A REAL Mortgage Crisis Coming?

Generali

As much as anything else, I don't see financial armageddon as likely as it so rarely happens. Maybe I'm overlooking 'long tail risk'. I think it's because I've a balanced view though personally.

mrs-puff

I love all these deep discussions here about catastrophic disasters when the obvious is just staring everyone in the face regarding house pricing.

Lenders will only lend on average 'x' = Sellers.. eventually.. will have to accept 'x'. Not Rocket science. There will be a fall, no other logical way out of it. Unless someone wants to enlighten me ?

Those in re-mortgage hell. Well, unless the Govt are willing to bail them out to lower and cushion their losses in turn so the Govt can produce stats in 'helping' reduce repo figures. I doubt there will be any sympathy there once someone notches up a few months arrears or a few defaults due to (yes sometimes heartbreaking) circumstances. Can't see it myself.

Lenders lend x = Sellers accept x... it may just take a bit for both buyers who want that 'dream home' and willing to do what it takes to get it even if it means trying for a 5x salary mortgage ( then rejected by mortgage lenders ) and sellers 'who think their house is worth blah ' ( but no offers for 8 months ) to accept it. Both will have to re-think and bring their desires within the housing market to realistic levels which means accepting, ultimately, what lenders are willing to lend. That's it.

Generali

mrs-puff wrote: »

I love all these deep discussion here when the obvious is just staring everyone in the face.

Lenders will only lend on average 'x' = Sellers.. eventually.. will have to accept 'x'. Not Rocket science. There will be a fall, no other logical way out of it. Unless someone want to enlighten me ?

Those in re-mortgage hell. Well, unless the Govt are willing to bail them out to lower and cushion their losses in turn so the Govt can produce stats in 'helping' reduce repo figures. I doubt there will be any sympathy there once someone notches up a few months arrears or a few defaults due to (yes sometimes heartbreaking) circumstances. Can't see it myself.

Lenders lend x = Sellers accept x.

There may be more to it than that.

Take the BTL market. Lenders will lend x. Borrower has y in cash plus z in realisable equity in their current place. BTL buyer can bid x+y+z for BTL place.

Or FTB. FTB can borrow a and has b deposit. Parents can stump up c and in-laws d in cash plus e and f in equity borrowed against current place.

I think house prices are way too high but it's possible to over simplify.

mrs-puff

I suppose,.. but all of the above you've used as examples MUST satisfy the banks lending criteria before consideration. However you want to play it. Cash up front either from equity from 8 buy to lets, parents helping out, or 'whatever'.

The money has to be there 'somehow' before the bank will lend. Over simplification ? If you insist. They won't care how you pay for the deposit or cover the risk. But it WILL be covered to their lending criteria and satisfaction before they offer a mortgage on it. That's for sure.
Up to you how you do that. Banks lending 'x' will still be the constant. How you get 'y' and 'z' is up to you and will be nowhere near as easy as it has been the last few years. House prices will always depend on what the banks will lend. Buyers will soon realise that, as will sellers. Both having to reduce both offer prices and asking prices.

Lending criteria and availablilty is vastly reducing, and quickly. House prices will have to follow suit.

ixwood

http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=1945085

ixwood

House prices are certainly comind down, we all know that, but is everyone aware that remortgaging/loans over the next year and beyond are going to be a lot tougher and more expensive to get?

ixwood

I can also see 0% CC deals being phased out and indebted people being squeezed for everything they've got!

Generali

ixwood wrote: »

I can also see 0% CC deals being phased out and indebted people being squeezed for everything they've got!

I agree. Whether intentionally or not, that's going to be the result of the credit squeeze. Presumably at some point the squeals of pain will be loud enough that the govt will step in with 'teezer freezer' rules or similar.

dannyboycey

ixwood wrote: »

LOTS of "normal" people are really going to struggle soon and it's already started, should we be doing more to discuss, riase awareness and prepare for this?

It's futile I'm afraid. Much of it lands on deaf ears as there are so many fully paid-up members of the bury your head in the sand brigade.

Unbelievably, there was a so called 'expert' (I have another name for him) on Breakfast news this morning, urging FTB's to grab the last of the 100% mortgage deals now before it's too late. Combine this with the idiotic headlines in the Daily Express ('prices rocketing again' etc) and the general feeling amongst many that prices always go up and other such misconceptions and you're fighting a losing battle. In fact you'll probably come up against a barrage of abuse and ridicule, as I have for even suggesting that prices could crash.

I'm not going to lose any sleep over a few more lambs to the slaughter. It's not as if the information isn't readily available for those that want to do a little research. Harsh, but true.

jamescredmond

harsh, but true indeed.

and why do some people continue to deny the blindingly obvious?
all the signs are there to be read. simple, even for a simpleton such as myself.

there will be no crash.

but there will be a gradual reversal.

a few posts may smack of schadenfruede when they talk the market down, but most give the 'cold light of day reality' response.

the real culprits, IMO, are those who seem to have o'dosed on prozac and blithely insist on talking the market up.

without question, there will be a reversal, and not just a slowdown as the more squeamish commentators like to put it.

although this subject has allready been done to death on this site, I'll bet a flagon of foaming ale (glass of wine for the ladies) that we'll be seeing more and more posts on house price drops for the next 2 years.