LAND REGISTRY data finally shows FALLS in House Prices

Romani_Ite_Domum

keeperbear wrote: »

A 40% fall in property prices. In your dreams mate.

Please explain why this would be so unreasonable. The current market is 20-30% overvalued. A downslide in the market could easily cause an undershoot of 10-20% before is hits the bottom. This could take as long as 5 years to bottom out before starting to show gains again.

keeperbear wrote: »

Also, most buyers are perfectly happy to live in the same house for a decade or so. Who the heck wants to move every six months? Someone who rents thats who. Not my cup of tea mate. I like to put down roots and build a comfortable living environment.

I think any LL will be begging tenants to stay in 6 months time. Why do you think tenants will have to move every 6 months?

noyk

Are you sure there is "absolutely no risk"? Boomers built a lot of houses, they might downsize and emigrate (as my mother is doing) leaving a lot more options open to us - see the demographic change - http://www.statistics.gov.uk/populationestimates/svg_pyramid/uk/index.html

brasso

Jennifer_Jane wrote: »

Thanks, Brasso, am enjoying all your posts - apart from damning the interest only mortgage, which has been my salvation!

JJ, I've nothing against 100% mortgages per se (though they're normally more expensive) -- my point is that at a time where there is uncertainty in the market (e.g. now), they're not advisable as you run a highish risk of getting into negative equity. With a 25 year mortgage it takes quite a few years to make any significant into paying off the capital rather than just the interest. If you're really over-leveraged, you're on something of a knife-edge if you lose your job or if you have to sell up for some reason.

If prices keep rising then you are gradually being insulated against this danger, In a stagnant or falling market, you don't have that luxury. So if you bought more than a couple of years ago you should be fine. If you bought last month in Nottingham, things are a little dicier.

Thanks for your kind comments. I hate being accused of being the author of other people's misfortunes just to make them feel better.

CB1979_2

enough now we all know these stats aren't representative of the whole market.

I only care about my area, and my type of property (flat), so do i really care that the "average" detached place in my area has fallen 2% to only £550k? do i fuk!


let's all talk about mel's tatties :money:

Jennifer_Jane

brasso wrote: »

JJ, I've nothing against 100% mortgages per se (though they're normally more expensive) -- my point is that at a time where there is uncertainty in the market (e.g. now), they're not advisable as you run a highish risk of getting into negative equity.

Mmmm. Yes, again, I totally agree with your comments. But I was talking about the interest-only mortgage, which is often more expensive too. Personally, it allowed me to buy a house when I had just been made permanent in a job (secretarial) at age 53, and which should be paid off by year-end. Couldn't have done that with a repayment mortgage.

JJ

brasso

Jennifer_Jane wrote: »

brasso wrote: »

JJ, I've nothing against 100% mortgages per se (though they're normally more expensive) -- my point is that at a time where there is uncertainty in the market (e.g. now), they're not advisable as you run a highish risk of getting into negative equity.

Mmmm. Yes, again, I totally agree with your comments. But I was talking about the interest-only mortgage, which is often more expensive too. Personally, it allowed me to buy a house when I had just been made permanent in a job (secretarial) at age 53, and which should be paid off by year-end. Couldn't have done that with a repayment mortgage.

JJ

Sorry JJ, my mistake. Though funnily enough my comments would be pretty similar. In a rising market, interest-only can work well (and obviously has in your case - well done). You obviously did the sensible thing and started to pay off the capital when you could. You hear horror stories about people who take out I/Os and have no idea until some years later that they're not paying a penny off the capital. Debt in general is perfectly OK in the right market conditions, and as long as it's tackled aggressively. Can be very dangerous otherwise of course, as I'm sure most of us have found out to our cost.

Congrats on getting your mortgage paid off. It must be a great feeling to be getting near the end. I have another 7 years to go.

TTMCMschine

Jennifer_Jane wrote: »

brasso wrote: »

JJ, I've nothing against 100% mortgages per se (though they're normally more expensive) -- my point is that at a time where there is uncertainty in the market (e.g. now), they're not advisable as you run a highish risk of getting into negative equity.

Mmmm. Yes, again, I totally agree with your comments. But I was talking about the interest-only mortgage, which is often more expensive too. Personally, it allowed me to buy a house when I had just been made permanent in a job (secretarial) at age 53, and which should be paid off by year-end. Couldn't have done that with a repayment mortgage.

JJ

You do realise that you have to pay back the principle as well - ie the repayment part of a repayment mortgage. You have to pay that back whether its IO or repayment, but you seem to be missing that bit?

brasso

TTMCMschine wrote: »

Jennifer_Jane wrote: »

You do realise that you have to pay back the principle as well - ie the repayment part of a repayment mortgage. You have to pay that back whether its IO or repayment, but you seem to be missing that bit?

Well if her mortgage is to be paid off by the end of the year, we have to presume she's been paying off the principal...?

Maybe it's me that's missing something.

dannyboycey

keeperbear wrote: »

The property market has NO impact unless you choose to sell.

Errr... what happens if interest rates are higher (which they are) at the end of the fixed rate period (which is likely to be soon) and she can't afford her repayments?

phlash

keeperbear wrote: »

The property market has NO impact unless you choose to sell. At 19, you could buy a property that you live in for the remainder of your life. I bought at age 20 with a 100% mortgage, and am still in the same property with my mortgage paid off. I also have loads of equity. There is absolutely no risk if you consider the life of a 25 year mortgage. There is no way that property will be valued less in 25 years time. Alternatively, if you rent, you have the risk of increasing rental costs and the transaction costs of finding a new property every six months.

Sorry I disagree. You've only considered one aspect out of two very important fundamentals. House prices and interest rates, equating to the ability to sell and the ability to afford monthly repayments. I was talking about the risk profile being worst case.

100% mortgage at a time when interest rates are low, and house prices high equates to HIGHEST RISK POSSIBLE. There are in effect four possible simple outcomes.

1) House prices rise, interest rates stay low........Jump for joy
2) House prices rise, interest rates go high.........Forced to sell at profit
3) House prices fall, interest rates stay low........Cannot move, keep house
4) House prices fall, interest rates go high.........Bankruptcy

You only considered 1 and 3.

This isn't 1994 when house prices were low and interest rates high. In that scenario I might agree that a 100% mortgage could be a calculated risk that is quite likely to pay dividends.

At this point in time, 4 seems most likely. Since house price falls and interest rate rises are historically (quite rightly if you think logically) linked. Which way do you really think the arrow is pointing with interest rates? (up - see various threads for evidence)