LAND REGISTRY data finally shows FALLS in House Prices

brasso

dannyboycey wrote: »

How did I know that was coming? Actually, 'metaphorically' and 'literally' are not atonyms at all.

If only you hadn't abandoned the thread, you'd have learnt that you're wrong. They words have opposite meanings. Figurative and non-figurative.

dannyboycey wrote: »

It is quite clear to me that you have a vested in HPI. Perhaps you work for a financial institution, or more likely, you are an estate agent (which would explain the nonsensical nature of some of your posts).

You seem to feel "quite clear" on a lot of things about which you are hopelessly wrong. This is another. If you'd read the "nonsensical post" I made on the previous page, you'd see that I said: "few people should 'jump for joy' if HPI continues. Perhaps the exception are people with small mortgages or no mortgages who have no plans to move up the fabled ladder. Or people planning to sell up and not buy again." HPI benefits almost no-one else, and actually prevents people from trading up.

dannyboycey wrote: »

I don't have the time or the inclination for petty arguments of an anally retentive nature, so I'll gracefully bow out now.

Next!!

OK, that's being flippant, but you sound like you've learned your arguments from somewhere like HPC. Franky, you'd be better off reading the financial pages of The Beano.

For the record, I don't want to see HPI continue over the rate of consumer inflation, and I'd even be happy with a gentle real decline over a 5 year period. I don't want (or expect) to see a major crash that will just cause a lot of pain for decent people. BTL-ers I'm less bothered about.

brasso

olly300 wrote: »

Nope. I felt your post to Phlash was patronising.

You don't know the posters background like they didn't know yours.

In addition my post did have some truth in it as I've got relations around your age who either:
1. Worked their way up the company they worked for into a management position without a degree (I could hunt out some links to studies to show this is more impossible now.)
2. Studied while working full-time to gain a degree.


I have friends' in their 20's and 30's, who either don't have a degree and they have told me that they can't/couldn't get certain jobs/promotions because they didn't have a degree. So some went off and became mature students........

Strangely the antipodeans I know, who say they have the same level of experience, aren't stopped from getting the same type of jobs without a degree as they state know one understands the qualifications they put on their CV and anyway they are seen as hard workers. I was in a similar situation when I worked abroad the company that employed me didn't understand my CV properly (even though I'm a graduate) so related it to their local environment so they thought I was over qualified for the job.



I actually wrote to my home MP at the time parliament was voting about bringing in loans and fees about having a graduate tax instead as it would be fairer. My MP abstained.

Actually, I agree that the tone of my post to Phlash was a bit patronising. That struck me afterwards. I apologise for that.

If you're making the point that university isn't for everyone then of course I agree. We all know loads of successful people who are non-graduates, but this wasn't the point you put forward in that previous rant.

Though you now say that you weren't being serious anyway, so god knows what you think.

Romani_Ite_Domum

brasso wrote: »

For the record, I don't want to see HPI continue over the rate of consumer inflation, and I'd even be happy with a gentle real decline over a 5 year period. I don't want (or expect) to see a major crash that will just cause a lot of pain for decent people. BTL-ers I'm less bothered about.

I like this sentiment brasso.

Do you think a gentle decline is possible though? With increasing global economic pressure and the fact that our economy has been built around the housing market and debt, I am not so sure we get away so lightly.

phlash

brasso wrote: »

This is a pretty crude analysis.

First of all, few people should 'jump for joy' if HPI continues. Perhaps the exception are people with small mortgages or no mortgages who have no plans to move up the fabled ladder. Or people planning to sell up and not buy again.

As for 2,3, and 4, you're not forced to sell or forced into bankruptcy or stuck, unless you're very highly over-leveraged. People who've recently bought and are already at the limits of their affordability are vulnerable, and have to find a solution. Being repossessed or forced to sell is a last resort, when all other options are exhausted.

Remember that 83% of new mortgagees are on fixed rate deals. Mine lasts for 7 years, for instance. The majority of current owners with newish mortgages are pretty well insulated against IR rises. Most other people who've been owners for a while will have a thick layer of equity between them and the workhouse.

Brasso, I was addressing the issue of 100% mortgages, as the post clearly states. I'm not saying the 4 scenarios are applicable across the board. In the case of someone (like a previous poster on this thread) with a 100% mortgage who bought recently, then the 4 scenarios (generic and simplified) do hold fire.
"Jump for joy", because the huge gamble has paid off without scenario 2-4 playing out. I do agree that rampant HPI is not a "jump for joy" situation for the Country as a whole, it just would be for someone in the scenario that was in discussion.
As for 100% mortgages, this is an interesting article http://www.myfinances.co.uk/mortgages/news/fixed-rate-mortgage/twice-as-many-fixed-rate-100-mortgages-$474822.htm
notably......"There are now more 100% mortgage products than mortgages for 75% loan to value rate (LTV) or less."

The council of mortgage lenders has some interesting information. Which is where I'm guessing you got your number of fixed rate mortgages from. Also within their statistics is that 21% of FTB are opting for Interest Only mortgages WITH NO REPAYMENT VEHICLE.... (Stats as of Apr 2007)
AND 27% of Home Movers are opting for Interest Only mortgages, again with NO REPAYMENT VEHICLE....(Stats as of Apr 2007)
Source: http://www.cml.org.uk/cml/statistics ML6 spreadsheet.
Thats an awfully high percentage when you consider those two stats were 14% and 15% back in March 2005.
It means people are taking on GREATER risk. The fact that most of them are taking out fixed rate deals, just means they are delaying when interest rate rises will hit them. Since I believe House Prices can't push much higher, it means these people are not building up a 'cushion' of equity. When they come off of their fixed rate deals they'll be whacked with a hefty increase in their interest payments, having paid off none of the capital and seen little to no appreciation of their asset.
I'll give an example to illustrate what could of just happened to some people who bought on a 3 year fixed deal, and just re-mortgaged. (May 04-May07)
In May 2004 12% of FTB and 11% of Home Movers took out Interest Only mortgages with no repayment vehicle when the BoE rate was 4.25%. In May 2007 the BoE rate was 5.5%. That is a percentage increase of 29.4%. If the FTB had taken out a £100,000 mortgage at a 4.25% rate then the Interest payments would be...£354 per month, that would have changed to £458 (5.5%) when they re-fixed. They are now paying £100 per month more, and are still no closer to paying off the capital. Granted, these people may have got some equity in that time, although in my local market there has been little change since then in some properties. Fast forward a few years and rates could be at 7%, the figures begin to look terrible, and the outlook bleak. Over the next 3 years do we expect HPI to come to the rescue of people in the scenario discussed. I don't think we'll see much more HPI, therefore the 21% of FTB and 27% of home movers that are currently taking out Interest Only mortgages with no repayment vehicle are very susceptable, and at huge risk.
It means that I don't agree with you, in that I do not believe that enough people are insulated against Interest Rate rises in order to make the housing market secure. It looks more like the foundations have been built on sand.

brasso

Romani_Ite_Domum wrote: »

I like this sentiment brasso.

Do you think a gentle decline is possible though? With increasing global economic pressure and the fact that our economy has been built around the housing market and debt, I am not so sure we get away so lightly.

A good question and no one knows the answer. Fervent bears and fervent bulls will argue that it's obvious that there'll be a crash or obvious that HPI will continue, but more objective people know that it could go either way, depending on unpredictable external factors. 9/11 sent IRs plummeting. Black Wednesday, when were forced out of the ERM in 92, did the opposite.

I think if you exclude these unknowns, you could say with some confidence that the occasional quarter-point IR rises we've had in the last year are likely to continue to cool the market. That's one of the very reasons they were introduced, so I'm a bit puzzled when I hear the HPC types crowing about the rate of HPI beginning to slow. Isn't that what we all expected the IR rises to bring about...?

But anyway, we can't 'exclude these unknowns' so it's all a bit unpredictable which is why I personally would think long and hard about taking on a 100% mortgage or an interest-only mortgage just at the moment, unless you have a steady well-paid job and no possibility of having to sell up in the next 5 years. (Though people who are very financially stable probably wouldn't be taking out I/O or 100% mortgages). If you can get a decent long-term fix, then you're largely protected from a sudden rise in IR.

So I think a gentle decline is possible, yes, definitely, but whether it's likely or not is another question that we don't have the answer to. The best we can hope is that the BoE stay on the ball, and that there are no major shocks like 9/11. The other unknown factor is Gordon Brown's premiership. That may spook the markets and the banks, or may give them confidence. We'll have to wait and see.

In the meantime, it's a good opportunity to make sure we're prepared for a downturn. I hope I am. We took out an 8 year fixed-rate mortgage last year at a rate I'm comfortable with. This has had a major reassuring effect on us. Also, I have a SIPP and a couple of maxi-ISAs. I've sold off about half of my shares so that if there's a stock market crash I'll be well placed to pick up some bargains.

We'll know a lot more in 3-6 months once Brown's got his feet under the table.

dannyboycey

brasso wrote: »

If only you hadn't abandoned the thread, you'd have learnt that you're wrong. They words have opposite meanings. Figurative and non-figurative.

Don't patronise me. "Learnt that you were wrong"?

Hereward

dannyboycey wrote: »

Don't patronise me. "Learnt that you were wrong"?

Sorry to take this thead off topic for a moment, but starting any statement with the word literally, implies that the following statement is not a metaphor.

dannyboycey

Hereward wrote: »

Sorry to take this thead off topic

That's my problem. Discussing the finer points of the English language doesn't really add any value to what was a pretty decent thread. And patronising people over such matters is uncalled for. I can see I'm wasting my time here.

CB1979_2

yeah let's talk about Mel Hewitt's tatties

brasso

phlash wrote: »

Brasso, I was addressing the issue of 100% mortgages, as the post clearly states. I'm not saying the 4 scenarios are applicable across the board. In the case of someone (like a previous poster on this thread) with a 100% mortgage who bought recently, then the 4 scenarios (generic and simplified) do hold fire.
"Jump for joy", because the huge gamble has paid off without scenario 2-4 playing out. I do agree that rampant HPI is not a "jump for joy" situation for the Country as a whole, it just would be for someone in the scenario that was in discussion.
As for 100% mortgages, this is an interesting article http://www.myfinances.co.uk/mortgages/news/fixed-rate-mortgage/twice-as-many-fixed-rate-100-mortgages-$474822.htm
notably......"There are now more 100% mortgage products than mortgages for 75% loan to value rate (LTV) or less."

The council of mortgage lenders has some interesting information. Which is where I'm guessing you got your number of fixed rate mortgages from. Also within their statistics is that 21% of FTB are opting for Interest Only mortgages WITH NO REPAYMENT VEHICLE.... (Stats as of Apr 2007)
AND 27% of Home Movers are opting for Interest Only mortgages, again with NO REPAYMENT VEHICLE....(Stats as of Apr 2007)
Source: http://www.cml.org.uk/cml/statistics ML6 spreadsheet.
Thats an awfully high percentage when you consider those two stats were 14% and 15% back in March 2005.
It means people are taking on GREATER risk. The fact that most of them are taking out fixed rate deals, just means they are delaying when interest rate rises will hit them. Since I believe House Prices can't push much higher, it means these people are not building up a 'cushion' of equity. When they come off of their fixed rate deals they'll be whacked with a hefty increase in their interest payments, having paid off none of the capital and seen little to no appreciation of their asset.
I'll give an example to illustrate what could of just happened to some people who bought on a 3 year fixed deal, and just re-mortgaged. (May 04-May07)
In May 2004 12% of FTB and 11% of Home Movers took out Interest Only mortgages with no repayment vehicle when the BoE rate was 4.25%. In May 2007 the BoE rate was 5.5%. That is a percentage increase of 29.4%. If the FTB had taken out a £100,000 mortgage at a 4.25% rate then the Interest payments would be...£354 per month, that would have changed to £458 (5.5%) when they re-fixed. They are now paying £100 per month more, and are still no closer to paying off the capital. Granted, these people may have got some equity in that time, although in my local market there has been little change since then in some properties. Fast forward a few years and rates could be at 7%, the figures begin to look terrible, and the outlook bleak. Over the next 3 years do we expect HPI to come to the rescue of people in the scenario discussed. I don't think we'll see much more HPI, therefore the 21% of FTB and 27% of home movers that are currently taking out Interest Only mortgages with no repayment vehicle are very susceptable, and at huge risk.
It means that I don't agree with you, in that I do not believe that enough people are insulated against Interest Rate rises in order to make the housing market secure. It looks more like the foundations have been built on sand.

I appreciate the detailed post, and to be honest, there is too much there to respond to everything, so just a couple of points if I may...

You make the point about repayment vehicles etc. I agree with the general implication that people need a strategy to pay off the capital, but the bald statistics don't tell us enough. These people may not have a repayment vehicle taken out as part of the deal (e.g. an endowment), but that doesn't mean that some/many have no plan whatsoever. They may have an inheritance coming to them. They may be in the early stages of a career in the professions that will start to pay them much more. They may just want to take a year or two as a breather before taking out a repayment mortgage. Etc, etc. If you're saying that some people will be taking out these mortgages without any forward thinking then I agree. They are probably just relying on capital appreciation. And it has to be said that almost all the people taking out I/O mortgages without a repayment plan since the mid-90s will have done exceedingly well with this outlook. In Leeds, where I lived for a while, I nearly bought a house in 1997 for £25K. Current price? About £125K. I don't approve of this sort of gamble, but most people have got away with it, like it or not.

Also, the figures you quote don't tell us enough about what sort of buyers these are. The only I/O buyer I know (that I'm aware of) is a developer who takes out a mortgage, adds value to the house in some way and sells again.

As for the 2004-07 fixed rate example, of course I take your point. These people have to find an extra £100 a month or so. Annoying for sure, but not
crippling for most of us. If we didn't have that extra £100 on our current budget then we'd have to change our spending. If that means taking a cheaper holiday or not eating out twice a month, then tough !!!!!!, that's the way it goes. Sometimes we have to make unpleasant financial decisions, but that's life. Most people will have created significant equity in that time, as you point out.

Yes I agree, some people will keep bumbling on without ever thinking how they're going to repay the capital even in a time of HP stagnation or falling HPs. What can I say? There are some foolish people in the world. If they can't/won't manage their finances even moderately well then what can we do? It's their problem and they'll eventually suffer the consequences.