Number of first-time buyers plummets to lowest on record

Thrugelmir

drc wrote: »

What I don't understand is why they don't raise interest rates slightly

Market forces are edging mortgage interest rates upwards. The BOE will have no need to intervene in the short term. As the correction will in part be a natural process.

CLAPTON

drc wrote: »

What I don't understand is why they don't raise interest rates slightly so that there is not one almighty crash but the market deflates slowly and those so over leveraged that they cannot get by on a 1% interest rate would have to sell up? Surely there can't be that many that are that over leveraged and it would mean those FTB's and savers would have a bit more money in savings interest.

I can't see how the economy can continue to function with such high property prices for rent and to buy as it means salaries have to be so much higher just so that people can pay for a roof over the heads. It also means that for a lot of people there is no incentive to look for work as they would be worse off. Surely this makes the UK uncompetitive? If the government of the day (nuLabour) could inflate the bubble over 10 years, then surely the government of the day (Tories) can deflate it?

the low BoE interest rate is also intended to help industry and commerce and also to keep the pound at a low rate to encourage exports

brit1234

CLAPTON wrote: »

the low BoE interest rate is also intended to help industry and commerce and also to keep the pound at a low rate to encourage exports

It's also meant to give home owners and renters more disposable income to spend in the shops on top. Who would of thought that landlords would take that extra money for themselves.

Anyway low interest rates dont help when everyone else is doing the same in currency wars. That and all the qe is simply increasing inflation.

I do think the return of stamp duty will hit ftbs hard as well

Rochdale_Pioneers

moneyinmypocket wrote: »

If someone bought a house between 2005-2007 and then put it up for sale but could only get 75% of what they paid then they wont sell purley because they wont want to take a hit on it etc - they will only sell/get repo if they couldnt AFFORD to live there any longer. Lots of houses are on market, little is selling but people wont take a hit because its cheaper to stay put.

Sounds like me. Bought in May 2006, took new job in Sheffield last spring and put the house on the market. No interest at the price the estate agent valued us at, nor at the two cuts we applied to the price. So we decided to pull it off the market and see what happens to others. There's a house virtually the same as ours now up for 75% of the price we stopped at - and they're getting very little interest.

So why sell? Even if you think you're desperate, taking a hair cut that bad will probably change your mind. My view is that in the medium term demand still outstrips supply - especially for decent family housing in nice areas. So as and when lending restarts the price will go up again with demand. At some point. And either way the value of my mortgage is dropping every month, so the walk away point on any deal is dropping as well. So sit tight it is.

HAMISH_MCTAVISH

brit1234 wrote: »

And all because house prices are too high.

Absolute Rubbish.

The article explains clearly it's due to mortgage rationing....

"Hefty deposits mean first-time buyers are struggling to get on the housing ladder despite prices being at their most affordable in eight years, according to Halifax’s annual First-Time Buyer Review.

“Housing affordability for those looking to get on to the property ladder for the first time has improved significantly over recent years, largely as a consequence of the decline in house prices since 2007,” said Martin Ellis, the lender’s housing economist.

The average deposit required in 2011 was £27,032, Halifax said. While this is almost £5,000 less than that demanded in 2010, it is still far above what people had to put down just four years ago. Then, deposits averaged just 10pc of the purchase price, now they are 20pc."

Mortgage rationing and the associated falling prices have led to fewer people being able to buy a house, not more people. In the meantime of course housebuilding has fallen to record low levels while population continues to increase. Rents have risen to record highs as a consequence, and we are sowing the seeds of the next boom.

HAMISH_MCTAVISH

brit1234 wrote: »

It's also meant to give home owners and renters more disposable income to spend in the shops on top. Who would of thought that landlords would take that extra money for themselves

Economically illiterate nonsense there Brit, I'm afraid.

The cost of rent was always going to rise when the housing shortage is so severe..... and mortgage rationing prevents people buying, and builders building.

brit1234

Rochdale when do you think lending will start up again? Do you mean a return to irresponsible lending so you can sell at an overpriced value. Because lending at present is pretty much at a traditional level.

We had a decade of a housing bubble caused by too low interest rates, irresponsible lending an mass fraud. To sell you house at 2006 level you will need a return to that or simply have to wait years for wages to catch up.

As for that supply and demand thing I think you will find plenty of supply and little demand hence prices falling.

Mortgage rates are likely to rise over the next year with or without an interest rate rise. Together with continuing price falls it may be costly for those who bought in 2006 to remortgage.

brit1234

Hamish so you are saying high deposits are the problem? Because if prices were lower back to traditional levels the size of deposit wouldn't be an issue.

Can you explain the reason why prices are falling, or do you still refuse to believe it happening?

HAMISH_MCTAVISH

brit1234 wrote: »

Hamish so you are saying high deposits are the problem? Because if prices were lower back to traditional levels the size of deposit wouldn't be an issue.

Brit there is no such thing as "traditional levels" for house prices.

House prices are a function of supply and demand.

Can you explain the reason why prices are falling, or do you still refuse to believe it happening?

I've never refused to believe prices are falling. In fact, I've very consistently been right in predicting both the direction and size of falls or rises in price over the last 4 years.

As it stands today though, prices are rising on some indices, and falling on others.

Which points to stagnation overall.

Rochdale_Pioneers

brit1234 wrote: »

Rochdale when do you think lending will start up again? Do you mean a return to irresponsible lending so you can sell at an overpriced value. Because lending at present is pretty much at a traditional level.

We had a decade of a housing bubble caused by too low interest rates, irresponsible lending an mass fraud. To sell you house at 2006 level you will need a return to that or simply have to wait years for wages to catch up.

As for that supply and demand thing I think you will find plenty of supply and little demand hence prices falling

You make some interesting points which highlight which perspective you're looking at things from.

First of al what is "overpriced". A house is an asset - its worth whatever someone is willing to pay for it at any given time. Something overpriced will not sell. Something priced correctly to match the offer price of a buyer is clearly priced correctly regardless of your views of it. I passed a bright Orange Overfinch Range Rover on the M1 today. An abomination of a car selling at north of £100k, but its not my money so what does my opinion matter?

Your comment about lending being at traditional levels flies in the face of the stack of fact based evidence that mortgage lending is on its knees throttled to almost nothing by the banks. If it was "traditional" it wouldn't be newsworthy or of concern to the government.

You refer to a decade of fraud and low interest rates. When was this? Interest rates were 4-6% through the noughties - low enough to generate the mass fraud you speak of? Perhaps not.

As for supply and demand, you're mistaking the non-actions of a throttled market with genuine figures. Compare and contrast the almost complete absence of house building at the moment with the increasing population and record numbers of households. Then look at the levels of demand before the crash and ask does more people needing a home and less homes in supply mean a long term glut of supply or a long term push of demand?