, if that 0.25% rise is having such an effect on people's finances at 5%, what's 7% Plus Interest rates going to do......? (7% is around the long term average)

sm9ai

smallstu16 wrote:

As a prospective first time buyer,

Ive recently spent alot time doing my research on mortages, prices and the general process and beleive im fairly clued up.

However ive been finding it difficult to find a plain speak explanation of the impact of a house price crash.

Can anyone help? Thanks in advance :money:

How will it effect you.

Well you buy your house for say £120k with £10k as a deposit.

So you owe a mortgage of £110k.

If prices lose 10k then for you its annoying but not the end of the world.

If prices half so your place is worth £60k then you are in negative equity. But does that matter if you going to stay in the house for the next 10/20 years when prices will be higher anyway?

Well actually yes it will and it will hit you very hard.

Firstly credit will be very hard to come by. Why would a lender lend you money when your £50k in debt?

But now most importantly when your two year fixed rate preferential deal at 5% finishes and its time to get another deal what will be on offer? Well all those with equity will get 5% again. But why would the bank take such a huge risk when your in negative equity? They won't so you mortgage rate will jump to 7%+

Sisyphus

sm9ai wrote:

How will it effect you.

Well you buy your house for say £120k with £10k as a deposit.

So you owe a mortgage of £110k.

If prices lose 10k then for you its annoying but not the end of the world.

If prices half so your place is worth £60k then you are in negative equity. But does that matter if you going to stay in the house for the next 10/20 years when prices will be higher anyway?

Well actually yes it will and it will hit you very hard.

Firstly credit will be very hard to come by. Why would a lender lend you money when your £50k in debt?

But now most importantly when your two year fixed rate preferential deal at 5% finishes and its time to get another deal what will be on offer? Well all those with equity will get 5% again. But why would the bank take such a huge risk when your in negative equity? They won't so you mortgage rate will jump to 7%+

yeah, but apart from that...