There could be a high price for creating a price boom

IveSeenTheLight · 3 June 2013 at 11:52AM

Generali wrote: »

To give this Tory Government their due while they're not knocking each other off they're passing some pretty sensible policies to make building houses much easier (in theory).

Unfortunately, British people will fight and argue about any new housing anywhere near them as a rule. It's crazy.

Are they?
I'm trying to build a house and whilst I found some parts easier than expected (planning permission, building warrants etc), I've found the self build mortgage market collapse in the last 6 months.

The availability of self build mortgage products is so restricted, that even though I own the land and have a 40% deposit for the building costs, I'm still likely to be hit with a circa £3,000 arrangement fee and interest rates almost 3 times what I could in the conventional market.

From that perspective, it's not encouraging building new properties.

wotsthat · 3 June 2013 at 12:22PM

Graham_Devon wrote: »

As I said, a plan is fine.

No you didn't. You said this...

Graham_Devon wrote: »

it's fantasy to pretend everyone can just plan from there and live happily ever after

You edited your post to remove this part presumably because you realised that it's not that fantastical for people to plan for the end on an interest free period on a loan or the end of a mortgage fix.

MrScroll · 3 June 2013 at 2:30PM

Graham_Devon wrote: »

I don't know how someone can think that buying a house, with 20% of it on an interest free loan (for five years) which will atract interest at probably the most likely time that interest rates will also rise....at the end of your mortgage fix so you have no where else to go....

Madness.

This certainly does seem to be looking like in 5 years time there could be a bursting of the property bubble. That is even if interest rates do not go up that much. If they do go up more than a little by then, there could be a significant fall in property..

grizzly1911 · 3 June 2013 at 2:32PM

IveSeenTheLight wrote: »

Are they?
I'm trying to build a house and whilst I found some parts easier than expected (planning permission, building warrants etc), I've found the self build mortgage market collapse in the last 6 months.

The availability of self build mortgage products is so restricted, that even though I own the land and have a 40% deposit for the building costs, I'm still likely to be hit with a circa £3,000 arrangement fee and interest rates almost 3 times what I could in the conventional market.

From that perspective, it's not encouraging building new properties.

Hasn't self build always been more difficult to finance?

Lenders are just making hay.

IveSeenTheLight · 3 June 2013 at 2:43PM

grizzly1911 wrote: »

Hasn't self build always been more difficult to finance?

Lenders are just making hay.

Indeed they are making Hay.
That said 6-9 months ago I got very comparable rates and arrangements fees.

Many lenders have walked away making it a very restrictive market.

The discussion was surrounding this government making it easier to build and in some instances this may be true, but certainly not in others.

grizzly1911 · 3 June 2013 at 3:04PM

IveSeenTheLight wrote: »

Indeed they are making Hay.
That said 6-9 months ago I got very comparable rates and arrangements fees.

Many lenders have walked away making it a very restrictive market.

The discussion was surrounding this government making it easier to build and in some instances this may be true, but certainly not in others.

Thanks.

If you took the expensive deal, acknowledged the up front fee as an unforeseen additional build cost, could you not re mortgage once complete onto a cheaper deal?

Not sure it makes it easier to build just puts some icing on the cake for the main stream developers/builders.

IveSeenTheLight · 3 June 2013 at 3:41PM

grizzly1911 wrote: »

If you took the expensive deal, acknowledged the up front fee as an unforeseen additional build cost, could you not re mortgage once complete onto a cheaper deal?

Let's look at this financially for a second.

1.25% arrangement fee on a £250k mortgage means a £3,125 arrangement fee.

6 months later after the property is built, you incur a 3% ERP meaning an additional cost of £7,500

During those 6 months you incur a 5.39% or £6,737.50 interest.

All in a cost of £17,362.50 for 6 months to finance a staged payment mortgage and port onto a competitive mortgage product.

That said, it probably is still worth doing as you save circa 3% over the next 18 months, thus saving £3,750 over that period.

grizzly1911 · 3 June 2013 at 4:56PM

IveSeenTheLight wrote: »

Let's look at this financially for a second.

1.25% arrangement fee on a £250k mortgage means a £3,125 arrangement fee.

6 months later after the property is built, you incur a 3% ERP meaning an additional cost of £7,500

During those 6 months you incur a 5.39% or £6,737.50 interest.

All in a cost of £17,362.50 for 6 months to finance a staged payment mortgage and port onto a competitive mortgage product.

That said, it probably is still worth doing as you save circa 3% over the next 18 months, thus saving £3,750 over that period.

Couldn't you take a higher rate and swerve the ERP?

bulccp05laer · 3 June 2013 at 5:26PM

Graham_Devon wrote: »

More negativity towards increasing house prices in the media...

http://www.telegraph.co.uk/finance/comment/rogerbootle/10094859/As-safe-as-houses-There-could-be-a-high-price-to-pay-for-creating-a-boom.html

Welcome article if you ask me.

I don't know how someone can think that buying a house, with 20% of it on an interest free loan (for five years) which will atract interest at probably the most likely time that interest rates will also rise....at the end of your mortgage fix so you have no where else to go....

Madness.

MrScroll wrote: »

This certainly does seem to be looking like in 5 years time there could be a bursting of the property bubble. That is even if interest rates do not go up that much. If they do go up more than a little by then, there could be a significant fall in property..

Some places in Europe could be a preview of what is in store for the UK. Unemployment is at shocking levels and things are looking really bad. Some thought they were safe in property but have found values plummeting and they can not rent them out for much because no one has much currency. Many poor people are now squatting in properties that have been repossessed by banks but there are no buyers no matter how cheap the price seems. Even highly educated professionals can not get work. Hearing first hand reports from some of these countries in Europe that were until recently not considered to be in crisis. For example Spain, Portugal and Greece are in a bad way at this time, I can only see them getting worse and worse until the end of the temporary fiat system. I can also see the crisis spreading elsewhere as I often say the worst is not behind us its ahead of us.

I would like to think after talking to such ones who tell of homelessness and poverty, that my family will be well prepared for this situation before it comes to our shores. Indeed I expect it to affect the entire world when the temporary system slowly comes to an end.

Who knows which parts of the world will be affected in different ways. Its so hard to say. But what is certain is that the temporary unbacked international monetary system that was brought in on Aug 15th 1971 is coming to an end. It will affect the entire world soon.

I would like to think that my family will be prepared if we go through similar times as the reports we hear of. There are vast numbers of properties now occupied by squatters unable to pay the rent or mortgages, even with such low interest rates. This is why I stay away from investing in property until after the collapse of the temporary system. The owners of these properties are trying to evict the squatters but the situation is so bad now these poor families have to find somewhere else to squat until they are again kicked out. There are very few who can afford to pay rent on these properties.

Things are not that bad yet in London. The government has all kinds of props in place holding up the property market. But they are very slowly coming out. The latest is called help to buy, the government will give 20% mortgage interest free for 5 years. It is causing another property bubble and numbers of properties being built are higher than ever before. But after the 5 yrs is up and the interest is due, it will be about the time for interest rates to go back up to normal levels. Also if someone can't afford to pay their high rents or mortgages at the moment the government pays them for now. But it is unsustainable. This is mainly because the UK can print its own currency out of thin air for now, unlike countries in the eurozone who have to rely on bailouts and Austerity. Or should I say in the UK they can create currency not print it, these days not that much is printed its mostly digital units expanding the supply. Now a days they just type billions into their bank account and boom the currency supply is expanded by those billions which were just created by typing a new balance into their accounts.

If things do get as bad as I expect in other parts of the world when the temporary system collapses I want my family to be prepared in advance. We always have our bug out plan to the countryside or out of the country to the far East where things will not be as bad. But I suspect it will be a very slow drawn out affair. Before it comes to bugging out to any of our bug out plans, we may find the property market collapsing as the government can not keep it proped up.

I would like to think that my family would be able to find somewhere to squat along with most others needing to do the same thing if it comes to it. If the crisis makes it too hard to earn enough to pay our rent, and we eventually get evicted. If we are finally forcibly evicted then to have back up places to squat some other empty places. I know this will be very hard living out of bags with young children. This is why I preach to keep your life simple.

Soon it could also be the case in the UK that the number of squatters is more than the authorities can deal with. The ones that do get evicted will just squat somewhere else.