House buying risks

Crashy_Time

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Are you seriously suggesting this "biggest hit in 300 years" was caused by "high house prices/rents" and not caused by one of the worst global pandemics in recent history?!?!

looking at the U.S jobs figures I wouldn`t bet on the massive "upswing" just yet

Are there any other foreign countries' jobs figures we should be looking at instead of our own?

If the U.S. jobs figures exceed expectations in the coming months then should we all be celebrating boom times ahead or are their jobs figures only relevant when worse than expected?

What is your view on it? You seem to have avoided the 300 year V 70 year problem though I see. LOL.

Mickey666

Crashy_Time said:

Mickey666 said:

Crashy_Time said:

Keswick1uk said:

So, our son has asked for our advice. He has saved enough for a 20 percent deposit and costs for a £200k home.  This will likely be a 2 bedroomed terraced place or a 3 that needs work doing, which he is happy to do a room at a time. He can then try and raise a 160k mortgage on his 36k salary. His work is stable.

He currently rents a studio for £550 a month.

This makes me nervous when he asks for advice as to where he might be after a 5 year fix, if interest rates rise. They can double and still be a low rate, but that would make affording the house so expensive,  and will likely cause a reduction in value too and possible negative equity.

These worries stem from us being caught in negative equity and high interest rates in 1990s. 

So, I'm looking for your views on what your advice would be to help temper our experience a bit (or back us up!) Don't mind which it is. 

Rising interest/mortgage rates will reduce the house value yes, because new borrowers won`t get such favourable fixes as your son might get now.

Well that didn't happen in the 80s/90s when interest rates were into double figures and fixed rate mortgages were hard to find.
My first early-80s house increased in price by 44% in three years and the second one increased by about 80% in six years.  My third house increased by 400% over 20 years.

Or perhaps these prices would have risen even faster if interest rates had been around 3% as they are now?

I'm not convinced that interest rates are the main factor in determining house prices.  People need somewhere to live and will the basic options are to rent or buy and, for an equivalent property, buying will always be the cheaper option over the long term.

The bad thing about rising house prices is that they prevent some people from ever being able to afford to buy, which locks them into the more expensive renting option.

So, there are many ways of looking at things but buying a house over 25-ish years is always going to be the cheaper option than renting one for life.  Always has been, always will be.

So nobody that bought property in the mid 80`s suffered any financial loss during the period `89 - `96?

It depends on what you mean by a financial loss.  If you mean did house prices fall then yes I guess that's a form of financial loss, and I guess my house lost value at times, along with everyone else's.

But what did it mean in practice? . . . . er, nothing.  I was still paying my mortgage and I was still living in my home so the 'ticket price' on my home didn't really matter.  Just as it doesn't really matter to me today.  If house prices fall by 50% tomorrow then the only way it will affect me is that it'll make my IHT planning a lot easier   I'll still have somewhere to live and it still won't be costing me anything.

Seriously, unless you're a property speculator, house prices are a lot less important than you seem to obsess about.  Yes, of course, it's frustrating for FTBs saving for their first deposit and of course it's frustrating for anyone who buys today and prices fall tomorrow, but in the grand scheme of owning your own home - which is what this is all about - these things are just blips.

Someone posted a statistic recently that at no point in recorded history have house prices ever been lower than they were 20 years previously.  Think about that for a moment - by the time you have paid off the mortgage your home will be worth more than you paid for it.  It may be worth a bit more, quite a bit more or a lot more, but it will be worth more.  Obviously, those whose homes are only worth a bit more at the end of their mortgage rather than a lot more might feel a bit hard done by, but that's a bit like being upset because you only won £100k on the lottery instead of £1m . . .  you're still a lot better off than you were!

hazyjo

Keswick1uk said:

People did lose houses in the mid 90s.
Our house fell from 69k to 48k. Luckily we bought when it was 52k, so didn't have to cover too much loss. Although we still lived on basic rations for 9 months to save it and get another deposit together to move.

Or you could've just stayed put and rode it out...

MobileSaver

Keswick1uk said:

People did lose houses in the mid 90s. When we moved in 1994 most homes we viewed were repossessions. It was very sad times.

While there were of course repossessions, I think the worst it ever got was in 1991 when a whopping 0.26% of all homes were repossessed... most years of that era it was much less than that.

Keswick1uk said:

Thing is many people didn't actually see this as they just lived where they did throughout the whole crisis.

Correct as while obviously devastating for the people involved it was of little concern to more than 99% of home-owners.

Keswick1uk

hazyjo said:

Keswick1uk said:

People did lose houses in the mid 90s.
Our house fell from 69k to 48k. Luckily we bought when it was 52k, so didn't have to cover too much loss. Although we still lived on basic rations for 9 months to save it and get another deposit together to move.

Or you could've just stayed put and rode it out...

There were (non financial) reasons we had to move. 

SpiderLegs

MobileSaver said:

Keswick1uk said:

People did lose houses in the mid 90s. When we moved in 1994 most homes we viewed were repossessions. It was very sad times.

While there were of course repossessions, I think the worst it ever got was in 1991 when a whopping 0.26% of all homes were repossessed... most years of that era it was much less than that.

Keswick1uk said:

Thing is many people didn't actually see this as they just lived where they did throughout the whole crisis.

Correct as while obviously devastating for the people involved it was of little concern to more than 99% of home-owners.

I think that the govt and FS industry have probably realised after 2008 that there is no advantage in allowing mass repossessions to take place anymore. There is literally no benefit to anyone involved. Even though the actual numbers are pretty small compared to the wider market, a relatively small cost of forbearance in order to maintain market confidence would be well worth it.

Times have changed and lessons have been learnt.

MobileSaver

Crashy_Time said:

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Are you seriously suggesting this "biggest hit in 300 years" was caused by "high house prices/rents" and not caused by one of the worst global pandemics in recent history?!?!

looking at the U.S jobs figures I wouldn`t bet on the massive "upswing" just yet

Are there any other foreign countries' jobs figures we should be looking at instead of our own?

If the U.S. jobs figures exceed expectations in the coming months then should we all be celebrating boom times ahead or are their jobs figures only relevant when worse than expected?

What is your view on it? You seem to have avoided the 300 year V 70 year problem though I see. LOL.

My view is we should concentrate on our own job totals.

You avoided answering my question: If U.S. jobs figures exceed expectations in the coming months should we all be celebrating boom times ahead or are their jobs figures only relevant when worse than expected?

The "300 year v 70 year problem" was your poor attempt to deflect from your embarrassing allegation: Are you still claiming that "high house prices/rents are trashing the economy" and have caused the "biggest hit in 300 years"?

As for the "300 year v 70 year problem", not surprisingly shutting down pretty much the entire country caused a massive and immediate downturn in the economy last year. We are already approaching half-way through 2021, many restrictions are still in place and it is unlikely that normality will return until 2022, if even then; consequently the fact that growth in 2021 will not entirely cancel out the drop in 2020 is hardly a shocker is it?

Keswick1uk

SpiderLegs said:

MobileSaver said:

Keswick1uk said:

People did lose houses in the mid 90s. When we moved in 1994 most homes we viewed were repossessions. It was very sad times.

While there were of course repossessions, I think the worst it ever got was in 1991 when a whopping 0.26% of all homes were repossessed... most years of that era it was much less than that.

Keswick1uk said:

Thing is many people didn't actually see this as they just lived where they did throughout the whole crisis.

Correct as while obviously devastating for the people involved it was of little concern to more than 99% of home-owners.

I think that the govt and FS industry have probably realised after 2008 that there is no advantage in allowing mass repossessions to take place anymore. There is literally no benefit to anyone involved. Even though the actual numbers are pretty small compared to the wider market, a relatively small cost of forbearance in order to maintain market confidence would be well worth it.

Times have changed and lessons have been learnt.

Not entirely sure that's the case. They are hardly helping leaseholders with cladding. Where's that going to end? 

SpiderLegs

Keswick1uk said:

SpiderLegs said:

MobileSaver said:

Keswick1uk said:

People did lose houses in the mid 90s. When we moved in 1994 most homes we viewed were repossessions. It was very sad times.

While there were of course repossessions, I think the worst it ever got was in 1991 when a whopping 0.26% of all homes were repossessed... most years of that era it was much less than that.

Keswick1uk said:

Thing is many people didn't actually see this as they just lived where they did throughout the whole crisis.

Correct as while obviously devastating for the people involved it was of little concern to more than 99% of home-owners.

I think that the govt and FS industry have probably realised after 2008 that there is no advantage in allowing mass repossessions to take place anymore. There is literally no benefit to anyone involved. Even though the actual numbers are pretty small compared to the wider market, a relatively small cost of forbearance in order to maintain market confidence would be well worth it.

Times have changed and lessons have been learnt.

Not entirely sure that's the case. They are hardly helping leaseholders with cladding. Where's that going to end? 

It absolutely is the case. Repossession rules have been tightened up. Cladding issue is a mess but not really comparable. Scale is less, impact on wider economy is less.

[Deleted User]

Keswick1uk said:

Yeah for a deal he will use a broker. Its just getting the MIP but I suppose may as well get the MIP from a broker you will end up using anyway? Otherwise perhaps just doing all the work twice.

It would be better to engage a broker and just get the one MIP.