'We've reached a tipping point' Signs of house price weakness

Philuk

ukcarper wrote: »

Have you any figures to show how many people have a mortgage of over 4.5x income.

For what it is worth, about 15% of the recently issued mortgage were over the ratio for London, those figures came up as new rules were implemented by bank themselves under the guideline of the BoE. I can't be bothered to find an official source for it but feel free to pull out what would be the exact figures.

On a more general note, the average property in London is 450k while the average salary is 35k which take us to a affordability ratio close to 12.9. Conclusion, the average household can't afford a mortgage.

chucknorris

Philuk wrote: »

49% of all mortgages in London are interest only, it is unclear how the market would react to the inevitable interest rate hike for later this year/early next year. People are over levered with debt income ratios close very far from the sustainable 3.5-4.5 bracket. If floating rates were to double from 2.2% to 4.5% which is still cheap, many household would have to sell.

I have 5 interest only mortgages in London, all on low margin tracker mortgages, when the base rate was 5.5% I was making very good profits, they are now making super profits (an extra £29k per year saved on mortgage interest). I really don't see what the problem with interest rate mortgages is.

ukcarper

Philuk wrote: »

For what it is worth, about 15% of the recently issued mortgage were over the ratio for London, those figures came up as new rules were implemented by bank themselves under the guideline of the BoE. I can't be bothered to find an official source for it but feel free to pull out what would be the exact figures.

On a more general note, the average property in London is 450k while the average salary is 35k which take us to a affordability ratio close to 12.9. Conclusion, the average household can't afford a mortgage.

What is that average salary I believe the published long term figures are base on male full time.

Philuk

Joeskeppi wrote: »

Your figures up there somewhere (assuming I'm not making a massive mistake somewhere) suggest you need a 50% crash before you would buy in, do you think that's likely? I wouldn't bat an eyelid at 20% (in London), but 50%... can't see it.

Not considered just leaving London?

My brother wanted to buy another house in London at the start of the year (edit, it was June, brainlapse), I told him he was mental.

No, 35%. An increase of 50% would require a drop of 35% or so to be offset 100 x 1.5 =150 and 100/150 = 0.67%. Price increased by 20% over the last 12 months with no particular underlying reasons. The current price level is not anchored/very volatile. We have a good 20% of real structural decrease to go through though.

Blooloo

Rota wrote: »

So at what level (% drop) do you find your local market fair value and buy?

Or are you just going to post drivel on a site that has a 0% strike rate on guessing when property prices drop?

I wouldn't be asking a bunch of losers for advice on winning.

winning betting on one horse is going to be a temporary game.

Of course, people selling the "secrets" of the housing market will only speak of winners.

Others will extract the michael from people who have possibly been accused of having made the error of taking a low paying job ( maybe a medical orderly or nurse), and in the next glossy ad tell us that you can get on the housing gravy train for 0% down and no income at all.

They will also say the last drops in 2008ish were caused by a nawked mortgage market...they wont mention the costly props government have felt they had to pay to support the market.

They wont mention that these props cant go on without causing serious damage to the economy...all they see is rising house prices and the road to riches...mostly through selling seminars and "exclusive" membership to BMV inside deals.

Philuk

chucknorris wrote: »

I have 5 interest only mortgages in London, all on low margin tracker mortgages, when the base rate was 5.5% I was making very good profits, they are now making super profits (an extra £29k per year saved on mortgage interest). I really don't see what the problem with interest rate mortgages is.

If an household can only pay £1000 and decide to go for interest only they can borrow 480k on 2.5% tracker. If the rate goes up to 4.5%, the household is enable to pay the monthly charges and have to sell. Other than that, if you are equity reach, no probleme

chucknorris

Philuk wrote: »

If an household can only pay £1000 and decide to go for interest only they can borrow 480k on 2.5% tracker. If the rate goes up to 4.5%, the household is enable to pay the monthly charges and have to sell. Other than that, if you are equity reach, no probleme

Generally speaking most people don't do that though, yes of course there will always be the occasional idiot, but you can't base logic on what the idiots will do.

ukcarper

Philuk wrote: »

If an household can only pay £1000 and decide to go for interest only they can borrow 480k on 2.5% tracker. If the rate goes up to 4.5%, the household is enable to pay the monthly charges and have to sell. Other than that, if you are equity reach, no probleme

Let's say that person earns £50k which gives you £3000 a month they would need a 9.6x mortgage how many would have got that.

Blooloo

chucknorris wrote: »

I have 5 interest only mortgages in London, all on low margin tracker mortgages, when the base rate was 5.5% I was making very good profits, they are now making super profits (an extra £29k per year saved on mortgage interest). I really don't see what the problem with interest rate mortgages is.

The problem is this...when rates are low, people can afford to lever up more...when rates then rise, those same people cant lever up anymore therefore the market price falls.

With leverage of say 5 times, a 20% drop wipes you out.

BTL of course have to maintain a contractural LTV...this means cash going out to the bank to restore the LTV, it means your equity is gone accross the board and your windmilling in the good times strikes at your heart.

Unscrupulous BTL dont give a monkeys cuss of course...its all borrowed money after all.

Thrugelmir

chucknorris wrote: »

Generally speaking most people don't do that though,

People have become infatuated with property treating if it's the holy grail of investing. Like everything in life, with hindsight it can all be rationalised into cause and effect. Over leveraging with debt is still a national pastime . Hence the what appears to be the heavy handedness of the FCA , PRA and BOE. A very gradual tightening of the thumbscrew on both lenders and borrowers alike.