housing crash 'could happen'

[andygrif]

Originally Posted by Neil

Not at all, all lenders are offering fixed rate, just at a premium. If I want a fixed rate mortgage, it will cost me approx £80.00 more per month than the equivalent discounted mortgage, which basically means an extra £960.00 per year, & thats a hell of a lot of interest rises in one year (that's why I don't think fixed rate mortgages are of any value)

I hope that makes sense.....

I meant that most lenders will not enter into a fixed rate mortgage for the full term of the loan - i.e. 25 years - like they do in the US and a lot of Europe.

[Neil]

Originally Posted by andygrif

I meant that most lenders will not enter into a fixed rate mortgage for the full term of the loan - i.e. 25 years - like they do in the US and a lot of Europe.

Soory-my mistake, it makes sense now I re-read it!

Originally Posted by andygrif

I meant that most lenders will not enter into a fixed rate mortgage for the full term of the loan - i.e. 25 years - like they do in the US and a lot of Europe.

You're right, most won't, but I did find one last week - Leeds & Holbeck Building Society will do you 25 years fixed at 5.99%. Anyone know what the long-term average base rate is in the UK? It's difficult to know how good a deal 5.99 is without some context.

[andygrif]

Here's the info - not the best graph in the world but is showing the trends:

http://www.houseweb.co.uk/house/market/graph.html

And the raw data here:

http://www.houseweb.co.uk/house/market/irfig.html

I guess it is not so much that the rate is higher than current amounts (as we can see the figures were as high as 15% at one point - but even if they never went much higher than 6% there is still the peace of mind that you know how much you will be paying every month until the end of the term. Good info BTW Towny.

[etccarmageddon]

Originally Posted by andygrif

However most people cannot get mortgages in this country which are fixed for any longer that 3-5 years. There's a few that are 10 years - but you'll pay 7-8% on those - that's the same rate as my credit card!!!

rubbish! :pp

I can get you one for 10 years 5.69%

http://www.marsdenbs.co.uk/pages/mor...mortframe.html

[andygrif]

There are always deals to be had - I'm talking generally.

Actually maybe I was a little off - more like 6-7% is the norm for 10 years - but what's 1% between friends

[Pierre]

Originally Posted by Andygrif

The problem is though that most first time buyers, particularly in the South East simply cannot afford to buy any house. I think there was some data a few months back saying that to buy a house in Hemel Hempsted an averaged salaraied first time buyer would have to borrow something like 10 times their salary - which is crazy.

So we're creating a situation where there will be no 'new blood' in the housing market, which will mean that the lower end will stagnate - and that is the start of a crash.

At present though the first time buyers are being replaced by the "buy to let" market.

Which is why house prices have continued to rise.

To enable first time buyers to get on the market some lenders are introducing 30year mortgages.

You can expect to see 40, 50 year mortgages being offered.

In Singapore there are 100 year mortages where the debt is passed onto the children!

As Working Lunch pointed out in today's programme, the "Doomsayers" in the Sunday papers took one comment from the Council of Mortgage Lenders and (typically) blew it out of all proportion.

The CML said that (as part of a much longer statement), to stop the housing market dead in its tracks would require at least a doubling of the current interest rate. They did *not* however, at any time say that this was either desirable or intended!

The Sunday Telegraph, however, grabbed that line, took it out of context and blew it up into a massive article, then the other papers saw that and decided to run with it.

Frankly I'm not worried about a housing price crash like the '80s. The situation is completely different, we don't have the problems with staying in the ERM at a ridiculously high exchange rate and having to jack up interest rates to keep the value of Sterling up, nor do we have the millions of unemployed from that time, so it's simply not going to happen like that.

Put it this way, I'm a very "risk averse" investor, but I'm planning on re-mortgaging my flat on a "buy to let" and getting myself a 3 bed house in the not too distant future and there's *NO WAY* I'd be doing that if I thought there was a sizable risk of a housing market collapse!

[Neil]

Originally Posted by Graham

Put it this way, I'm a very "risk averse" investor, but I'm planning on re-mortgaging my flat on a "buy to let" and getting myself a 3 bed house in the not too distant future and there's *NO WAY* I'd be doing that if I thought there was a sizable risk of a housing market collapse!

Ditto-I'm doing exactly the same, & as I said earlier-rates would have to rise substantially for me to justify a fixed rate mortgage that is (currently) £80.00 per month more expensive.

[andygrif]

Originally Posted by Graham

The CML said that (as part of a much longer statement), to stop the housing market dead in its tracks would require at least a doubling of the current interest rate. They did *not* however, at any time say that this was either desirable or intended!

The Sunday Telegraph, however, grabbed that line, took it out of context and blew it up into a massive article, then the other papers saw that and decided to run with it.

But even at a tiny growth, we still have a situation where first time buyers cannot afford to get on to the ladder. One of two things financially would have to happen - either salaries increased at way beyond the rate of inflation or a decrease in the cost of housing to even the balance. If the value of houses falls, then you're on the way to a crash - even if it not of the scale of the late 80's, there will still be a lot of people left with negative equity. If the interest rates rise astronomically, then many people will not be able to afford the payments - as people are now having to borrow the absolute maximum possible, sometimes more to get a house - it's a catch 22 situation unfortunately.

[QUOTE=Graham]
Frankly I'm not worried about a housing price crash like the '80s. The situation is completely different, we don't have the problems with staying in the ERM at a ridiculously high exchange rate and having to jack up interest rates to keep the value of Sterling up, nor do we have the millions of unemployed from that time, so it's simply not going to happen like that.

No, you're right - there were a lot of external forces that contributed to situation of the 80's. There are quite a few similar external forces this time around though, such as the Euro referendum - for example what will happen if the country votes to keep the Pound - will the rest of the EU vote to have us out? Unlikely as we are one of the strongest economies in the Eurozone, but it is a consideration.

Originally Posted by Graham

Put it this way, I'm a very "risk averse" investor, but I'm planning on re-mortgaging my flat on a "buy to let" and getting myself a 3 bed house in the not too distant future and there's *NO WAY* I'd be doing that if I thought there was a sizable risk of a housing market collapse!

I'm not saying you're right or wrong to do this - everyone needs to be aware of risk, and there is no way that even the most competant economist (and I'm not one of them!) can predict whether there will be or not. It is always a possibility. Also you already have the equity there, the current situation affects first time buyers the most right now.

[etccarmageddon]

that's right Andy - the first time buyers are being priced out of the market plus the buy-to-let market is heading for saturation. People are over extending themselves in order to get on the ladder or move upwards - add to this the prospect of an interest rate rise and you have all the ingredients for a 'correction'. in the same way the stock market 'corrects' itself when it has gone too high.

the only positive is that market supply of new houses isnt matching demand.

if you intend to buy a house now just remember this... the best time to buy is at the bottom of the market not when it's at the top.

[Pierre]

if you intend to buy a house now just remember this... the best time to buy is at the bottom of the market not when it's at the top.

Another saying is

A house will never be cheaper than the day you buy it

There is always a very slight risk of negative equity, if there was a crash. But it is a slight risk, also there has to be crash. I'm not convinced there will be one. A slow down yes. But that just means property prices wont rise as quickly. It's unlikely that prices will drop.

[WHISTLED]

Just found this thread - How right you were!

Watching Panorama now, and althought its not a nice thing to say some of these people (on the programme) deserve to lose their houses, one lady fell behind with her first payment and the experts say she never had a chance in keeping up!

The property decline is one thing and the banks have a responsibility but ultimately its your own responsibility to ensure you can can afford payment in the event of problems.

[handyman]

Been waiting for this to happen for the last couple of years. (sorry to any of those affected by this).

Currently paying less than a 3rd of the price of getting a mortgage in this village which is funding a stress free life. I'm thinking about increase my savings so that 18 months down the line I can as panorame put it 'put in a cheecky offer' on one of the many town house developments round here that are just not selling. The ones opposite me £200-400k have been up for sale for at least 18 months if not almost 3 years so the developers must be thining that they will never sell.

I looked round a 2 bed modern luxury flat the other day that is priced at £175k. i'd love to get it only i think I could only afford £80-100k Which I still think is over priced for it.

[peanut]

Originally Posted by WHISTLED

Just found this thread - How right you were!

Watching Panorama now, and althought its not a nice thing to say some of these people (on the programme) deserve to lose their houses, one lady fell behind with her first payment and the experts say she never had a chance in keeping up!

The property decline is one thing and the banks have a responsibility but ultimately its your own responsibility to ensure you can can afford payment in the event of problems.

Whilst I do agree with what you're saying, there was a time where nothing else matter apart from getting that foot on the ladder, some knew the risks and ultimately do have themselves to blame. But personal circumstances can change quite easily and quickly through no ones fault.


The one that was behind on the first payment, well I think some of the blame has to fall with the lenders there at least, why or how was she accepted is another matter.

I wouldn't want anyone to lose their homes as that must be terrible. But taking a mortgage is a risk, there's always winners and losers.