House price crash?

nonsensefactory

Lets look at the maths of buying a small 2 bed terrace with a £120K mortgage on a salary of £25K. If you went for a discount mortgage, it would be around 5.5% with a fee of £1,000. For the first 2 or 3 years you'd be paying £660 pcm which is affordable as you say. Fast forward 2 or 3 years when the mortgage reverts to SVR (and the rate reverts to 7.2%) the mortgage cost has jumped to £864 or around 60% of your take home pay.
BUT that based on a base rate of 5.25% - base rates have to go up to quell inflation (we're going to see 0.25% on Thursday plus at least one more by the end of the year) adding another 0.50% to the 7.2% meaning the mortgage is now £925 pcm. How is £925 pcm affordable on the average salary of £25K ? Take my original point of 3.5 x income, the biggest mortage you could have got would've been £87.5K meaning a payment of £670 pcm (high, but affordable)

Rick62

Thats quaint, minimum £250k for a small 2 bed terrace round here (anywhere in SE).

stashmycash

Melissa177 wrote: »

I'm trying to understand why you think people who have second homes should be penalised (I don't have a second home, I struggled enough to get the first one!), and also why banks should be restricted to how much they lend potential homeowners.

I don't see why banks should be controlled (by the government, or anyone else for that matter), how much they can lend to people.

Happy to debate the points, "Ad"!

The reason I think people having a second home should be penalised is that where I live in the south west, house prices have been pushed up because of all the people with holiday homes here. Thus preventing local people from getting a property in line with the wages here.

Mr_helpful

stashmycash wrote: »

The reason I think people having a second home should be penalised is that where I live in the south west, house prices have been pushed up because of all the people with holiday homes here. Thus preventing local people from getting a property in line with the wages here.

Perhaps you should move to North Korea. next you will be saying we cant have 2 cars or even 2 kids.

kenshaz

stashmycash wrote: »

The reason I think people having a second home should be penalised is that where I live in the south west, house prices have been pushed up because of all the people with holiday homes here. Thus preventing local people from getting a property in line with the wages here.

Restricting purchase to those who live within the vicinity would assist First Time buyers who where brought up in the area but cannot afford to buy a home there.

Parisien

Eeeeeemmmmmmmm.....not quite...........more like hold onto your hat.....its a vertical part of the price increase curve over here.........


YYYYYYYYYYYYYYyyyyiiiihaaaaaaaaaaaaaaaaaaaaaaaaa!!!!!!!!!!!!!!

http://news.bbc.co.uk/1/hi/northern_ireland/6583393.stm

Parisien

stashmycash wrote: »

The reason I think people having a second home should be penalised is that where I live in the south west, house prices have been pushed up because of all the people with holiday homes here. Thus preventing local people from getting a property in line with the wages here.

Tough...then they demand more wages or go out and get better jobs.....but then we have our East European friends to blame!!!

lestamunda

Huge increase again in April 2007 - largest for 5 years!

Something surely has to give soon...........roll on another rate increase on Thursday........

Also, alot of old fixed rates are expiring, with much higher rates for those borrowers.


http://www.rightmove.co.uk/pdf/p/hpi/HousePriceIndex16thApril2007.pdf

mystic_trev

jaghir wrote: »

Huge increase again in April 2007 - largest for 5 years!

Something surely has to give soon...........roll on another rate increase on Thursday........

Also, alot of old fixed rates are expiring, with much higher rates for those borrowers.


http://www.rightmove.co.uk/pdf/p/hpi/HousePriceIndex16thApril2007.pdf

I do wish people wouldn't use those as they're ASKING prices. I could ask twice as much as my homes worth, but would I get it? We know Property prices are still continuing to rise, but lookk at Halifax, Nationwide or Land registry prices.

Snow_Dog

The social trend for second homes, especially as summer holiday homes, is causing problems, not only in counties like Cornwall and Devon. In the Isle of Purbeck in Dorset there are a number of villages that resemble ghost towns during the winter.

This has a very long lasting effect on the village and is like the snowball effect in that once it starts then things like the village shop, post office, pub, village hall and all the community events become unviable. The image of the quaint English village, where cricket is played on Sunday and everybody knows everone else will become a memory. These villages will become ghost towns as the summer visitors drop into the Hyper-super-Tesco clones on the way down to stock up for the weeks food.

The whole infrastructure of this way of life will die out as small communities lose their youngsters when they see they cannot afford to buy a home at the inflated prices and what would be the point anyway as the only rural industry left would be the seasonal holiday trade.

Unfortunately there aren't many solutions to this problem that retain a truly free market, ie one that anyone can purchase a house wherever they want as long as they can raise the funds. One solution being used in a few places is that to purchase a property you have to prove that you are already a resident in that area, ie local. However, by imposing this restiction you are limiting the potential that the owner of that property can acheive. Is that a free market?

One thing that is certain and that is change is inevitable, economies grow and contract, history shows that some cities grow because of a certain trade or industry then they decline then the trade changes.

Who knows that will happen to house prices over the next few years, certainly no-one on here, and from the looks of some of the names on HPC (eg crash2005) no-one over there. Thats the beauty of the economy, because its such a complicated system affected by thousands of factors, not only internally but globally its unpredictable in anything other than short term broad measures.

Oh yes, there are indicators to a crash being round the corner tomorrow, but then the other side of the argument is true also. All this talk of how certain people will be sitting pretty when a crash comes, and how their jobs will not be affected, and how they will laugh at all the debt monkeys, well wake up boys because it will affect you, a house price crash will go hand in hand with economic recession and those who say they wont be affected are either very rich or aren't old enough to have lived through the last one.

Personally my heart goes out to all the people who through no fault of their own end up struggling all their lives but are always in the wrong place at the wrong time to get the breaks. Heres to them.