Needing to sell versus Wanting to sell

Pimperne1

In my view that's what it boils down to. If more people "needed" to sell then the market would suffer a fairly significant correction, until that time then prices will probably continue to stagnate (with the odd uptick and downtick here and there). I suspect that there are around 25k to 30k distressed sellers each month so at the moment there are only 20k to 25k enthused buyers out there.

The trigger for more people having to sell has been identified on here as either the forthcoming redundancies or interest rates moving significantly higher.

I don't really see either of these as short term prospects in that interest rates would need to go to about nine times their current rate to be around the average for the past ten years - there must be quite a cushion for most people in there who are either on low trackers or on the more recent SVRs which are lower than historical rates. The argument that other commodities have gone up so considerably so there is a squeeze on mortgage payments doesn't wash either - the Nationwide affordability data on the other thread shows that the Earnings to Mortgage ratio is quite low so there must be some scope for this going up without too much angst.

As for the massive unemployment headed out way, certainly there is some to come but those being made redundant will have some capital with which to pay their mortgage for the foreseeable future and those that don't will be looked after by the Government for a while.

The crash keeps getting kicked into the long grass and whilst this will no doubt affect the "real" price of houses most of are interested in the nominal price as only our wage increase contributes to our ability to buy a house and this will take a long time before it bites into the average price of circa £165k

Sibley

There will never be a crash. Thats obvious now.

geneer

Pimps "sellers strike".
(C) 2008.

Pimperne1

geneer wrote: »

Pimps "buyers strike".
(C) 2008.

Oh dear, nearly right (it was a Seller's Strike).;)

geneer

Pimperne1 wrote: »

Oh dear, nearly right (it was a Seller's Strike).;)

Quite right. I got mixed up.
It was the buyers strike that actually happened in 2008.

Thrugelmir

Pimperne1 wrote: »

I don't really see either of these as short term prospects in that interest rates would need to go to about nine times their current rate to be around the average for the past ten years - there must be quite a cushion for most people in there who are either on low trackers or on the more recent SVRs which are lower than historical rates. The argument that other commodities have gone up so considerably so there is a squeeze on mortgage payments doesn't wash either - the Nationwide affordability data on the other thread shows that the Earnings to Mortgage ratio is quite low so there must be some scope for this going up without too much angst.

Depends when you took your mortgage out. Average mortgages hide those that took them out in 1991 and owe £10k, and those in 2007 with £500k.

shortchanged_2

Well what about this for an example.

Someone with a £300,000 mortgage @ 3% over 25 years IO pays £750 a month. Each percentage rise on that mortgage adds £250 per month.

Therefore only a 2% rise would add £500 a month to someones monthly payments. Also bearing in mind if someone is already on an IO mortgage the only other way they can cut back mortgage expenditure is to reduce overpayments (if they were paying any) or reduce the amount they pay to some form of repayment vehicle. Either way is not a really good scenario.

Pimperne1

Thrugelmir wrote: »

Depends when you took your mortgage out. Average mortgages hide those that took them out in 1991 and owe £10k, and those in 2007 with £500k.

So they took them out in 2007 when the average SVR was around 7.5%, they should be in clover now unless they tied into a high fixed rate (and if they went for a tracker then they will be building up a massive credit now that the BoE rate is less than a tenth of what it was then).

ukcarper

shortchanged wrote: »

Well what about this for an example.

Someone with a £300,000 mortgage @ 3% over 25 years IO pays £750 a month. Each percentage rise on that mortgage adds £250 per month.

Therefore only a 2% rise would add £500 a month to someones monthly payments. Also bearing in mind if someone is already on an IO mortgage the only other way they can cut back mortgage expenditure is to reduce overpayments (if they were paying any) or reduce the amount they pay to some form of repayment vehicle. Either way is not a really good scenario.

If he got a 5x mortgage he would be earning £60k take home £3450 a month. So if rates double he will still have almost £2k left which is more than someone earning £30k would have before paying for accommodation.

Pimperne1

shortchanged wrote: »

Well what about this for an example.

Someone with a £300,000 mortgage @ 3% over 25 years IO pays £750 a month. Each percentage rise on that mortgage adds £250 per month.

Therefore only a 2% rise would add £500 a month to someones monthly payments. Also bearing in mind if someone is already on an IO mortgage the only other way they can cut back mortgage expenditure is to reduce overpayments (if they were paying any) or reduce the amount they pay to some form of repayment vehicle. Either way is not a really good scenario.

Well if they took out their loans recently then they have already passed the very stringent tests set by the banks, if they took them out a while ago then they are most likely benefiting from low rates at the moment and if they are not overpaying or saving then they are !!!!less and deserve all they get (but if they thought enough to go into buying a house then they are unlikely to be !!!!less in my opinion).

Thrugelmir

Pimperne1 wrote: »

So they took them out in 2007 when the average SVR was around 7.5%, they should be in clover now unless they tied into a high fixed rate (and if they went for a tracker then they will be building up a massive credit now that the BoE rate is less than a tenth of what it was then).

Any gains from the recent run of low rates. Could easily be wiped out by a fall in house prices. While disposable income for many continues to be squeezed and is falling. Those in the public sector looking at 0% pay rises are in for a tough time over the next 2 years. My partner is also losing a weighting allowance of around £45 pm and being asked to pay an additional £30pm for staff parking. There is a very real tightening coming down the tracks.