Credit Crunch -reports the worst is over

dubsey

When we bought our first house in 1994 the initial building society we took out our mortgage with (Kent Reliance) were only offering 2.5x joint income or 3x sole income. Because I'd had a CCJ a few years before they wouldn't even entertain me on the mortgage, DH (then boyfriend) had to do it alone AND have his dad as a guarantor AND have his dad's house as collaterol AND have a deposit.

I was stunned when my cousin was looking at buying a year ago when he already had 13k of debt, no deposit and a pregnant girlfriend. He also wanted a 125% mortgage to 'do a place up/pay off some of the debt'. We never thought he would get that, but he was certainly offered it. We sat and had a long talk with him about how much he would have to pay out each month and he decided against it and is now happily renting.

I am seeing not only drops every day on property bee but today there are 4 changes from Sold STC to Available, but as Glen8 says the new developments here are still going mad. Could it be that people still don't get that 'mortgage subsidy for 1/2/3 years, deposit and all legal/moving costs/stamp duty, 110% part exchange, or even the stupid buy 100% of your new home for 75% of the price is to hide an inflated price in the beginning?

danm

but what is a 'traditional' level.

what do prices need to be before people stop saying there will be a house price crash.

my guess it will be just until they are able to afford a property...then the prices will be just right and people will start to jump off the bandwagon.

All assets are priced on speculation to a degree. If house prices need somthing tangible to back them up then surely the price of the house would simply be the price of the land, the rebuild value of the property with an adjustment for the quality/standard??

fwiw i agree there will be a correction in the market but don't agree with all the hype surrounding house price crashes and the apparent joy that people seem to be getting out of the fact.

guyrulius

danm wrote: »

but what is a 'traditional' level.

what do prices need to be before people stop saying there will be a house price crash.

my guess it will be just until they are able to afford a property...then the prices will be just right and people will start to jump off the bandwagon.

All assets are priced on speculation to a degree. If house prices need somthing tangible to back them up then surely the price of the house would simply be the price of the land, the rebuild value of the property with an adjustment for the quality/standard??

fwiw i agree there will be a correction in the market but don't agree with all the hype surrounding house price crashes and the apparent joy that people seem to be getting out of the fact.

Traditional levels would have to be 3.5x salary plus a deposit (for reasons stated above).

Average salary in Salisbury is about 24,000. So, 3.5 x 24,000 = 84,000 plus say 10k deposit would mean an average 3 bed semi family home in Salisbury would be about 94k.

Anything higher has to be based in unsustainable levels of credit.

Conrad

People could only pay the market rate for prices due to the support of cheap and easy mortgage credit.

If you remove that support by way of a 40% reduction in lending, then a 40% price reduction is in theory on the cards.

N Rock Together product for 125% lending made up some 10% of all mortgage sales in the last 5 years, and thats now totaly dissapeared along with all the others. Such products were an ARTIFICIAL MARKET SUPPORT.

Dan argues the shortfall in deposits and cash could come from parents and savings but I cant see this will be sufficient to plug the massive shortfall of market cash.

Furthermore we have the domino effect where the trend is for lenders to protect themselves from negative equity by tightening criteria which then has the know - on effect of other lenders further tightening given the new landscape which in turn has a further knock - on to prices which means lenders tighten further and so on as no one wants to be left at the end of the queue holding a higher proportion of risk.

A freind of mine argues it will take 20 years to get prices back to where they were last summer which I think is over the top, but there is every reason to suppose a 20% price fall with recovery not comming for at least 2 years.