economy..

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.

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.

Originally Posted by DanDare

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.

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

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.

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.

[northwind]

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.

Originally Posted by northwind

stuff

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.

[Biker Biggles]

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.

[Gazza77]

Originally Posted by HooliganDan

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.

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.

Originally Posted by anna

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???

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