50% house price falls

sm9ai

I wasn't around at the 15% interest rates times so can I ask a few questions.

How long was it at 15% for? years/months/days?

Was the Mortgage rate the same or higher as now it seems that the interest rate of 5.75% bares little resemblance to the mortgage rates of 7-8% or am I missing something.

Also just noted abbey are offering 8.1% savings - how do they make money if mortgages are charged at a lower rate?

adr0ck

there is a glut of properties on the market at the moment due to HIP's

therefore asking prices will have to fall (as seen by rightmove)

just speak to an estate agent if you don't believe me

m00m00

Abbey offer higher savings rates as it's 'cheaper' for them to use your savings deposits for their other products, than to currently borrow money in the internal banking market at the moment.

the 15% figure is bandied around a lot, but iirc, rates only hit 15% for one day

there's also a big misconception on this, yes rates were higher, but property was much cheaper.

15% on 60k, is cheaper than 7% on 240k in terms of debt servicing.

Guy_Montag

nelly wrote: »

Houses have gone up 300% in the last 10 years while wages havent been nearly as high, which means we dont need anything like 15% interest rates to cause the same problem

back then the average house ws what? 60 grand?

now its 200 grand 15% on 60 is nowt compaired to 15% on £200 000


Ps - I'd love a zombie attack

Yeah, sod these house price shenanigans - bring on the zombies! :cool:

teabelly

Unfortunately for all the crash mongers there are plenty of people out there that can afford the high house prices. If rents cover interest only mortgages then FTB houses and family homes will still be bought by BTL investors. Rents will go up in areas where demand for rented properties is greater than supply and further keep the housing market buoyant. Demand is going to exceed supply for many years as it is shown on one of the govt's website about the number of new households forming per year. All these new households will go somewhere and house building is not going to cover it. Add to that increased migration and you have a recipe for strong prices. Sentiment doesn't come into it. It's business.

The banks and HMG will do anything to avoid another crash. High house prices give a feeling of weath and allow more money to circulate. The chancellor might make noises about easy credit but it is likely the rules won't be tightened that much. Lots of people complaining it isn't fair they can't have what they want isn't going to make any difference.

Imagine being in the situation where banks stopped lending high multiples but there were still enough people that could buy at the higher prices so you couldn't blame the banks for the situation. House prices then carry on rising and become even further out of reach for the less well off. If high prices and panic put people off from selling then prices will rise even further as supply further dries up. People then will be demanding higher multiples. What matters is whether the amount borrowed and the repayments are affordable, not necessarily what amount of money relative to income is borrowed. Two people can earn the same but have different outgoings. One could be useless with money and one could have thousands in savings as they're prudent. They represent different risks and the sensible one should be able to borrow more as they've shown a responsible attitude to money so I think the notion of restricting borrowing to income multiples is out dated.

The crash proponents have been saying if FTBs wait just another year then houses will be affordable since 2001! It may be time for the less well off to realise that they just won't be able to afford their own home unless they move somewhere cheap eg Burnley. Also the current young generation are used to having exactly what they want so when they complain about not being able to afford a house they mean they can't afford a large house somewhere nice and can only afford something smaller and somewhere grotty. Well welcome to the real world where most of us can't have everything we want. I want a nice detached house in Cheshire but I can't afford it. I either have to get off my bum and increase my earnings until I can or accept I'll have to make do with what I have.

WTF?_2

Alan_M wrote: »

At the end of the 80's I was still a teenager, but desperate to get on the housing ladder before it got to a stage where the prices were so high I couldn't afford to buy a house. (ring any bells?).

I bought my first house at the end of the 80's for £72,000, 3 years later I handed the keys back when it was worth £48,000 and the mortgage repayments at 15% interest were more than my gross salary. I'd lost a £9000 deposit, £12,000 in renovations and had to continue paying for a property I no longer owned.

What you've highlighted is timing, nothing else, due purely to luck (I'd guess you're late 40's to early 50's) You were born 10 years before me, and bought at what was "the right time".

There are many thousands of people still buying BTL property this year.

In your case, you didn't take anything on the chin, you bought a property for £20,000, it's notional value is irrelevant unless you are unable to meet the mortgage payments or you need to sell for any other reason.

Basically the "value" of your house is always £20,000 until you come to sell it. You straddled the crash, many thousands of home buyers and investors won't.

Don't mistake your luck for shrewed investing, sit back and look at the bigger picture.

Yes - this underlines the mentality that has seen a house change from a 'home' to an 'investment' or for increasing numbers of people 'an ATM that endlessly discharges credit'.

We've had an extremely good run on house price increases which not coincidentally has run alongside the deregulation of financial markets and of late by fiscal loosening by the central banks.

All the money and easy credit pumped into the economy had to go somewhere and a lot of it went into the housing, inflating housing assets massively.

People who through sheer luck bought before this phenomenon hit its peak have unfortunately taken it for granted that prices will always go up at a rapid rate and that you can't lose by buying a house. It's this mentality that will lead to a lot of people who bought in the last few years getting into heavy financial trouble, I'm afraid.

Your story stands as a sobering reminder that scrambling like mad to jump onto the bandwagon isn't always the best idea.... It seems that you have recovered well from that setback in the 90s so well done to you.

adr0ck

m00m00 wrote: »

the 15% figure is bandied around a lot, but iirc, rates only hit 15% for one day

.

during the last crash yes

but historically interest rates have been over 15% for a long time

harryhound

RabbitMad wrote: »

If house prices loose 50% of their current value then I for one will be jumping back on the BTL bandwagon.

I've just sold my rental place for £174,000 while getting £625 pcm rent. If that was available for £87,000 then that's a great return on your investment (alternatively the rent would cover a repayment mortgage - subject to being able to get one of course)

It ain't going to happen without a major recession and near total economic melt down.

Buy 2 !?!

No problems, only opportunities

sm9ai

teabelly wrote: »

Also the current young generation are used to having exactly what they want so when they complain about not being able to afford a house they mean they can't afford a large house somewhere nice and can only afford something smaller and somewhere grotty. Well welcome to the real world where most of us can't have everything we want.

Oh how I dream of being able to afford somewhere small and grotty!

dannyboycey

ManAtHome wrote: »

Can't see why that would cause prices to fall - if you have to pay for a HIP, you'd presumably increase your price to cover it?

If you couldn't afford the £400 or so on your £300k+ property, you wouldn't put it up for sale which would reduce supply, so presumably push up prices?

Completely agree. In fact many estate agents are even offering free HIPS so I think they have very little to do with it.