Repossesions - 'Tsunami' or 'unlikely to rise' which is it?

wymondham

We've got threads on both conflicting views. Which is probably correct?

Really2

Do a poll, we all love one.

But we do prefer some obscure choices also if you could please. (EG Neither, silver is the true store of wealth.)

But on the story I think they both discuss the same thing there would be lots of defaults if the rate was 5% now.
But the indication is we will not be at that rate until the economy is stronger. If that is the case the "tsunami" is more likely to be a small wave (eg around normal averages for a stable/growing economy).

People are right to think defaults would go up one a more normalised based rate, but they need to take the blinkers off about what would get us to a normalised base rate.

Graham_Devon

Personally, my theory is if people are struggling now...which enough people are....then in theory, if costs go up, more struggle.

I know...basic, but hey, 2+2 doesn't have to be complicated.

Really2

Graham_Devon wrote: »

Personally, my theory is if people are struggling now...which enough people are....then in theory, if costs go up, more struggle.

I know...basic, but hey, 2+2 doesn't have to be complicated.

But would you not need to take in to account why they me be struggling (recession more than likely).
Would you not need to factor in the chances of stronger growth and falling unemployment might change those who are struggling now's circumstance.

More people struggle in a recession usually because of the recession not the base rate.

So 2+2 looks like it could be equaling 757 as there seems to be more evidence supporting the fact less people default in general when rates are around 5%, that reason is usually because they can find work easily because the economy is ok.

Graham_Devon

Really2 wrote: »

But would you not need to take in to account why they me be struggling (recession more than likely).
Would you not need to factor in the chances of stronger growth and falling unemployment might change those who are struggling now's circumstance.

More people struggle in a recession usually because of the recession not the base rate.

So 2+2 looks like it could be equaling 757 as there seems to be more evidence supporting the fact less people default in general when rates are around 5%, that reason is usually because they can find work easily because the economy is ok.

If, if, if.

As I say, 2+2 does not have to be complicated.

Based on today, if rates started climbing before year end, more would struggle, which in turn (dependant on stimulus packages) would probably lead to more repo's, or at least, more people in trouble, clinging on to a nice large prop.

On a side note....I don't know anyone who "struggled" during the recession, bar those who actually lost their jobs. However, I personally know people struggling month to month, suggesting the cost of living is going crazy. These people were able to remortgage before....

If theres one thing the recession has done, IMO, it's made people actually look at their spending, and sway away from getting more credit to cover the debt.

Really2

Graham_Devon wrote: »

If, if, if.

I don't know anyone who "struggled" during the recession, bar those who actually lost their jobs.

Most probably the main cause of mortgage payments falling more than one month behind. (but such a major point of peoples troubles)

But it's a pointless debate really as you will never look at the fact that the base rate is unlikely to move much until the economy and employment outlook a lot better.

You will also never admit that the recession is the main cause of people struggling (EG they cant find a better job like in a boom etc, or can't find one at all).

Obviously if you put the base rate up now it would cripple some, but it compleatly ignores the reasons why rates would go up and the effect that would have on those struggling.

PS I did not use if in the whole statement you quoted..:)

Really2

Graham_Devon wrote: »

However, I personally know people struggling month to month, suggesting the cost of living is going crazy. These people were able to remortgage before....

Are you suggesting that mortgage lending is constrained and that most people are not on 0.5% IR.

But I will ask as you state the base rate is rescuing most what has gone up so much if their mortgage has dropped so much? Surely a mortgage has come down more than the cost in living, unless many do not have these cheap base rate deals?

You seem to be indicating people are not actually benefiting from lower rates like you make out.

Graham_Devon

Blimey, you seem to have so many issues with what I said.

Ok....fine, have your issues. But do you honestly think that if costs go up, no more will struggle?!

wymondham

I can't make up my mind on this....

More people seem to be struggling at the moment from what I hear and read, and this is on historic low interest rates, but suppose they have never borrowed so much. On the other hand we hear of scheme after scheme to stop those in trouble losing what they have -some call in government assistance, others call it meddling!

More people than ever live from day to day, often running out of cash just before payday (and some of these I know are on hefty wages indeed!), so anything that rocks the boat is likely to cause knock on effects?

Really2

Graham_Devon wrote: »

Blimey, you seem to have so many issues with what I said.

Ok....fine, have your issues. But do you honestly think that if costs go up, no more will struggle?!

The only issue I have is your reading ability.

Really2 wrote: »

Obviously if you put the base rate up now it would cripple some, but it compleatly ignores the reasons why rates would go up and the effect that would have on those struggling.

ruggedtoast

wymondham wrote: »

We've got threads on both conflicting views. Which is probably correct?

Due to political pressure, and self preservation, banks are unlikely to start a 'tsunami' of repossessions. This happened in the 80s and exacerbated the housing crash by flooding the market with repos, which lowered prices more, increased negative equity, made more people default because they couldnt sell, then the banks repos were worth even less etc.

I think the banking industry has pretty clearly said this wont be happening again.

Rates going up would certainly push people over the brink if they've become unemployed or taken a drop in income since taking out the mortgage however.

Otherwise, most people who purchased at peak were doing so on base rates of around 5%, so most people should in theory be able to weather a few rate rises at least; unless they really have been extraordinarily wasteful of the low rate windfall they've had for the past four years.