Level to step in at when prices crash?

mystic_trev

F_T_Buyer wrote:

Ha. Go and read the threads on HPC about that report. It is full of contradictions and cherry picking of data.

I would say 5.5% to 6% rates would cause have the same effect as last time!

Yes I was trying to be "ironic" F_T_Buyer! I think most people could cope with 8% but those who've bought (or over MEW ed) in the last few? years are going to have serious problems.

meanmachine_2

You have to go way waaaay back to 1998 to see rates close to 8% - 7.5% in this case.

Ah yes, I remember 1998. We all rode around on penny farthings, unions were strong and a loaf of bread doubled with each passing hour.

If the A&L are telling us that the economy can't ever again sustain a base rate just above the national average of 8%, that worries me more than it reassures me.

I'm sure that, given their new range of affordability mortgages which are super sensitive to rate rises,, that wasn't the intention of the piece though, was it?

poopscoop

Talking about debt, have you read this from the other day?
http://news.bbc.co.uk/1/hi/business/5004654.stm

See how long they can survive without a job

madfrenchgirl

oh dear another one going round... yawn!

to the OP, if you think you hold the magic answer, you are welcome to wait for your crash to come round and be cleverer than any home buyer or owner out there...

Zammo

mystic_trev wrote:

Yes I was trying to be "ironic" F_T_Buyer! I think most people could cope with 8% but those who've bought (or over MEW ed) in the last few? years are going to have serious problems.

Exactly. I wonder how many people buying in todays market have been wise enough to work out what a 2-3% IR rise would do to the cost of servicing their mortgage? Well it looks as if a lot of them are about to find out!

Personally I would much rather rent right now than risk losing my house along with my deposit and/or be stuck in negative equity for years.

:money:

van_persie

meanmachine wrote:

Oh now stop it.

That was a generation ago. The entire economy has radically changed since then. We've evolved to a higher plane of being.

There are no more booms and busts. We're not greed driven like we were back in the 80s, you know.

Claiming that a FTBer should wait for the next downswing in the cycle is just wicked talk, you know that.

Meanwhile, back in the real world, the world economy starts gearing up for the new Inflation Age. Interest rates of 4.5% might seem like chicken feed.

But then, don't listen to me. I'm "mongering doom". People should ignore risks and borrow for Britain. Homeowners need YOU!

Love it! :rotfl:

lightspeed

Zammo wrote:

Exactly. I wonder how many people buying in todays market have been wise enough to work out what a 2-3% IR rise would do to the cost of servicing their mortgage? Well it looks as if a lot of them are about to find out!

Personally I would much rather rent right now than risk losing my house along with my deposit and/or be stuck in negative equity for years.

:money:

Those people that are going to be severely affected by a rate rise of 1% or even 2 - 3% have either borrowed WELL above their means and/or have outstanding debts elsewhere other than their mortgage.

IMHO, i think that a lot of people are aware of the consequences of rate rises and therefore dont need a constant reminder of what MIGHT happen (yes, i know it looks like IR's will rise - but by how much nobody knows)!!!

Most of these will get by, adjusting their spending habits accordingly while they ride the storm. If you understand the concept of "normal distribution", some will be affected badly, others will be laughing and not affected at all, while most will make do.

The average homeowner understands that they have purchased a home to live in and if IR's rise significantly over the next few years it will have to be accepted and dealt with.

I am getting really annoyed as to why are so many people concerned with other peoples POTENTIAL problems? Its as if people hope a crash happens just so they can see others suffer and point the finger "i told you so!".

If s@*t hits the fan with regards to house prices,then so what? All of you wishing for the crash will be happy and a small proportion of homeowners could well be faced with difficult financial situations which might just allow those currently renting the chance to get on the property ladder for a cheaper premium.

As things stand, IF there is a crash, prices will need to fall by at least 50% (which could take a very long time, during which people are ever decreasing their mortgages) to get back to what many call realistic prices. Personally i dont think that this % decrease will happen as houses have been built up to be such a desirable asset there will always be the demand and with the slightest decrease's (5 -15%) we will probably see another influx of buyers that think that this is their opportunity to buy (unless IR's are far too high).

For a crash to happen there needs to be a combination of many variables which quite franky are difficult to predict, however, if a crash happens it will benefit those who have waited and MOST homeowners will have to bite bullet and... oh!, continue living in their homes. If it doesnt and prices remain relatively stable (maybe small decreases) those who have waited will have to have a rethink.

FACT: most know the consequences of rate rises, but unfortunatly knowone can predict the furture.

ukbondraider

Why do people spend and borrow beyond their means?

Why does everyone have to have new cars, new clothes and be able to go on holiday 2 or 3 times every year.

In my opinion those who have spent more they can afford deserve to lose everything if they cant even cope with interest rate rises.

Those that have got greedy trying to make money from property by purchasing 5 Buy to Let properties only to struggle with their mortgage also deserve to lose everything if they have been careless. In fact anyone who fails on their mortgage payments should lose the whole house regardless of the amount they have already paid into it.

I keep reading that the average salary in the UK is around £30K per year yet whilst driving around everyday I am amazed how many new cars there are on our roads. I earn a comfortable six fig salary and could never envisage buying a new car on my current wage despite being single.

Why do people always also have to get a 25 year mortgage and stick to it throughout its life. Why is the mentality not to get a 25 year mortgage but to turn it into a 10 year mortgage with overpayments.

The culture in this country is greed as everyone feels they deserve to own a house or to own nice things despite dropping out of school and having no skills. The world knows this which is why we have "rip of Britain" as the world knows they can always sell things in the UK for a higher price as the brits will always spend regardless of whether they can really afford or not.

As for house prices, trends are always changing so the past is not reflective of the future. The current trend I am seeing is that mortgage terms are getting longer and longer which will allow more people to be able to buy. Whos to say that mortgage terms will not extend to 50 or 80 years. This would make monthly payments affordable, thus reducing the number of repossesions and preventing a house crash. Whilst I feel this is unrealistic in the short term I think it will be the norm in the future when owning a house will only be able for the mega rich and to be able to secure a rental agreement via a 30 yr mortgage will be the norm.

Getting back to our century who really cares whether rates rise or not. Everyone should be smart enough to ensure they dont get affected. Those that are affect deserve all that happens. Those waiting to buy low in the midst of a crash deserve to be rewarded if a crash does happen due to the risk the are taking by letting prices run further away than their salary increases. Likewise those who own a house and are observing significant paper profits deserve their profits for jumping aboard despite all the uncertainty.

At the end of the day, the direction that the housing market takes will depend on how many stupid people there are in the UK versus how many smart people there are.

How someone can let the commitee from the BOE determine the direction of their lives is beyond me. You wouldnt let a stranger tell you when you can eat and go to the toilet in your own house would you.

Lastly stop financing everything. Only your house should be financed. Cars, clothes electrical goods should all be bought outright. If you cant buy these outright dont buy them as you cant afford them. Also when buying a house buy what you can comfortably afford and factor the costs of equiping it. I was constantly amazed when viewing 5/6 bed detached houses to find the main rooms furnished with cheap goods particulary the front room only accomdodating old small CRT TVs. A £500-800K house should have decor to match.