So - negative equity?

pinkshoes

IF prices do drop that much, then couldn't you just rent out your house if you have negative equity, then buy another one at those dirt cheap prices??

Or maybe so many people will have negative equity, there won't be many properties on the market because no one can afford to sell?!?!


Don't forget during the last crash the interest rates were sky high (>15%) which had a massive impact on the whole situation. There's no signs that that will be the case this time round.

If you don't like your location, then I suggest selling and buying something in a location you do like. By all means rent for a bit and wait for the prices to drop, but some people have been waiting for years, and there's no guarentee they will drop much.

It just depends if you're after a home or an investment.

Kez100

I would be interested in seeing evidence of which lenders used to let you port negative equity. I see I am not the only one on this thread that was actually in a position of negative equity in the early 90's and couldn't find any way out but to 'save' ourselves out of it.

PasturesNew

On the basis the last crash was 20 years ago - and there was no Internet, it's unlikely to be able to find the evidence unless one spent a day down some old newspaper archive searching for articles/adverts.

However, even now/recently we've seen a LOT of 110%-125% mortgages being lent to people who didn't have a good income, and based on 5-6x their salaries. These mortgages started off putting people into negative equity.

Therefore, it stands to reason that,when the tide turns, lenders will have to capture some of this marketplace of people with good incomes and good credit histories who want to move. These products WILL appear - and sooner than they did last time.

Although as a lot of the current issues are due to poor lending strategies, you can expect the criteria to be quite tight.

seraphina

I very much doubt you'll be able to rent your current place out and buy a new place. You'd have to convert your current mortgage to a Buy to Let product and in the current climate you'd need more equity in your property to make sure that your rental income exceeds your mortgage repayments by some margin.

MissMoneypenny

pinkshoes wrote: »

Don't forget during the last crash the interest rates were sky high (>15%) which had a massive impact on the whole situation. There's no signs that that will be the case this time round.

Annual % wage rises were higher last time. So when the interest rate started to drop, people had a lot more cash in their pockets. This time, the annual % wage increases, are low.

My neighbour has just told me that his fixed rate has just come to an end and he is paying £200 per month more.

Aiko_2

Kez100 wrote: »

I would be interested in seeing evidence of which lenders used to let you port negative equity. I see I am not the only one on this thread that was actually in a position of negative equity in the early 90's and couldn't find any way out but to 'save' ourselves out of it.

I know Lloyds Bank offered this as we took them up on it.

Our mortgage (100%) was with Prudential and when we wanted to move we took out a new mortgage with Lloyds who offered a separate product to cover the negative equity.

Kez100

PasturesNew wrote: »

On the basis the last crash was 20 years ago - and there was no Internet, it's unlikely to be able to find the evidence unless one spent a day down some old newspaper archive searching for articles/adverts.

However, even now/recently we've seen a LOT of 110%-125% mortgages being lent to people who didn't have a good income, and based on 5-6x their salaries. These mortgages started off putting people into negative equity.

Therefore, it stands to reason that,when the tide turns, lenders will have to capture some of this marketplace of people with good incomes and good credit histories who want to move. These products WILL appear - and sooner than they did last time.

Although as a lot of the current issues are due to poor lending strategies, you can expect the criteria to be quite tight.

So, what we should be saying then to the OP, is that the situation this time is so very different (different era, different magnitude, different reasons for negative equity (high interest rates (90's) versus high borrowing (Y2K)) that we cannot predict and so give advice on what will happen if negative equity arises again. Except - if you are convinced it's coming then get out and rent.

jonewer

In the last crash we had to save to get ourself out of negative equity.

In t'last crash we had to carry oor bicycles t'save on rubber.

dolce_vita

pinkshoes wrote: »

Don't forget during the last crash the interest rates were sky high (>15%) which had a massive impact on the whole situation. There's no signs that that will be the case this time round.

.

I won't forget, don't worry. I was there.
Interest rates were at 15% for about a week.

And anyway, I'd rather pay 15% on a 50k mortgage than 6% on 150k

Kez100

They were 15% overnight only! That afternoon they climbed by small percentages points nearly every half hour. It never hit the mortgage rate. It was to do with some geezer buying and selling currency or something. Danish rings a bell. Anyway, following morning the chancellor (Lamont?) dropped the rate again and mortgages remained the same (around 13%).