House prices need to drop 40% to be affordable discussion

MrRee_2

I can tell you something right now.

BTL Landlords will buy up all available property LONG before prices drop 40% - of that you can be guaranteed ...... hell, I'll buy everything I see come to the market if it means returning me a yield of 25% on my money!

A 7% rental Yield is the base price of a property in my opinion.

If interest rates increase then all bets are off as the yields would then need to climb.

Interest Rates are the absolute driving force ..... cheap loans, pathetic savings rates = a floor under property prices.

It is as it is and it is as it always has been.

Thrugelmir

HAMISH_MCTAVISH wrote: »

Not a lot of that in the mainland UK though. Negative equity currently only affects 800K people, and for most of them it's a relatively small amount.

With many stuck on interest only mortgages. So akin to standing on a desert island while the sharks circle.

michaels

I plan on living in my house for the next 20 years (and probably longer) and am on a life tracker so no need to re-mortgage so the value of my house does not matter to me.

HAMISH_MCTAVISH

Thrugelmir wrote: »

With many stuck on interest only mortgages. So akin to standing on a desert island while the sharks circle.

Fascinating.

Now back on topic, can you tell us how many of the mortgages in NE are interest only, and how many of those I/O mortgages in NE are in NE to the tune of more than say 5% or so?

Also how many of them have payment vehicles set up or some other form of payment arranged for later in the mortgage?

And finally, how many just plan to hold it on I/O for 25 years and then sell up and pay off the original (and by this point tiny thanks to inflation) mortgage?

MrRee_2

At the end of the day, an Interest Only Mortgage over - say - 30 years is still a much better bet than paying more, every month of that 30 years, in rent.

Going4TheDream

MrRee wrote: »

At the end of the day, an Interest Only Mortgage over - say - 30 years is still a much better bet than paying more, every month of that 30 years, in rent.

Only if a vehicle is in place at the end to cover the loan.... or then what?

Mallotum_X

Going4TheDream wrote: »

Only if a vehicle is in place at the end to cover the loan.... or then what?

Dont be silly, house prices only every go up, so you sell it and use the proceeds to pay off the mortgage and then buy a couple more houses with the spare cash of course!

IveSeenTheLight

Idiophreak wrote: »

Since when do people have to substantiate their thoughts?

You seem to be mistaking fact and opinion.

If I have an opinion on something, usually it's as a result of weighing up the information I am aware of.

This information is crucial and of course if people can provide contradicting information it all helps to weigh up the balance.

On average, aren't properties circa 13% below peak, so theoretically only those that bought at absolute peak AND bought with a 100% mortgage would be the worst affected.

If they have been on repayment mortgages, the outstanding mortgage would have reduced and of course there are discounts to consider, so quote possibly the amount currently in negative equity might be quite small.

Additionally, those that bought post peak, would arguably have bought at a lower rate and face even less likelyhood of NE.

Hence why I was wondering where the information had come from to consider that many (how do you quantify "many"?) who bought since 2006 would want to hand their keys back.

IveSeenTheLight

Mallotum_X wrote: »

Dont be silly, house prices only every go up, so you sell it and use the proceeds to pay off the mortgage

Indeed, history shows that house prices over a 30 year period, would nominally increase, thus have sufficient funds to pay off the outstanding debt and have some left over.

Mallotum_X wrote: »

and then buy a couple more houses with the spare cash of course!

Hardly likely, having sold one property and cleared the mortgage, your unlikely to be able to buy " a couple more" with the rest.

Still, having "mortgage interest" relatively fixed over the 30 year period is likely to be better financially than renting over the same period.

IveSeenTheLight

undetterred wrote: »

A lot of its mind games,i'm sure many would baulk at owing a fortune on asset worth not alot.

e.g asset worth 100k,mortgage owing 160k

Assuming the mortgage was bought with 100% mortgage, that would represent a 37.5% drop.
There are not many properties that have fallen into that category.

Of course the market has partially recovered and given time will fully recover.

In the meantime we see that mortgage rates are reduces, meaning that whilst the value of the property may have reduced in the short term, so has the cost of servicing the mortgage.