House Price Crash 5

meanmachine_2

lynzpower wrote:

from the inside housing article.



Are investment clubs things like "inside track" ?

How many are we talking about here? Surely this is an absolute travesty if indeed it is true.

PLus if the property sells 18 months - 2 years later allowing for those rich capital gains ( in hull ) which poor FTB is going to get lumbered with shed loads of snags that they cannot resolve?

This is surely nonsense. 10% of London properties are empty? Surely that must mean 10% of the population are on the streets, since we apparently have a shortage.

Anyone know how many is 10%? 500,000?

Let's hope all of those don't suddenly flood the market at the same time. Unless the poles have their cheque books at the ready.

Hereward

meanmachine wrote:

This is surely nonsense. 10% of London properties are empty? Surely that must mean 10% of the population are on the streets, since we apparently have a shortage.

Anyone know how many is 10%? 500,000?

Let's hope all of those don't suddenly flood the market at the same time. Unless the poles have their cheque books at the ready.

Not quite, the empty properties could all be 5+ bed mansions, where the demand is for 1 bed flats. This would create a property shortage as there is not enough of the right type of property. The surplus property, if it is for sale, helps lower the price at that level, which in turn encourages people to move up the ladder and, hopefully, relieve some of the pressure where the shortage is.

In addition just because there is a property shortage does not mean that people are sleeping rough on the street: it is more than likely that some of them are part of the hidden homeless who are sleeping on friends and families floors or in hotels/bed & breakfasts. The majority of people experiencing this property shortage, probably already own a property, but is does not suit there needs (it’s in the wrong place for work, it’s the wrong size, etc.) and are unable to find a property that is more suited to them because none are on the market, rather than being too expensive.

lypsey

This makes interesting reading

http://www.lloydstsbcorporatemarkets.com/media/pdfs/Economicresearch/Econweekly/fm_ew_18_12_2006.pdf

It says on page 1" This means that monetary policy in 2007 is set to tighten. The question is whether or not interest rates only rise a further 0.25% or whether the MPC leaves it too late and interest rates end up rising towards 5.5% or above."
This is one of the first times I have seen a major bank talk IR's above 5.5%

At these house price levels a 1% rise over the last few months and the months ahead could be catastrophic for the housing market . The re-payments on mortgages will self correct the market. All you people have laughed at me for the last 2 years but can you imagine what 6 or 7% base rates will do to this market

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talksalot81

6 or 7% would cause major stirrings but we are not there. The financial controls in the country are currently such that it is hard to guarantee any rise, letalone something quite as drastic as this. However, with the current growth in just about everything (inflation of course, but the financial system manages not to show it too clearly) - something has to stop it eventually!

I also wonder about the time effect with IR changes. Alot of people are on fixed rate so the IR's dont effect them for several years perhaps. It does effect anyone on the move though. So significant rises could see a stagnation in the short term and then something trule catastrophic in 2 years when all those on fixed rates come off...

movieman

So significant rises could see a stagnation in the short term and then something trule catastrophic in 2 years when all those on fixed rates come off...

That seems to have been what's happened in America, with people taking out 'lie to buy' mortgages around 3-4% that they could barely afford to pay back, and then being hit with a 6+% rate two years later when their initial fixed term came to an end.

Which is, of course, why American mortgages typically tended to be fixed for life, but in recent years more and more people have moved away from that because they got better rates on adjustable mortgages when they took them out. And if they couldn't afford to buy on a 4.5% fixed-rate mortgage, they're toast when their adjustable rate goes much higher.

roswell

I thought a good part of the american market was the ARM mortgages ... 2 % for X years and 4 or 5 % accrued for those first years onto the back of the mortgage ... could be wrong though

movieman

Good point, I'd forgotten about those. I remember now reading something about an American couple seeing their interest rate rise from around 2% to around 10%...

Alan_M_2

We had similar mortgages here in the UK towards the end of the 80's I remember warning my sister about one, but she went ahead and took it out anyway. It was a two year low start, after the two years was up, all the extra interest had been lumped on the loan and she owed more after two years than they had done at day one.

Of course as house prices had dropped, they could remortgage because they owed more than the house was worth. They had to take out a £20K loan to get them away from the mortgage company and onto a sensible lender.

roswell

Likely hood that this be the next goal post move by the banks ?

movieman

Likely hood that this be the next goal post move by the banks ?

Dunno. The banks are starting to hurt from bad loans, so unless they can sell the mortgages on to suckers^H^H^H^H^Hinvestors I doubt they'll be too eager to get into even riskier territory right now.