A big house price correction appears to have started.

Flight2quality

macaque wrote: »

Like many people, I would have preferred a correction years ago but thats not the way things go. We have seen a lot of false dawns over the years but it is difficult to see how the current slide can be stopped.

The problem with a slide today is that no one knows how far it will go or what damage it will do in the process. Prices were allowed to go too far into lala land.


http://www.whatmortgage.co.uk/news/property-price-reductions-grow/

Yes and this is before the props are taken out that are still holding up high prices.

When housing benefit is cut as it will have to be, rents will fall and bring with them house prices.

Conrad

paulmapp8306 wrote: »

2. Lenders. unless they start offering 5x and 6x wages again, then the average joe wont be able to borrow the amounts required

Some are still doing 5 x income you know. They don't use a simple multiplier but instead an affordability calculator and it is not uncommon for this to equate to 5 x income.

Furthermore, a couple with a good history and existing mortgage are routinely getting c5 x joint. Halifax just offered a couple I'm dealing with, £600k. He's on £60k as is she. They have 10% deposit and are selling current home. They have no other debt to speak of, but do have a child.

In case you wonder, they don't have much deposit as she ploughed a ton into a failed business.

paulmapp8306

Conrad wrote: »

Some are still doing 5 x income you know. They don't use a simple multiplier but instead an affordability calculator and it is not uncommon for this to equate to 5 x income.

Furthermore, a couple with a good history and existing mortgage are routinely getting c5 x joint. Halifax just offered a couple I'm dealing with, £600k. He's on £60k as is she. They have 10% deposit and are selling current home. They have no other debt to speak of, but do have a child.

In case you wonder, they don't have much deposit as she ploughed a ton into a failed business.

Nice to have that income

I know there are some 5x mortgages about. Not so much for FTBs mind, which need to come in at the bottom really.

Even so - 5x joint incomes for "average wage earners" are still not really enough for "average house prices". Its a wider problem i guess, and explains why in some areas, and on some property types are going up in price, while other types in other areas are not.

paulmapp8306

nollag2006 wrote: »

Really - where's that ?

Tripoli?

Nottingham.

Looked in 2007, and 2008. My sister bought in 2009 just as the crash was happening (people) when they were cheaper than both 07 and 08. Im looking again and now similar houses and none repo houses are less than my sister paid then.

Not by high amounts ill add.

2007 prices around £170k, 2008 prices around £175/£180k. sister bought for £147 in late 2009. similar properties now between £120 and £130k.

i cant talk for other areas, or other property types, or in other "price brackets". But I know what im looking for - and there still falling.

paulmapp8306

wotsthat wrote: »

My comment was made in response to a poster who appeared to be implying that because mortgages were difficult to come by that prices would somehow reduce to levels at which people could get mortgages.

Looking at your example a BTL can buy this place for 25% down and get a sub 4% fixed rate mortgage. On a repayment basis that's around £600/ month for 25 years. Not sure what the rental returns would be on this but I'd bet that even though the average single person can't get a mortgage there will be someone who can and can then rent it to the average single person. i.e. there's potentially still a market without prices having to come down.

That house is probably in reach of a couple on average wages too.

Single people on average wages have probably always struggled to buy the average house - I don't think this is anything new or that prices have ever reduced to accommodate them.

Rental for properties Im looking at (Im looking both to buy or to rent post army) that are going for those prices, are between £550 and £650 pcm

I agree about prices as well. The only problem with BTL, is a lot of the lets are to people being subsidised by HB. Thats going to go down very soon, so Im not sure how that will affect rental prices. Sure everyone has to live somewhere, but if you cant afford private rents on your own wages, and the government is giving less help - them Im betting people will be looking for cheaper housing, in whatever area they can get it.

ukcarper

paulmapp8306 wrote: »

Depends how much of a mortgage.


The current average wage (worked out from http://career-advice.monster.co.uk/salary-benefits/pay-salary-advice/uk-average-salary-graphs/article.aspx) is £27583.

Current mortgages are maxing out at around 3.5 times you wage, so £96540. Add even 20% for a deposit, and your talking £115k. That is where the average house in the UK should be priced, in order for the average wage earner to be able to afford it - and thats with a 20% deposit as Ive said.

.

I don't think there have been many times when that was the case.

Jimmy_31

wotsthat wrote: »

If you can't get a mortgage you can't buy a house whatever the price.

Are you sure ? because if thats true im going to need a new plan.

Flight2quality

Its a ticking timebomb when interest rates go back up to normal levels repossession will go to the moon.

We will not see the bottom of the house price crash until this has happened, going to be a long drawn out crash this time.

paulmapp8306

So not really a crash

I do agree to a point. Once interest rates go up (and they must soon given the inflation levels) not only will current mortgage payers be even more squeezed - inevitably leading to some reposessions - but it will also mean more people, particularly FTBs, wont be able to get a mortgage to start with.

I applaud the government for trying to help FTBs - underwriting 5% deposit mortgages "should" mean the banks lend more of those mortgages - however, lowering house prices would be of better help for two reasons.

Firstly, the 5% these peopl have will represent a higher % deposit, so the banks would be more likely to lend anyway.

Secondly - and more importantly, If prices are at a level where it is a push to afford to repayments of that 95% their borrowing on - fewer will apply and fewer will get accepted.

While exadurated for example, what is better (not for house prices, or current owners - but purly to gert FTBs on the ladder so stimulating the market).

1. £140k home, with a £7k deposit (5%) - underwritten by the government at £940 pm payments (based at 7% interest for when rates rise - something people do take into account).

2. £70 home with £7k deposit (10%) with £445pm payments.

Surly the second will get far more people on the ladder? As i say - really over exadurated to make the point - homes are not going to fall in value by 50% - but you get the idea.

ukcarper

I’m not sure what point you are trying to make obviously cheaper houses are easier to afford but the thing keeping prices down is the lack of high LTV mortgages and if they become more readily available prices will not fall. In an ideal world houses prices rises would rise in line with wages but that is not what happens.