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Itchy
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 Posted: 09:32 - 25 Nov 2008  Post subject: |
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Sit and wait a year or two , prices are expected to tumble by 20% more next year , the knife is still dropping ... I'm not talking about houses being an investment either.
remember every £1 you save is £2 or £3 you don't have to pay back to the bank... you should also factor in +3% ontop of any final rate you agree to as said the BoE needs to hike rates to sell its gilts.
As next year the REAL job cuts start filtering through , the UK is averaging 5000-10,000 jobs a week being lost , once the depression really gets going there will be many many repos...
For example there is to be a blood bath in banks next year 350,000 jobs to be culled, Swindon Honda is closed for the next 4 months (its going to be closed).
And many distressed forced sellers, with more sellers prices get suppressed badly...
The current turbulence the UK has had is just the fall out from the US, the UK house price crashes haven't even started yet.
I was predicting 30% losses , now even pundits are predicting 60% losses at the very least, these things tend to over shoot, they over shot on the way up and they will overshoot on the way down.
Also don't forget ALL debt in a deflation is incredibly painful , GDP drops = deflation , we dropped 0.5% and its accelerating.
Here are two complimentary websites:
Moneysavingexpert.co.uk (which is a veritable bull market)
Housepricecrash.co.uk (which is a bear market)
Read both ask questions on both and you should get views from both sides of the fence, the bears are currently winning.
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ms51ves3
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LustyLew
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| Posted: 11:14 - 25 Nov 2008 Post subject: |
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My sister is having to remortgage after splitting with her husband and buying his half of the house. She is now expected to stump up a 25% deposit.
A couple of people I know are getting the same answer.
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Kickstart
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Itchy
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| Posted: 13:33 - 25 Nov 2008 Post subject: Re: Mortgages. |
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| Kickstart wrote: | Personally I do expect house prices to continue to fall for a fair bit longer, but not by a massive amount (another 10% wouldn't surprise me in the slightest, 20% would). I wouldn't be in any hurry to buy a house.
All the best
Keith |
Why ? even mainstream sources are quoting more than 50% drops, and remember when people lose their jobs and can't find another they pretty much HAVE to sell as gigantic mortgages on properties are well above the 125K mortgage interest benefit people get.
Another person said
| Quote: | Here is the input data:
Office of National Statistics - 10.8mln properties in UK are mortgaged;
Bank of England - £700bln lent by UK banks between 2001-2007 in excess of normal lending practices and above UK commercial banks' own capital allowances, this lending was facilitated by the one-off event - use of financial instruments called ABS - asset-backed securities
Halifax (bank) - £199,850 - average price of a UK property when the prices picked in the third quarter of 2007
This data gives one the opportunity to calculate by how much UK house prices have been distorted due to the use of ABS alone and, hence, by how much the prices should go down when this artificial excess liquidity has been taken out. Divide £700bln by 10.8mln properties and you get £64,815 - average amount by which a mortgaged property has been overpriced between 2001-2007 based on excess liquidity alone. Thus, by dividing £64,815 over the pick average house price of £199,850 we get the percentage fall - 32.4%
This figure is still very conservative because it does not account for the reduction in lending due to actual losses made by the banks on foreign or domestic ABS instruments. We know that to date, worldwide, those losses amount to nearly $1trln. (Bloomberg data).
Please note: this is the very minimum by which prices should/will go down. Why? The calculation strips off from any other factors an abnormal historical event - ABS induced liquidity - and looks at what that event did to the market. The calculation does not take into account further falls due to factors of the normal economic cycle of the boom and bust: recession, unemployment, repossessions, irrational behaviour of sellers (when panick sale may lead the price curve well below historical averages).
If one wanted to arrive at a total maximum fall in prices, one would need to apply any historicaly predicted (based on the previous recession) falls AFTER and on the TOP of having taken account of this 32.4% minimum fall. |
32.4% ,  , Colin is rather queit on these sorts of threads these days isn't he?
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Kickstart
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Itchy
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Kickstart
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| Posted: 13:59 - 25 Nov 2008 Post subject: Re: Mortgages. |
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| Itchy wrote: | But you are taking too limited a view I'm looking at knocks... |
Nope, I am taking a realistic view, having seen it before and experienced it before. Bought a house in 1989, which lost 1/3 of its value (about what I would expect them to lose in total this time round), and got made redundant in 1994 at the tail end of the last recession.
| Itchy wrote: | Ie who pays the insurance...... its like banks saying ah we are safe , when they have enourmous insurance polcies with AIG, if the insurer goes bust who pays out the insurance?.... also forgetting that insurance payments do not last forever. |
But no point in foreclosing on the loans if they are not going to get paid. Hence flexibility.
| Itchy wrote: | As I said before in a downturn to sell you need to compete with others, and thus lower your prices if it is not a unique product, people do and WILL haggle like crazy , buyers smell blood and when you are utterly desparate you'll take prices that are far too low. |
Which is only relevant if you need to sell. Most can and will just sit tight. Those who have over stretched themselves recently are only a small number, with a very large number having taken out mortgages ages ago and thus having fairly low payments.
All the best
Keith
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Itchy
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| Posted: 14:12 - 25 Nov 2008 Post subject: Re: Mortgages. |
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| Kickstart wrote: |
Which is only relevant if you need to sell. Most can and will just sit tight. Those who have over stretched themselves recently are only a small number, with a very large number having taken out mortgages ages ago and thus having fairly low payments.
All the best
Keith |
But based on the premise that people will keep their jobs, if people can't keep their jobs they won't be able to just sit tight, recessions almost always mean job losses , and also the inevitable axe has to be swung at the 5 million non jobs the government has.
https://news.bbc.co.uk/1/hi/business/3478635.stm
from 2004
The industry says 1% , beeb says 30%,
30% is far from the tiny amount said previously ..... infact have you ever looked at US property websites? , you see places like detroit where houses are $1000 ...... at one point houses got down to $1 per house.....
Also most people in the UK do not keep reserves behind you could see the panic in our office when wages were paid late, nobody keeps reserves so they lose their job.... they all of a sudden became able to pay to not being able to pay.
you also forget a huge number of people work in retail , what happens to spending a recession? ..... oh and rumours abound that Woolworths is toast, as employees have been told not to sell gift vouchers as they will no longer be valid...
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Kickstart
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| Posted: 14:30 - 25 Nov 2008 Post subject: Re: Mortgages. |
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| Itchy wrote: | But based on the premise that people will keep their jobs, if people can't keep their jobs they won't be able to just sit tight, recessions almost always mean job losses , and also the inevitable axe has to be swung at the 5 million non jobs the government has. |
Plenty of easy ways to save money (already happening, hence a major reason why retail sales are suffering), and with many families having 2 incomes there is breathing space.
| Itchy wrote: | https://news.bbc.co.uk/1/hi/business/3478635.stm
from 2004
The industry says 1% , beeb says 30%, |
The beeb says nothing of the sort. They just mention that they found one broker who estimated that up to 30% of new mortgages are done without proof of income. A very different thing, and certainly nothing like 30% of mortgages.
| Itchy wrote: | Also most people in the UK do not keep reserves behind you could see the panic in our office when wages were paid late, nobody keeps reserves so they lose their job.... they all of a sudden became able to pay to not being able to pay. |
Big difference between not being paid on time and losing your job.
| Itchy wrote: | you also forget a huge number of people work in retail , what happens to spending a recession? |
Which has already largely happened.
All the best
Keith
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Al
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| Posted: 19:04 - 25 Nov 2008 Post subject: |
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What is the currant amount X your wages that you can borrow?
They used to lend you 3.5 X your annual wage or something? 
I have a decent deposit, about 40% of the kind of flat/house I'd be looking to buy, but I'm on a piss poor wage and probably will be for the next few years.
Probably wouldn't want to buy for a year or two anyway to see how much more prices will drop but it would be nice to know roughly how much I could borrow when the right time comes.
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Kickstart
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Posted: 19:15 - 25 Nov 2008  Post subject: |
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Hi
There seems to be plenty of talk of pushing it back towards 3.5 times income. Oddity is the affordability of a mortgage is basically down to the interest rate, and compared to that the total amount is far less relevant.
Limit things to 3.5 times income and very few would be able to get a foot on the ladder now (OK, there are plenty who just want to move into a big house, and they are going to be stuck whatever happens), but really that is what should have been done a few years ago somehow (personal feeling is that house price profit should have been somehow taxed even when the seller went straight out and bought something else).
All the best
Keith
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Itchy
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| Posted: 20:07 - 25 Nov 2008 Post subject: Re: Mortgages. |
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| Kickstart wrote: |
Plenty of easy ways to save money (already happening, hence a major reason why retail sales are suffering), and with many families having 2 incomes there is breathing space.
| Itchy wrote: | you also forget a huge number of people work in retail , what happens to spending a recession? |
Which has already largely happened.
All the best
Keith |
I disagree there is still plenty of discretionary spending , ie non essential , buying going on out there, hell I even bought 2 books yesterday..... which means retail can suffer even more..
When all people are buying is food then you can say people have cut back and retail won't suffer anymore....if all the retail parks and shopping centres turn into ghost towns and are boarded up then you can say retail has slowed down....
As said the paradox of thift, people hoard their money = less retail spending , which means more job cuts....
There are some huge job cuts to come as said Honda Swindon.... but there are knocks there also, Honda Swindon shuts? , then support industries and indirect support things like sandwich shops nearby will also go under.
There is also the spectre of pay cuts, some of the clients we do work for have told the staff take a pay cut or be fired...... and or 4 day weeks .... this cuts income further....
Remember our economy is suffering because of the 'germs' we caught from the US, the 'germs' inside the UK economy haven't even begun to start yet....
You've also still dodged my question about demand destruction , ie UK goods maybe cheaper due to currency devaluation , but if there is zero demand for your goods you are finished.... al la Volvo lorries last year sold close to 40,000 units and their sales dropped 99.97%....
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WildGoose
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| Posted: 20:13 - 25 Nov 2008 Post subject: |
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Just wrote a large post and lost it cos the dog pulled the modem out just before I clicked post 
But basically, we (girlfriend + I) got 152k two years ago over 28 years, 95% of the value of the house, 5.49% fixed for two years from Abbey. That means £900 a month. Reverts to standard variable around April time, which wouldn't bother me if the bastards would pass the recent interest cuts on as they should. If they do not, I anticipate a few hundred quid extra a month. Not a major problem, as I have been anti-consumerism for a year or so, and there is enough spare each month.
Did the sums a while back, and could sustain this mortgage up to about 12% beyond that, may be issues.
From what i've read (and no, not from Itchy  ) it is going to be hard to remortgage if you want more than 90% of the property value like us. Equally difficult if not more so for first timers.
I.e piss poor deposit effort = fail.
Money saving expert is a good site, has two 40 page PDF guides on mortgages, well worth a read if you are not up to speed.
I take home slightly more than you (but not by a lot, depending on overtime) girlfriend earns a bit more, but then has other significant outgoings that I do not, so we split all the mortgage and bills 50/50.
Ultimately, what will be will be, its out of my control, but generally sustaining my own house rather than paying some landlord to line their pockets is my first priority financially.
Wish you luck with it, it's not a great deal of fun. Try and get some independant financial advice or use a broker who earns commision from the mortgage company and won't charge you a fee. Plenty about, and can make it slightly simpler than dealing with the mortgage company yourself. Particularly if you don't know all the ins and outs.
Just like with car insurance etc, they will send you a lot of useless overcomplicated guff, that is basically meaningless paperwork unless you are an accountant. If you want straight answers, you need to talk to somebody who knows about it, generally.
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| Kickstart |
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Kickstart
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| Posted: 20:28 - 25 Nov 2008 Post subject: Re: Mortgages. |
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| Itchy wrote: | I disagree there is still plenty of discretionary spending , ie non essential , buying going on out there, hell I even bought 2 books yesterday..... which means retail can suffer even more.. |
And plenty of people will not be so screwed that they cannot spend (for a start, all those on nice government pensions).
| Itchy wrote: | When all people are buying is food then you can say people have cut back and retail won't suffer anymore....if all the retail parks and shopping centres turn into ghost towns and are boarded up then you can say retail has slowed down.... |
No, that is retail sales being dead.
| Itchy wrote: | There are some huge job cuts to come as said Honda Swindon.... but there are knocks there also, Honda Swindon shuts? , then support industries and indirect support things like sandwich shops nearby will also go under. |
Major assumption. Honda announces they are cutting production (and the sensible way to do that is to have a break, saving lighting / heating costs, etc), and you have assumed that they are closing the factory. A pretty modern factory. A factory in a country whose labour costs have just got substantially more attractive (which is a major saving to them).
| Itchy wrote: | You've also still dodged my question about demand destruction , ie UK goods maybe cheaper due to currency devaluation , but if there is zero demand for your goods you are finished.... al la Volvo lorries last year sold close to 40,000 units and their sales dropped 99.97%.... |
A very extreme case (and not relevant to your point as the Swedish Kronar has dropped in value by far less than the pound against the Euro, hence no real change in their costs and entirely possible that their sales have just been lost to cheaper competitors). Plenty of things have not dropped in demand much (a small drop in demand for transport makes it easy to extend the life of a few trucks for a short while). Car sales have dropped by about a third, sounds a lot but not really on historical levels.
All the best
Keith
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Itchy
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| Posted: 21:11 - 25 Nov 2008 Post subject: |
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The UK a cheap place to export? a few weeks ago you said the filtering effect makes things more expensive...
Ie high taxes make things cost more, ie because the employer has to cover his CT , his NI biz rates in addition to his material and labour costs.
2011 NI goes up 1% on EEs and ERs
also this little tit bit
https://news.bbc.co.uk/1/hi/business/7749074.stm
VAT is speculated to jump to 18.5% end of 2009 when the VAT 'cut' ends.
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_Will_
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Itchy
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| Posted: 19:29 - 26 Nov 2008 Post subject: |
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It appears as if we've moved into stage 2 , where the big job losses are occuring , over the past 2 weeks its been averaging at 20,000 jobs a week....
Even the treasury reports are warning of 25% crash next year (more than 15% is considered to be a crash) , but considering Darling says the economy next year will grow 0.75% , while the IMF and OECD day it will go negative 1.7% next year I'm more inclined to think its going to be 75% .
Wheres Colin! ,
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_Will_
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Itchy
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| Posted: 22:53 - 26 Nov 2008 Post subject: |
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| vee wrote: | We looked at the house today and fell in love, might be able to get a fair deposit, (15-20k maybe) so would need to borrow £125k, since the rates are going to drop maybe a tracker mortgage for a year then while they're low get a fixed one at re-mortgage time? £125k over 30 years.....workable? |
I say don't buy , seriously have you posted your question on both
moneysavingexpert .com
and
housepricecrash.co.uk?
As said both will give you extreme views and you can figure a balance between them , MSE is the bull market , HPC is the bear market...
In that BCF you have limited opinions.....
My own opinion is that interest rates can't and will not stay low, why? ...
here is my reasoning
Ok you want to put money into a bank where do you put it? , in the account that offers 3% , 5% or 10%?...
Hu jintao is sitting on 2.1 trillion US dollars right now, Gordon needs cash and his borrowing plans all involve selling debt to the Saudis or China , by way of bonds.
They go via auction ie he'll put them out at 3% +1% or 2%...
Hu jintao will think why should I buy that when I can get 4% + 2% from Germany or the US? ...... which means Gordon has to put up base rate, which means your prior mortgage of 3% just increased in cost by 25%, remember the lower your interest rates start at , the more painful the interest rate increases are...
15% to 16% is a nominal 1% increase but its a 7% increase
A jump of 3% to 3.5% is a 20% increase.....even though in terms of points it is half the increase of the first example...
If Gordon doesn't sell these bonds he is effectively f**ked, and thus he may hike to get the sales.....
Think VERY carefully about it, and as said pay a visit to both of those websites to get more opinions.... as my opinions are of things getting worse, and Kickstart has barely been able to balance me out and he is losing too.
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nasty
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| Posted: 23:26 - 26 Nov 2008 Post subject: |
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I wouldn't bother buying a place at this point in time if I were you, it can go seriously tits up very quickly.
If I could go back and UN-BUY my house I would, with the financial issues hitting anyone and everyone at the moment.
My house is now in negative equity and my current deal expires in March, I'm really not looking forward to that, there is no way I will be able to get another mortgage unless I stay with my current lender on their stupidly inflatated SVR 
I've got 5 kids and a wife to look after, feed, clothe and home. I'm in a bit of a no win situation as I'm the only earner and have no room for manouvere, financially, at the moment.
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