economy..
 

so just a quick thought for the day what are peoples thoughts on the falling house prices and the inpact on the economy this might have???

Re: economy..
 

I've lived in London for the last 10 years - never been able to get on the housing ladder. I would be glad to see house prices fall.

I have been totally priced out of home/flat ownership. Houses aren't worth this much. I would love to see ?50-75k slashed off the price of houses.

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I wouldn't. I'm in the middle of selling mine! They can slash 50-75k in a month or so, ok?

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Its gonna affect everyone in different ways due to their circumstances.

I would welcome a house price fall, then I can afford to buy, however those looking to sell or tied into a mortgage would not see it as so good.

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The signs have been hanging around for years now; have a look at housepricecrash.com for some major doom mongering!

I imagine it'll be ok for those not planning to move for a long time / or with little or no debt secured on their property. Anyone in a different position may be getting nervous now though.:sad:

Re: economy..
 

Yup obviously it's going to affect everyone very differently according the position they are in and a lot of people joined the housing market to be able to make profit from it in the last five years are now finding themselves in a bit of a tricky situation trying to make mortgage repayments.

But it isnt just houseprices that are going to be affected by the recent turn of events with interest rates falling as well.

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< not an economist. Mind you, they seem to have as much difficulty as everyone else in predicting the future :D

Do kinda think that people perceive wealth which doesn't really exist when their house is worth a fortune - wheras in reality if everyone's house price halfed over night then they wouldn't actually be any better or worse off (as everyone's in the same boat). Even negative equity isn't actually harming the individual so long as you don't need to sell your house; and therein lies the problem. People divorce or split up quite a bit these days, and after that you either have to be either *extremely* amicable, or sell up.

I do worry (with personal bias admittedly) however that we've already gone way past the point where first time buyers can get on the ladder, and with the afore mentioned divorce rate, money which was typically inherited and passed down now gets split a lot more ways. So are we content to live in a country where property is wealth and held by the minority, or is property a home, somewhere to live, where we'd like to see everyone have a fair chance to own a house and make a home.

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I don't think that the price fall will be that major, if any at all. But then I just bought a new house so I have to say that.

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i have to believe there will not be a crash for the simple reason that i owe a lot of money on my mortgage,

however, the economy wont crash because its balanced, eg. should house prices drop you still might not be able to get on the market as they will rack the interest back up to stop everyone suddenly jumping into getting a mortgage, thus, mortgages become more expensive . Okay so this will scre everyone without a fixed rate mortgage, but thats sort off life i guess isnt it?

Regardless i would still have a roof over my head... even if i was in negative equity!!

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My wife used to be an estate agent and knows a whole lot more than me.

One thing she keeps saying if that first time buyers keep the housing market alfoat and running. You price these people out and you've lost your housing market.

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:winner:

I'm with Luke on this one, they can fall when I've sold mine. A month on the market and one viewing makes me think it might take a while however....

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I had clients in last week, they were not quite 2 months in arrears because he's a manufacturing engineer and his hours have been cut back. I couldn't believe how vicious the lender was being - a building society - in the first letter they even advised them to go talk to the local council so as to be sure they had alternative accommodation for when they were evicted. They have 4 kids between 15 and 3. If I can work out how to do it, I'll post an edited version of the arrears letter. I've replied in a firm but tactful way to see if we can come to some arrangement but I can see I'll have a battle to keep them out of possession proceedings.

However on the other hand, I do agency mortgage litigation advocacy, so I will probably end up doing a few repossession hearings myself.

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Once again the Labour Government is bankrupting the country, good work!

Anyone who thinks the economy is stable; please try to understand how percentages work. Debt is rising on an exponential scale, wealth isn't...

Re: economy..
 

Everyone in "bulk letter writing" grades currently employed by banks & building societies is probably young enough to only remember low interest rates and ever increasing house prices :D Although I suspect the bulk letter writer is now a computer :D

To be honest, if that was the opening salvo letter I wouldn't worry too much about the wording, I got a red reminder from Severn Trent the other week (after their balls ups, profiteering, and insistance that every time it rains it's "an act of god") I've taken them off direct debit. And as a result I forget. Anyway, even the red reminder was full of "thou shalt be sent to the poor house and fed a diet of bread and.... no... wait... just bread" etc.

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With the risk of turning this into a political debate, I spoke to my grandmother over the weekend who has been on this planet alot longer than most here ( she's 91 ) She still has all her marbles.

Anyway she said throughout her lifetime, she noticed Labour Governments spend spend and keep on spending till there's nothing left and were in poo.
Tory's come along in charge and oh sh*t no money in the kitty. Everyone gets hacked off as tax is increased to claw some money back and everyone then hates the Tory's. Eventually money is built up just in time for Labour to come into power and blow it all again.

Makes sense to me

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The house price changes are symptoms of a bigger problem relating to issues in the credit markets, and people having overstretched themselves with credit/mortgages. That's what is affecting the economy at a wider level, and what we should be more concerned about.

IMO the economy is more stable than it has been in past periods of trouble, and with interest rates lower than say the 1990 era the downturn is unlikley to be as bad and many people will be able to ride this out.

But if you've just come out of a fixed rate mortgage and are seeing a big interest rate jump, are having to sell up having recently bought a property, or you're one of the unlucky ones whose job is being affected by the downturn then it is going to be a tougher time.

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I don't understand that, surely it's in their interests to try and keep the arrangement on track?

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I'd worked that out by the time I was 15, having lived through the early 70's and Labour's imbecilic economic policies of the time. A quick check through recent history seems to confirm this. Look at any country where there is a socialist government and you will see high taxes and stifled enterprise.

If we saw a decent return on the billions they are throwing around, then great - but 10 years in and nothing is better. On a personal level, things have got worse under this government. Fed up of paying for something I never get. They have to stop promising jam tomorrow and start delivering.

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Ive got a big mortgage so the last thing I want is for prices to be slashed. If that happens, we'll have to ride the storm out in this 2 bed property. Fortunately I am in job which isnt affected by the markets and if anything an uprising will only bring overtime :D

Our 2 yr fixed rate is due up this year but looking to switch once its up.

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I'm so close! (touch wood) survey was done last week. Can't be long now. This isn't just a house sale; it's my new bike we're talking here!

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We bought just over a year ago on a 5 year Fixed rate of 5%. So we got a very good deal. I dont consider us to have a very big mortgage mind as we had a decent deposit. I think our mortgage alone including insurances etc is only £1100 a month.

House prices would have to drop alot for us to be in negative equity and they would have to drop even further for us to make a loss on the house.

At the end of the day people are not stupid and wont slash the price of their house unless they have to. So prices wont drop that much people will just up staying put.

The only cheap houses coming on the market will be repo's and very desperate people.

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Well twice since the war they've managed it!
I don't think that the tory party could do any better though; they're both as bad as each other.

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I'm buying with my gf, and things are moving along fairly steadily at the moment. We can buy without selling mine, it will just be a struggle to complete the renovations without freeing up the capital a sale would bring. Worse case scenario is mine doesn't sell and we run out of funds for the work; I'll just remortgage mine and rent it out instead. Still all a pain though, not like last time I sold within 48 hours of it being on the market!

Nothing was standing in the way of my new bike though!

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hmmmmm makes me glad me and the Mrs are in a ressesion proof carrer!! and i would rather rent than buy in the curent climate!

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Ed i would be very interested in reading your letter..

those that are currently on fixed rate's are safe for now but when the term of this is up then then deals out there may not be available again and then the increase i mortgage payments diffcult to keep up. I think this is the main worry of many people I have spoken to so far.

slashing prices of the houses generally arent the decision of the seller if their house has been valued by the mortgage provider by the mortgage indecies they have sellers may not have a choice??

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I think your absolutely right but I also dont think we have currently seen the full extent as to what is going on.

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I own my house outright so in theory any overall fall in house values does not really effect me.

I have however see the effects of house price crashes/negative equity etc. in the past, When my brother found himself redundant, 2 months into a new job, so one weeks statutory minimum, negative equity and an unsympathetic lender. He did not tell anyone about his plight until the morning he knocked on my door with his possessions in the back of a van.

Then he had the fun of trying to find social housing. he and his wife were living on my settee. Local council did not consider them in urgent need. In desperation he accepted an offer of a 1 bedroom flat in a nearby town and was then told he was no longer eligible for housing by the council he had always lived in and paid his rates to as he did not live in their area.

My son is mortgaged to the hilt at present. He works in building and has seen the repressed market reflected in his take home. Now the utility bills have gone up 15-20% and I am finding myself slipping him £50-100 a month just to keep his head above water and buy in a bit of food.

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I'd agree with that. I think it would be quite a misconception to base one's opinion on house prices on your own circumstances i.e whether you can/can't afford one or are trying to buy/sell.

With such a high rate of home ownership in the UK, and with house prices being arguably much more valuable than they are actually worth in bricks and mortar, it has a higher proportional impact on the economy than in some other countries. So just because a house crash might help one get on the ladder doesn't mean that the resulting (massive) impact on the economy will not hit you equally hard in other areas.

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BOE just cut the interest rates from 5.5% to 5.25%. Hopefully it will go down another 1/4 or so before I have to renew my mortgage in June.

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It matters not a jot really what you think about Labout or Tory,or even what level interest rates are this month.Theres an ultimate bottom line that transcends all that,and its that this country has been living well beyond its means for over two decades.We produce very little wealth or products that others want to buy,yet we consume vast amounts of goods that others sell to us.Try running your personal life like that,cos the national economy is ultimately no different.

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Mr.Biggles makes sound comment and general purchasing via forms of credit do not help out at all. Gone are the days when people saved for what they wanted,in this day it's want it now and so good pickings for lenders.

I wonder how many people when considering a mortgage actually try to factor in the affect to them if the rate did increase by say 2 whole %? Or do they simply borrow to the max in the misguided hope that things will work out? Some do elect for fixed or capped rates but all of that is a gamble. You can hear them squeal if they are locked in higher than the prevalent free rate and moan again if things are not going there way when it is time to restructure their loan.

It makes me smile when people wring their hands with mortgage rates around the 5% ish mark! What the hell would you have done in 1984 when they hit 15%? Since around 1984 the general lending rate has shown a downward trend but yes along the way the requirement for a brake on spending can be deemed vital and so periods of upward blip may have to be endured.

The property market in the UK is solid. It is subject to various peaks and troughs of course but I am sure I read that the entire cycle tends to pan out about once every 7 years. A property is not a short term investment, is the best advice and one should look to optimise the buy in time and the sell on.

To ease those troubled minds on average property prices in the UK have gained 4.14% p.a during the period 1976 to 2006,(2007 alone saw an increase of 4.2%) Long term outlook is the only way folks.

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It's easy to criticise those over-stretching themsleves, but I can understand why people do it. Like many who live in the London area, I watched prices spiral out of my reach for several years. We finally managed to get together enough to buy 3 years ago, at a bit of a push - though knowing that we were doing so in a reasonably stable economic climate and that we could weather a few % points change.

Fortunately for us the risk worked out, but TBH we didn't have much choice but to take it - as you say long term prices just keep rising, and if you leave it too long you end up having to stretch yourself even more to buy in future.

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correct, the need to drop a little to restore confidence into first time buyers.

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The missus work for an Estate Agent and she thinks all is okay with prices. They are steadily slowing but a crash is not quite accurate. We've just bought a place, just waiting for completion.:p

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If prices were slashed I would be in s*%t street, without a doubt. Myself and my ex bought about 2 years ago and I payed a ?25k deposit. The house has been valued at ?10k more than was payed for it, but we have spent probably half of this on the house. It's bad enough that my ex is now trying to grab half of what isnt hers but if prices fell I would end up with less than nothing! Im all for prices levelling up to decrease the amount of people getting into debt they cant manage however a large number of people being evicted and having no home and no money is not a good thing. If house prices were slashed it would mean alot of people in alot of trouble through no fault of their own.

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House prices aren't generally a good indicator of economic strength though- especially in a market as overdue a correction as ours is, so supported by deep debt. The danger here is that people are buying houses they can barely afford, totally reliant on them appreciating. You see this everywhere, high LTV mortgages etc, the overgrowth of buy-to-let, and the delusional fad for "project management"- buying a wreck, spanding a fortune, and only making money because of the overall boom in house prices rather than adding value.

House price hyperinflation is a total mug's game, the gains are imaginary (since though the value of your house rises, so does the mean price of all housing stock, so your house value is effectively the same) but the losses are huge. The only people who really profit are those who get out of the game- ie sell their house and don't buy another, move somewhere cheaper, or combine 2 estates into one- or people who inherit. But an awful lot of people lose out.

And if prices do drop, yes people will be in trouble but it's wrong to think of this as a drop- the problem in this case isn't due to the fall, it's due to the rise. Falling off a cliff, it's the ground that gets you but it's the height that's the problem. And it's easy to say "Don't buy into an overinflated market" but it's kind of hard not to, us all got to live somewhere.

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I'm very impressed by your post. I've been on at people for years about the fact that sure, their house may be worth ?60k more than when they purchased. But then they've still got to go buy somewhere else, so how have they made money?! People don't seem to (want) to get it.

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The problem is that we have used the ever increasing value of our houses to borrow money in order to finance our ever improving standard of living.Because those house values are essentially "virtual" values rather than anything founded on real wealth,we come unstuck when the creditors want paying and there is only virtual money to pay them with.We have overdone it for years,and I think a huge lesson is about to be taught to those who have not thought this through.

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Exactly. For the sake of an example, I've known people go on about how great it is that their 100k terraced house has risen 10% in value in a year and is now worth 110k. What they don't seem to realise is that the 200k family home they want to move to also rose 10% and is now worth 220k, thus making it even harder to reach. As Northwind says, the rise only benefits if downsizing.

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Back in Brizzle they went up by 14% last year.