PeteBrant

If you look at the trend from the 1920s House prices have risen consistantly. In terms of percentage.

There is the odd dip of course (even the "crash" of the 90's was only a 4% dip followed by two years of zero growth)

But the price always recovers.

So on the face of it there is no reason why you wouldn't expect this trend to continue. Generally rising, with the odd dip. Its around 4% a year taken as an average


Except for two things.

(i)Consistant low interest rates - We are in a period where interest rates are consistantly as low as they have ever been. Far lower than the average 8% between 1967-1997.
This has driven people borrowing crazy - People have been able to borrow far more than they would ordinarily been able to and as a result pushed the price skywards. As well as this, people that should not have been able to borrow have been allowed to.


(ii)Because the avergae house price rises as a percentage consistantly, obviously the biggeer the original figure, the bigger that , say, 4% per year is.

Now, unless inflation is also around 4%, (by inflation I mean the official figure you company and government sets pay rises by) then there is going to be an increased gap between average wage and average house price. The last thing you need with a consistantly low interest rate, is a consistantly low inflation rate.

And this is, of course, exaclty what has happened.

End result, the ratio between average wage and avergae house price is now approach 10:1. THis is the highest it has ever been. Since 1997, the record has been broken every year.

THis is what is forcing FTBs out of the market. We all knew that at some point FTBs would dissapear - And its looks like it has happened, with the lowest number of FTB mortgage applications since 1975.

This isn't simply due to FTBs being priced out, but it a combination of this, and the fact that Mortgage companies are withdrawing offers left right and centre and of course the overall credit crunch atmoshpere.

The only thing that can stop prices from going into free fall IMO is the Government stepping in with some form of incentive - Like bringing back MIRAS or such like. (which , of course, they cannot afford to do)

Olly

Scoobynet General: A couple of Diana stories and a discussion on house prices seemingly every day.

I'm off to the Daily Mail website to look at Subarus.

stilover

This is Non Scooby related dumb-***.

Try clicking on the General page. You'll find loads of threads about Scoobies.

shamrock

Did anyone see either the News at Ten on BBC1 or ITV last night?

I was still celebrating the football result so I may have misheard this but on the BBC they had a couple with a flat in Brighton that had just remortgaged.

Their payments 2 years ago were £800 a month but are now £1200 per month!! I'm sure I misheard them so I was wondering if anyone else heard the same?

Then on ITV they showed an Estate Agents window.

There was a picture of a house in the middle of the window with what looked like a price of c£315,000 crossed out with a red line and reduced to c£151,000. Did I see that correctly?

Nobody in the office seems to have seen these programmes last night so I'm wondering if it was all a dream.

rossyboy

iTrader: (8)

yes, I heard that.

but pretty sure you dreamt that. A 52% fall, not likely any time soon.

Olly

I remortgaged not so long ago, and my payments went up too.

I tripped over a pile of logs yesterday, but that didn't make the nightly news.

Hardly sounds worthy of a News at Ten slot.

SlimJ_2005

I had to laugh at that tbh, perhaps they can afford the extra £400 increase, but for those that could only afford £800 maximum, perhaps £900, are surely going to suffer but then they should expect that the future is uncertain and mortgage rates were likely to rise.

I think 5% mortgage rates or whatever they are now are probably as low as you're ever likely to see, so to buy a house with a 100% mortgage and expect the payments to stay the same for the next 25 years is pretty stupid!

Glad the prices are comming down, got a nice little deposit being saved up at the moment for my first home!

lozgti

It will be the only thing on the news soon.

Mind you,make a change from blooming CO2 discussions

Terminator X

iTrader: (7)

Must resist temptation to post ... aaarrrggghhh, failed!!

TX.

Terminator X

iTrader: (7)

Good grief ... yet more crystal ball gazing! As if that will ever be standard practice (does it even exist today other than one or two cases?).

TX.

lordretsudo

These threads are always interesting (and entertaining), especially the glee that certain people take at the prospect of a fall... I agree with a lot of what stilover said in post 29. We've got (or had) around £100k of equity in our house, and are thinking about moving in the nearish future. As things currently stand, we'd have a very hard time selling our house so a fall may help (as long as more expensive houses fall by the same % otherwise we'll lose out).

I don't personally believe a largescale fall is probable, more likely a correction of something like 10% over a year or so. I think the situation with mortgages is more worrying - we recently finished our 2 year fixed deal and have reverted back to base rate. When looking at remortgaging, most deals only saved us £30 or so a month (on a £1000/month mortgage), and required a fee of £1500 or whatever to set up. A total waste of time...

One other thing that always seemed a bad idea to me were those 100+ % mortgages. If you don't even have the will power to save a deposit for something as expensive as a house, it doesn't bode well for your future prospects IMO. When we bought our first house we were earning a pittance between us but we still managed to save a 10% deposit, plus enough to cover stamp duty, fees, etc.

PeteBrant

10% would be pretty large scale.

If someone brought a house today for £200,000 with a 95% mortgage, when they come to remortgage in two years time, say, they won't be able to because they will be in negative equity.

Tidgy

have to say im one fo the lucky ones, i currently rent, and was struggling to get on the property ladder. the drop in prices , if continuing, will alow me to buy a house

Terminator X

iTrader: (7)

They aren't influenced by housing, they do what's best for the UK.

TX.

lozgti

So why was Gordon Brown (following the last cut) urging the lenders to pass on the interest rate cuts to all the borrowers?

(and funnily enough,lenders have ignored him)

lordretsudo

Fair point, but only true for people buying houses in the current climate (and how many of those are there?). Anyone who bought over the last few years will already have enough equity to withstand a 10% drop. I'd say it would take a drop of somewhere in the region of 20-25% to really cause major problems.

al4x1

are you lucky though, If the drop continues it will be because people are having trouble getting mortgages and the offers are more and more expensive. I'm glad I bought when i did and that I've a tracker mortgage at a rate you can't get now without a large up front fee and also redemption penalties.
Round us in the South its not bitten yet and there is still demand there, my brother in laws an estate agent and they are having to work harder but sales are on a par with last year. A lot of it is media driven as lets face it if you own a house today and can sell it there is nothing to stop you moving as mortgages are still there if you have some equity.

zip106

There seems to be no point looking at B of E base rates.
The only rate that matters now days is the LIBOR rate. That's the one which will determine how much you'll be paying.

I'm coming off a 4.65% fixed rate soon but I know I'm lucky and at the moment I can afford the increase that'll come.
I'm only borrowing 41% of the value of my house so there's a long way to drop.

I can't imagine trying to buy a house for the first time, now.

Scoobychick

iTrader: (1)

The Daily Mash - HOUSES WORTH LESS THAN THE BRICKS THEY ARE MADE OF

richardg

bit rat faced last night were you? didnt; see that - i was busy watching shameless

lozgti

Wayne Hayes, 36, pulled apart his detatched, four bedroom house and put all the bits on e-Bay after the best offer he received was a can of dog food and a dirty stick.

He added: "I got nearly 500 quid for the bricks. Once you add in the copper wire, the light fittings and the Belfast sink I've only lost about three-quarters of a million."

shamrock

Yep

It's not easy to focus on the TV when the room is spinning

Shark Man

If Bentley did mortgages, their response to 90% of applicants would be :





If the banks didn't allow people to borrow stupid amounts in the first place, this situation wouldn't have arisen

Norman D. Landing

Yay, glad I have a staff mortgage which tracks the BoE base rate

unclebuck

The squatter who currently occupies No.10 was never elected in the first place! He has no right to be there whatsoever.

richardg

i can recommend leffe blond btw

EddScott

Down she goes to 5%

stilover

Saving accounts to go straight down.
Mortgage rates to remain the same, or go up.

Just means the banks can borrow from the BOE for 5% while charging there customers alot more.

Should have stayed at 5.75% for a couple years if you ask me.

PeteBrant

Well obviously those people that have BoE base rate tracking Mortgages will benefit.



But I absolutely agree that the insterest should not have been lowered.

It is not high interest rates that caused the problem, so lowering them will do absolutely nothing.

It's like going to the doctor with a broken arm, and him putting a plaster on your ankle.

(in fact it's probably more like him breaking it a bit more for you, since low interest rates combined with low inflation is absolutely the cause of the **** we are in)