House Price Crash!

tomstickland

Interesting thread and a lot of views that I share.
I'm a would-be FTB, saving up a deposit at the moment and looking at rental properties.

I need to do the maths, but I think I'll be better off in the long run if I can save at the maximum now, build up a really big deposit and then take on a minimal mortgage. I refuse to take on more than 3 times salary, which allows to to look at £100K properties max. Knowing that similar properties were selling for £30-40K 5 years ago doesn't really make me that interested in buying. I can wait.

This is interesting

I work for a financial institution that takes responsible lending seriously. Unfortunately, too many institutions are so driven by their own sales/growth targets and the problems faced by increasing house prices that they have relaxed their lending policies to enable people to borrow far more than they would have been able to over latter years. A number of people probably haven't worked out how much of an increase in monthly commitments a 1%, 2% hike in base rate makes. Ultimately, the borrower must take full responsibility for their commitment, but I believe that the lenders have a duty to lend responsibly based on their income.

http://news.bbc.co.uk/1/hi/business/4377938.stm

deemy2004

It really is going to be a cold wind thats going to blow across britain this winter !

Economy slowing, record debt, rising inflation, housing teetering on the brink, and now the stock market also is beginning to look wobbly . - All bad omens !

tomstickland

Well, I have a morbid fascination with seeing what will happen.

mystic_trev

deemy2004 wrote:

It really is going to be a cold wind thats going to blow across britain this winter !

Economy slowing, record debt, rising inflation, housing teetering on the brink, and now the stock market also is beginning to look wobbly . - All bad omens !

You forgot Bird Flu!

Walletwatch

tomstickland wrote:

Well, I have a morbid fascination with seeing what will happen.

I know the feeling, so do I. I admit it sounds evil and voyeuristic, as I would definitely not be harboring such sentiments if it were my house that were one of the repossessed, or if I were one of those burdened with a heavy mortgage or credit card debt, for example.

rozeepozee

I'm all for people taking individual responsibility for their actions but we also live in an economy that has boomed on the back of that debt and it has therefore been encouraged by the institutions and not discouraged by the state, so surely there needs to be some empathy for those who were naive enough to fall for the facade of consumerism....? (I know this is getting a bit off thread, but perhaps we need to consider that us money savers are something of a minority - I am amazed when I read magazines etc how much people seem to be willing to spend on tat, e.g. cashmere hot water bottle covers for 50 quid etc. The amount of advertising that goes into these glossy brochures suggests to me that maybe I'm a bit of a freak with my keeness to watch my pennies... Discuss! )

Almost_Redundant

After thinking long and hard about a house price crash, I am starting to wonder if there will actually be one!! I hope i'm only just getting confused by reading all sorts of different opinions.
Could anybody explain how we can have a crash when interest rates are unlikely to take off. Yes i agree that they may rise a little but this wont be enough to push people into panic mode. A little forced belt tightening may ensue. It is sky high interest rates alone that would cause a crash, where people would not be able to afford repayments. As long as repayments stay reasonably low (<7%?) then people will stay put. There cant be that many people (relatively) mortgaged to the hilt and saddled with unsecured debt can there? - are there any official figures?

Anyway, arguements for and against my thoughts welcome.

Hoping i'm wrong!

Swipe

Almost_Redundant wrote:

As long as repayments stay reasonably low (<7%?) then people will stay put. There cant be that many people (relatively) mortgaged to the hilt and saddled with unsecured debt can there? - are there any official figures?

Hoping i'm wrong!

There are MANY people saddled with unsecured debt and mortgaged to the hilt. I'd go as far as to say that interest rates at a mere 6% would cause a significant correction. The way the rates are rising in the US, and wasn't it annouced the other day that higher inflation in this country was predicted to be a longer term threat than originally anticipated (something like 3 years)? I wouldn't be surprised to see rates over 5% this time next year.

meanmachine_2

Almost_Redundant wrote:

As long as repayments stay reasonably low (<7%?) then people will stay put. There cant be that many people (relatively) mortgaged to the hilt and saddled with unsecured debt can there? - are there any official figures?

Wow, if rates "only" went to 7%, I think the whole economy would go into meltdown. Think about it - at 4.75% the economy ground to a halt, at 7% you'd be looking at mass suicides I'd imagine...

1990: Property is 100K @ 15% = £1300pm
2005: Property is 300K @ 7% = £2100pm

Even with inflation taken into account, you can see why "only" 7% would be a disaster.

rozeepozee

I dunno what the average mortgage is these days, but I'm about to remortgage and the quote helpfully but scarily gives me a figure for a 1% interest rate rise on my 150K mortgage at an extra £125 per month. I'm not the greatest when it comes to maths, but I calculate that this means if rates go up to 7%, I'd be paying an extra £312/month. I have no other debts, but that still seems like a fair chunk from my net income. How would this affect others here?