House Price Crash Discussion Thread

carolt

Vincenzo wrote: »

Sorry, I thought this was a balanced discussion (or did I?). So by your reckoning we should forget the 10% of people that COULD benefit from doing other than what you would recommend?

And tell me, how was what I said misleading?

Apologies - I'm sure your intention is not to mislead, but the fact is not many people on here are going to read all 93 pages to get a balanced view! Newbies reading the last 3 or 4 posts might well get the impression from your posts that the balance was more like 50/50, and that both sides were equally weighted, which I don't think they are. As you yourself said, most people are not as financially literate/don't spend large amounts of time researching/debating house prices and the housing market.

FWIW, I don't think the numbers who would benefit from buying at the moment are as high as 10% - I sai 9 out of 10 as a shortcut, but as research has shown - on the BBC website not long ago and elsewhere, I know, can dredge it up if anyone's interested - renting is currently 30% cheaper than buying (interest-only) on average in the UK.

Whilst there may still be a few pockets left where buying is actually cheaper than renting, they are few and far between. For others, even those no good at saving, as in your example, surely it is still better to buy after the market has fallen, rather than at or very near the peak? Unless you think the amount prices will fall is so minimal as to not make any difference eg stagnation until wages catch up, this strategy doesn't make any sense. I, personally, believe that falls will be somewhat larger than that, and so would frankly be hesitant to advise anyone to buy into the market now.

merlinthehappypig

VFR-Rider wrote: »

Apologies, this is a totally off topic Q


Any more info on this? :money:

Informative discussion here:

http://forums.moneysavingexpert.com/showthread.html?t=768001&highlight=fast+transfer

Vincenzo

carolt wrote: »

For people stupid enough to take out interest-only mortgages, that situation will continue indefinitely, unless they save the amount the house costs elsewhere.

Always passing judgement Carolt. There is nothing 'stupid' about interest only mortgages in a rising market especially as an alternative to renting. The large amount of equity I have built up over the past 8 years is largely thanks to those interest only mortgages. Prices would have to drop 50% before I would hit negative equity and that is after spending some of my gains on an expensive wedding, a Masters Degree which included not working for a whole year etc....

God I was stupid.

merlinthehappypig

Interestingly I was chatting to an IFA today and he says that many lenders are now insisting on something being set up to repay interest only mortgages and require proof that this has been done. I don't think we will see a return to the days of endowments, but it is another thing that would make it difficult for someone to buy at current prices if they were already stretched.

Up until very recently, apparently, the lenders didn't care and simply put a disclaimer in the paperwork reminding borrowers that it was their responsibility to pay it off.

He says this is a direct result of FSA intervention. They apparently have concerns over three key areas (worried about mis-selling claims probably).

These are:

Interest only mortgages;
Mortgages going past retirement date; and
Self-certification (no surprises there)

I actually agree with carolt and Vincenzo even though their opinions differ. I agree that interest only mortgages with no thought about how to repay them can be a bad thing. It's no good relying on the built up equity unless you are prepared to sell the house to pay the mortgage off!

Equally there are circumstances where an interest only mortgage is the right solution such as a graduate starting in employment who knows that their income is going to rise (Just not right now!)

Snafflepants

I do agree that the security of your own home is priceless.

My dad sold our bungalow 20 years ago and bought his current house which I grew up in outright. He paid 80k for it then and in the current market it's said to be worth about 300k which he thinks is ridiculous!!! (So do I tbh)

We lost my mum 15 years ago and the amount of times he had said to me in the last few years (since I became a home owner) that the security of owning the house helped him sleep at night and get him through the day.

My mortgage is less than £300 a month, its repayment and is fixed until 2012. If we rented in our area we'd get a garage or a shed for that amount....

WTF?_2

Snafflepants wrote: »

My mortgage is less than £300 a month, its repayment and is fixed until 2012. If we rented in our area we'd get a garage or a shed for that amount....

If you were to buy your current home at current prices, how much would your mortgage be?

Snafflepants

On our same rate deal it would be just under £450 - still way under what we would pay to rent a house like ours....but might have been less as I might have had more than a 20% deposit.

But saying that I don't know what interest rates are available as we are fixed I tend to not look for the latest deals....

carolt

Vincenzo wrote: »

Always passing judgement Carolt. There is nothing 'stupid' about interest only mortgages in a rising market especially as an alternative to renting. The large amount of equity I have built up over the past 8 years is largely thanks to those interest only mortgages. Prices would have to drop 50% before I would hit negative equity and that is after spending some of my gains on an expensive wedding, a Masters Degree which included not working for a whole year etc....

God I was stupid.

Surely you'd agree interest-only mortgages are stupid and dangerous in a falling market. And we all know how quickly a rising market can turn into a falling one.

It's not a strategy I'd choose to base my family's security on.

You made your decision several years ago and it worked for you - lucky you. But to advocate it to people now does indeed seem foolish to me.

Vincenzo

carolt wrote: »

Surely you'd agree interest-only mortgages are stupid and dangerous in a falling market. And we all know how quickly a rising market can turn into a falling one.

It's not a strategy I'd choose to base my family's security on.

You made your decision several years ago and it worked for you - lucky you. But to advocate it to people now does indeed seem foolish to me.

I am not advocating anything, other than that everyone should keep an open mind and judge all the options open to them on their merits at the time and taking into account their own circumstances.

To make general comments such as 'interest only mortgages are stupid and dangerous in a falling market' is not helping anyone. I could make lots of comments like that, hmm let's see....

'taking out an endowment/ISA mortgage is stupid if the stock market is falling'

'borrowing more than 3 times your salary is pure idiocy'

'it is impossible to make a return on a buy to let investment in the current market'

'mortgage protection policies are a complete rip off and should be avoided like the plague'

'property has been overpriced for years'

And so on........

These kinds of stark claims can be true and they can be false, to different people, in different times and in different circumstances.

All I am trying to do is balance out what has become a very one-sided and often sensationalist thread.

carolt

Poppycock. You are entirely advocating something , and to suggest you are not is disingenious to say the least. On another thread you have just advocated that now is a good time to get into buy-to-let.

That is no more impartial than I am.

The only difference between us is I am honest about where I stand - you pretend to be impartial whilst pushing your own agenda.