rob878

Ok moving into thick mode here, everytime i see a housing thread on here, i see the doom merchants rubbing hands and saying "oh good house prices falling now i will buy".

When i was hunting around for a new mortgage product, companies where requiring at least 10% deposits and for a decent rate of interest and not a huge signing on fee, at least 25% deposit. (Not sure what they are asking for now)

So where are all the reasonable rate products for these first time buyers? As unless you have a stonking deposit, you may not be stiched on the price of your house, but surely you'll be stitched on the mortgage rate instead
??

David Lock

I needed a few bob and didn't want to downsize as I am very happy where I am. And that would have been 20k or so just to move with fees etc. So I took 100k out of equity at 5.99% fixed and I can either pay this off monthly or let it roll-up. I could have given this dosh to my kids as deposit/s if they were in a position to buy. I can't be repossessed for not paying the mortgage and can take the scheme with me and move if I want to. If/when prices start to move upwards the gain in house value will exceed increase in loan if you see what I mean and I accept this may take a few years. dl

cookstar

iTrader: (6)

There are motgages about if you have deposits etc.

richardg

remember prices aren't the same as values. prices are always overstated, that's why there's room for an offer in every deal!

Henrik

iTrader: (5)

How does this work then? If you don't pay, surely they'll petition to have you bankrupted and then you'll be forced to sell the house anyway.

Henrik

iTrader: (5)

I don't think we're doom merchants. I think the term "joy merchants" fits better, as surely it's *bad* to pay too much for housing? The doom merchants are the ones desperately trying to talk the market up, thus essentially trying to get house buyers to commit to a lifetime of mortgage misery.

Hand me the noose

rob878

i take your point, housing prices never really bothered me, as i was lucky enough to buy the house i wanted each time and both where/ are at a price i can afford. For me i bought at the very bottom the housing market sold at the top and moved (not by judgement just pure luck i guess). Now my mortgage although larger than my initial one is still proportionally the same amount of my take home pay.

I would however be in my brothers situation, as each time he saves up, the goal posts move and he's back to saving again. He seems to have been saving for years and as i know he's a tight **** i'm positive he'll have a rather large deposit (ohh err missus )

Oh and i agree that it is bad to pay too much for housing, i see housing not as an investment but a pretty basic need. The house i currently live in i couldn't buy in my home town, and i dread to think how much it would cost around the south, which is a pity (for me, maybe not others) as it pretty much means i wont move south.

MikeCardiff

iTrader: (2)

They may drop 'on average' but it depends when they take the peak from - if it was 12 months ago when the market had stalled, and most houses were at least 20% overpriced in the first place, for the majority of people it wont be that big a drop.

Also, the hugely overpriced houses in London, 1 bed city 'apartments' and new build executive estates all skewed the average house price figures, and these are the ones that will get hit with the highest drops.

For most normal people living in normal houses, that they didnt overpay for on 100% mortgages, a realistic drop of 10% to 15% isnt going to make that much difference, and probably wont put them into negative equity.

As for the comment on older parents downsizing - mine just did this, only problem is they bought a bigger, more expensive house with a garden 4 times as big in a much nicer area, so I think they missed the point somewhere ( they also said us kids wont inherit it as when the garden gets too much for my dad, they'll sell the house and buy somewhere much smaller and cheaper and live of the money they make ).

David Lock

The mortgage just rolls up and increases year on year. When I die the house is sold and the mortgage company get repaid and the balance goes to my Estate. If house prices rise, on average, by 2-4% a year I win in the long term. If they don't then my kids lose out. dl

nixxon

Unwise, greedy people only live in London?

Henrik

iTrader: (5)

Ah, makes sense now, thanks You're in a good position

dpb

I very much think inflated prices exist beyond the realms of knighstbridge - infact i suspect they exist beyond the home counties !

silent running

It's very simple to me, so apologies to those who get upset. I've been through a serious 'credit crunch' of my own several years ago and as a result I got totally out of the housing market i.e. I jumped rather than waited to be pushed. So I see things from a much more pragmatic viewpoint.

In the last ten years, lenders allowed more than the traditional 2.5x single or 2x joint income. They also allowed huge LTV percentages which never happened before. The idea that you had to save up for a deposit, to show commitment to spending your own money rather than the bank's, was out the window. This flood of easy money to a nation of young and middle-aged Britons who believed they had the right to own a house as long as someone would lend the money, was what has caused this problem.

Again, I don't wish to offend anyone here, but the housing market is, was and always will be a gamble, as is everything that you sink money into. The last decade has seen a nation of gamblers, who mistakenly thought that house-buying was a gamble which you couldn't lose on. And if you could double or triple your money in a few years, why just get in for 50 grand? Why not 100 grand, or 200 grand? Who cares that it was 6-8 times your actual salary and the salary of 95% of the people around you? If everyone else is doing it, it must be safe, right?

Wrong. I honestly have no sympathy with these supposed 2.5 million people in negative equity. They paid far more than they should have in the last few years and instead of standing back and saying 'wtf - how can a pile of bricks and mortar be worth 150 grand' they saw it as a bargain and didn't want to miss the boat. There's no-one who bought their house 10 years ago or more who's in negative equity unless they've remortgaged and again, gambled that they had an investment that couldn't lose.

The real question is why do we as a nation feel sorry for the richest segment of society i.e. homeowners who chose to gamble as much as they could manage to scrape together because everyone else was in on it and they didn't know better? Are we seriously pretending that none of these unfortunate gamblers ever questioned the value of what they were buying or worried about the obscene amounts of money they were allowed to borrow?

When the average house comes back down to 3 to 4x the average salary, I'll look at the housing market again. The only people who benefit from inflated house prices are property developers and I don't give a flying **** about whether they go out of business. First time buyers don't benefit from overpriced small homes. Established homeowners don't because when you move house you have to pay more for your next one, so it almost makes no difference. No, the only people who benefit are developers OR gamblers who have remortgaged to get 'free money' to spend on kitchens or cars or yachts.

And don't get me started on weak-willed first time buyers who you still see on the telly whinging about how they can't get on the housing ladder - AAARRRRGGGHH!!!!!! You're not supposed to be able to, at current prices! Be strong, rent a place for a while or live at home until prices come down to a sensible level that you CAN afford. If all FTBs did this, half this problem would have been avoided.

The market will correct itself. I have no doubt whatsoever that a 25% fall is a gross underestimate.

WRXWagon.

I have been looking to buy in the South.

The new builds are amazing value at the moment with builders fighting each other for my money.

I will wait another 6 months and see how far it has actually fallen, Nationwide have always been rather conservative in their estimates. If they think 25% down I would not be at all surprised if the outturn was -40%

SlimJ_2005

I'm a potential first time buyer and can only see the fall in prices as a good thing, I'm in total agreement with Silent Running above. There is no way I would be willing to splash out £150k+ on a small 2 bed apartment that are for sale around this area of the South East and anyone silly enough to have spent that much now with a massive mortgage must be feeling quite sick as those prices begin to fall! I also think that the governments planned intevention to kickstart the housing market again is incredibly stupid, they should let the problem correct itself, and it will eventually.

A friend of a friend bought recently, a small house but with a 105% mortgage, I feel sorry for them as they have a young child now, but I also think they were quite silly to get a mortgage on that scale.

In my opinion, I see a 20-25% deposit as a sensible amount to find before buying your first property, perhaps with mortgages limited to a maximum of say 75-80% we wouldn't be in the mess we are in now. The money being handed out by banks has been absolutely rediculous and they really only have themselves to blame for the conditions occuring now.

Me, while the property prices are falling I think I'll sit tight and save over the next few years towards a nice hefty deposit to minimise my future mortgage repayments!

lozgti

They are asking for 25% deposits because I reckon thats how much they reckon the market will fall.

They then have their'cushion' as it were and the house should still be worth enough to pay back the mortgage company if it is reposessed without having to chase the householder for any shortfall.

We could talk till the cows come home.Bottom line is,its all going wrong,lots of people are going to suffer and no,we weren't in a new phase of home ownership where prices continued to rocket forever and a day without ever being corrected

Oh,and I have no sympathy whatsoever for buy to letters,builders or investors all of whom have taken the pee for the last few years AND built shedloads of bleedin 'city living' things or 'flats' as we humans call them

MrNoisy

iTrader: (28)

Couldn't agree more. If these buy to letters had put their money into banks or other investments instead of the property market half these problems would have been avoided, although IMHO it still doesn't address the issue that people are allowed to borrow far more than they can afford to ever pay back without much in the way of regulation, which I find disturbing to say the least.

My wife and I moved just before the market started to fall and into a new build; we were lucky, we got our new one for about £30k below the asking price, so although we've had to borrow more to bridge the gap, we're prob. not as screwed as someone who paid full whack....still not looking forward to our renewal in February though

MikeCardiff

iTrader: (2)

I dont see that buying a house is 'a gamble' - most people dont buy their HOME as an investment, its somewhere to call your own and to live.

If you borrow sensibly - i.e. not what the banks will lend you, but what is affordable in your situation, and dont overpay or overstretch you are unlikely to have problems. And most importantly, dont be tempted to 'release your equity' to pay for a new car or holiday as this is just like taking out a really long term bank loan, then paying back twice what you borrowed.

House price rises are mostly just dinner table talk for people who like to boast about how much theirs is worth, not realising that it isnt real money the house has increased by, and unless they are planning on selling up and renting they'll never see the benefit of any increases.

As an example, we bought 18 months ago - when we went to the IFA we could have got a 100% mortgage, and they were willing to lend us over 5 times our joint income. Apart from the fact this would have given us huge mortgage payments, we would have just ended up buying a house that was twice as big as we would need with all the extra running costs.

In the end, we decided to take out a lower LTV and pay a cash deposit from savings, and the amount we borrowed ended up as just over 2x our joint income on a 5 year fixed rate. The thinking behind this being that if only one of us was working for some reason, then we would still have enough money coming in to cover the mortgage and bills, and we would also know exactly how much the payments would be each month.

We are also building up savings so that in 3 and a half years when the fixed rate ends, we should be able to pay off a big chunk of the mortgage ( possibly around 50 - 60 % of the outstanding ) so even if rates go really high when we have to get the new mortgage, we will be able to counter the higher monthly payments with the lower loan value.

Borrow sensibly and within your means, and leave plenty of extra money as a security cushion and you can ride out any bad times easily enough.

silent running

Yes interesting that buy to let has come up. My best pal is an estate agent and more recently has been involved in marketing newbuilds in a fairly affluent city. A few years ago, the market was, as we know, climbing unstoppably and people were wondering about getting out at the top of the game then hanging on and finding that prices still kept rocketing, all they had to do was sit there and put their feet up. Anyway, I said to him, how can all this be sustained without a large pool of first time buyers propping up the rest of the housing ladder? The answer - in part, huge mortgages which would never normally have been approved in the past, but mainly BUY TO LET. The property 'boom' has created a new land-owning class of people who got lucky with their own houses, traded up and up on a never-failing market and then used BTL mortgages to start their own min property empires. Fair enough, you might say - I'm all for people taking risks and working hard to achieve what they want. But the side effect of this was that the houses that these new BTL landlords were buying were of course the cheapest terraces and cottages that weren't too much of a financial burden at first, and could be quickly and repeatedly let out and whose tenants wouldn't be too fussy. In other words - they bought up all the stock of homes that normally only first timers would consider living in, or could afford. So that's how the people already on the housing ladder managed to pull it up after them, whether intentionally or not. The only first timers left were those who gambled unwisely and overstretched themselves.

My sister and bro-in-law just moved out of London and bought themselves an 850k mega-home with the proceeds earlier this year. But instead of taking the money they made in the city and then buying a reasonably priced family home in the country with maybe a 50% mortgage which they could have done easily, they went and overstretched themselves again. The latest figure I can wheedle out of them is that they are totally skint and the mortgage alone is 2500 a month! not to mention what their council tax, heating bills etc will be like. And of course no-one in their right mind is going to take it off their hands now for 850. As you can no doubt tell, I don't have much sympathy for them.

silent running

Can't argue with most of what you say Mike. The problem is most people are NOT as sensible as you. This has been proved by the situation we are in. You were offered 5 times joint and you turned it down because you were circumspect enough to know it would be a mistake.

I would say that you're right, most people - in the 20th century - DID buy their house as a home; a shield from the vagaries of renting and a place to call your own, with little if any thought for whether it would rise in value. In the 21st century I would say the majority of buyers saw it instead as a no-lose investment as well as a home. Perhaps not you, but I think most did. The most valuable things are always those that are least recognised for their investment value at the time they were bought and are just bought because they are liked and wanted.

You are absolutely right to do things the way you are doing them.

lozgti

Quite right,but the opposite for BTL's though.

Using money they didn't really have (mortgage) to buy properties in the hope a tenant would be found to pay the mortgage while the BTL bod could sit back,watch the value rise while someone else paid all the bills.

A gamble if you couldn't find a tenant or the mortgage costs went up and people wouldn't pay the equivalent in rent....you have to stump up the shortfall yourself.If you have a few properties and you are doing this and their value is going down,I wouldn't fancy that position.

Most BTL's I know use borrowed money and the ability to shop around and find better deals has dried up.

austinwrx

[QUOTE=Deep Singh;8120841]
to be honest investment in good quality bricks and mortar in good areas is always a safe bet. its all the the buy to let investers buying lovely mill conversions in terrible areas that make no sense- the areas may take decades to regenerate.

there's some beautiful ones here in Yorkshire- but step outside and all you can buy is a kebab and some alloy wheels or crack - or get stabbed or run over by some yoof. Its hardly waterfront cafe culture which is the bolloxs lifestyle people think they are buying into.

or buying barrett type shoeboxes on some mass estate- they'll never be enough character, infrastructure or quality within the property to see that type of stock as a good investment.

buying flats with massive leaseholder charges ???? just dead money.

funnily enough I work in housing/property for a living so I see it day in/out all the time. some people just buy sooo unwisely. and as I said peoples own greed has forced the market to burst, ditto personal debt.

I come from the old school of if you want something, save for it- don't rack up personnel debt to have it.

I'm hoping market crashes further and there are some more nice cheap properties to buy.

I'm sorry but the type of person who borrowed heavily for the big telly, the fancy car, all the holidays etc etc on a 100-125% mortgage- good luck to them.

MikeCardiff

iTrader: (2)

I agree, long term as an investment, property will always rise, and if you can rent it out for more than the mortgage payments, then someone else pays your mortgage and you still have the asset at the end of it, which in the past was why it worked.

Problem is with the amateur BTL and property developers - they believed the media hype and Channel 4 programmes, and thought it would be easy money, and they would make a killing on a short term investment.

I really cant see how some people got suckered into the BTL thing though - it wouldnt have taken much research to realise that the mortgage payments would be a lot more than the rent you could get, even if you were 'only' borrowing 75% of the property value.

The rented house we had prior to buying was £700 pm to rent, which was about the going rate for the area - to buy the same house would have cost us £250K. No matter how much you fiddle them, its never going to add up as an investment.

s1lko

One thing to bear in mind is the pool of potential first time buyers, who can't currently buy. It's growing. And it will continue to grow until the market settles and lenders loosen their belts a little.

The basic business laws of supply vs. demand, coupled with their eagerness to gain their independence, could see a faster 'recovery' than many reports are suggesting. The first signs of turnaround in the market will, no doubt, be fuelled by the marketing bods at the major lenders. This could, effectively, act as a green light for the first time buyers to start clamouring for their first home. As a result, hearts rule over heads and prices are given a tickle.

Of course, the banks still hold the purse strings, but there is plenty of time for the first time buyers to start scraping deposits together. Unless they buy a Scooby and have to keep filling it with petrol that is.

I'm not claiming this to be gospel - just throwing it out there.

Naturally, if people (and the banks) showed some common sense in the first place, we might not even be having this conversation.

Henrik

iTrader: (5)

I'm not so sure that even when the purse strings are loosened, the FTB's will be to eager to jump into property immediately. Why would anyone want to buy into a falling market, especially if the market has been falling for some time, so that the new thinking is that property always goes down?

What I mean by the "new thinking" bit is that up until very recently, most people agreed that house prices always went up. Of course, there are several instances in the not too distant past where prices actually *did* fall (up until 1995, roughly), but because it's more than a couple of years back, people have forgotten about it and thus over the time span people can remember, prices have always gone up, so the incorrect conclusion that prices always rise is drawn.

I think we might potentially see something similar on the way down. Having said that, I have been known to be wrong about property for about the last five years

s1lko

I did mention that it could happen when the market settles.

After all, prices can't continue to fall forever or we'll end up giving houses away. No mortgages, just an all out bundle for the best properties.

I 'bagsy' Buckingham Palace...

austinwrx

we've just taken on 5 mill conversion one bed flats. well crappy bedsits in my opinion, just done to a high spec.

some idiot BTL investor from london has bought them 170K each.

can't sell, rent etc.

so we taking them on and giving him £80 a week each. that's all the market is worth for them. we'll put single homeless people in.

another persons pain is someones gain.

if he didn't do his research why should I care ?? he'll be bankrupt soon no doubt.

speedking

Excellent posts "silent running" and MikeCardiff.

We bought our first house for £36k. We liked one for £38.5k and could have stretched that far, but thought it a bit risky That was in 1988. I do slightly regret not going the extra, but hindsight is a wondeful thing.

The problem now is going to be when those that have overstretched, get made redundant, can't keep up the payments, get repossessed and turfed out on the streets. It will be us taxpayers who's money is used to support them.

Now I don't have a problem with that in cases of genuine need. But I have gone without a new car, gone without a large plasma TV, gone without a second holiday, to ensure that I can keep up my mortgage (and other bill) payments. Why should I support those that haven't. They will have had their cake and eaten it.

Before you qualify for the government handouts there should be a basic standard of living to which you must adhere, i.e. small car, small tv, no Sky, etc.

I just have a horrible feeling that if I was made redundant my savings would count against me, whereas if I'd spent it all (and more) on luxury goods then I would be smiled upon by the benefits crowd

davegtt

I think alot of people are still safe, the problem will be for them that took on a massive mortgage, say 90-95% of the value. If/When the property drops in price, negative equity isnt a problem if you are not selling but what happens when that fixed rate runs out. Who will give you another mortgage for the value you require on a property thats not worth that? Maybe your current lender but you have a good chance of getting screwed on rates etc.....

s1lko

While, by luck more than judgement, I managed to choose a 5yr rate remortgage just before the market plummetted, this is a subject close to my heart.

A very good friend of mine bought his first house around the peak of the market, with very little available deposit. It is a humble three-bedroom ex-council property, which was the minimum he needed and was keenly priced at the time (a repossession). He has a young family, with three kids. He's never been a big spender and isn't bothered about living it up with flash TVs or cars. By my estimation, though, he's at the end of his discounted period and staring at negative equity. Of course, he's got no chance of remortgaging and can only take the increased repayments on the chin, while hoping for the best. With five hungry mouths to feed, coupled with rising food and fuel bills, this isn't going to be easy.

Not the most exciting story, I know, but I just wanted to paint some middle ground to balance the talk of greedy buy-to-letters and the must-have-it-alls. This is a guy who works as a kitchen fitter (not a financial expert) and wanted to do best by his family. His situation is probably typical of a lot of the people currently at risk of losing their homes because of irresponsible lending, rather than personal greed.