economy..

I'm hope the entire housing market collaspes, property is way over priced, I have to work in London. Yet I don't paid anything near that reflects the cost of buying a flat/property. What are first buyers supposed to do?

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.

There is still the dream of selling up at retirement and moving abroad... at least for me.

[anna]

Xan .. I know

It wasnt just houseprices though that I was opening a discussion about as has been pointed out house prices are just a marker or a sympton of the economic position we are in.

Houses are something that I have always thought of to invest in as one might a pension scheme as a long term investment. If you have to buy to live then obviously it poses greater problems if not budgeted correctly and many people buying for the first time do not have all the information infront of them or the knowledge to know that they need to allow themselves a bit of extra for the inevitable interest rate changes. Something that i believe the FSA are trying to change rapidly.

But as has been pointed out it is based on the increasing debt culture that Briton is growing and no real steps seem to be taken to try and pan this out.

I have always thought that it is ridiculous that kids in school are taught everything bar how to handle money. No teanager is taught how to open a bank account what a credit card does how it works and more importantly how credit ratings work.. I do wonder if this was taught if people might have a better understanding on how to manage their own finances in the real world rather then keep looking for borrowed money to sort it out?

Not read the whole thread, but Northy's post is good.

Reposessions are going to rise. The banks have been far too lax in their lending policies.

Many young people have bought on 100% mortgages and in some cases even higher, 125% etc as they don't have the money for furnishings, etc and many buy stuff like cars and holidays, so they are in negative equity before they start, but they are hoping that the value will rise fast enough to cover it. They have also bought on a stretched budget, ie: they borrowed as much as they could afford to repay, they are overdrawn before payday every month and have no disposable income. 3 years ago you could get a fixed rate mortgage for two or three years at 4.5%, those fixed terms are coming to an end and moving onto 7.5%. There is a lot of young homeowners that are going to stop paying their mortgages just shortly as it's crippling them.

Reposession is expensive and prices are already dropping, so for the banks it's not just the arrears on the mortgage, the longer they leave the problem the less money they will be able to re-coup, so as Ed has described they are being very aggressive with the reposessions.

Many folk have borrowed on overinflated equity they have earned in the last 7-8 years, and made home improvements or bought properties abroad. House prices will drop and leave them with negative equity.

What is already happening in areas in the south where a large family house on 100 grand mortgage, now worth 400 grand, is that people have remortgaged their houses on the equity and used the money to buy houses abroad for cash (and the banks have allowed this). So they are maybe left with 50-100 grand equity in the house (and 300-350 owing). The house price falls by 50-100 grand and they go into negative equity, so they hand the keys back to the bank, retire and move to the house in France, over which the bank has no security and cannot repossess.

[Sid Squid]

So it's just left for me to buck the trend for thinking there will be a specific drop in prices. Overall Andy's right, things may be due a 'correction' but it's not, overall, going to happen if the pressure on housing remains, same as in the job market. Our population is rising and becoming more centred and urban, as such the demand for housing isn't in the foreseeable going to ebb away particularly in such areas, this means that in the most densely populated areas prices may slow in their rise, but they are most unlikely to fall, which is exactly what happened the last time there was some change in the rate of rise, the average countrywide price may have dropped, (albeit an irrelevant amount, and it made that back again soon enough), but the prices in the densely populated areas didn't.

Our fixed rate is up in June and as such will be looking at deals when that comes around.

When we took out our mortgage, we went 95%LTV. At the time, we were both on lesser wages but still took a hefty 4x Joint which on reflection is a lot of risk. That now has fallen to just above 2.5x Joint which makes things a little easier to stomach, and thankfully I have a structured pay scale where I can see what I will be earning each year.

We actually do very well with our disposable income and I havent really felt too much of a pinch in moving as the money I had I was putting away for a deposit when I didnt have a house. It is a worry when thinking about moving houses in the future as those too will have risen and we will find it a struggle to take on much more debt.

My mate is currently developing, building new properties and converting barns etc. With the slowing market, their properties are failing to sell, the bank is not wanting to release much more cash and they have a whopping mortgage which they have had to self certify on. They have took a massive gamble which will make them very well off if it works out, but could put them on the bones of their **** if it fails.

My 2 Pence is that its not the goverments fault, these seen to be natural cycles. I seem to remember (just old enough) that pep's went exactly singing the tory praises back in the 90's.

I saw on the news that the average morgage is 9 times the average wages, as many have said this is due a correction its just how big. From what I can see if the economy doesnt slow too much the house market will be alright, it may fall a bit but any bigger falls will bring in so many new buyers that the market will natually rise again. IIRC the big problem is if america goes into a deep recession, this could trigger a worldwide recession and as a county that has a lot of companies working offshore (just look at the breakdown on the FTSE) we could then be in big trouble.

Its a great time to be looking for a new job. Glad I havent bought a house recently as though

[tigersaw]

What falling house prices? - I don't see them, prices are still rising, allbeit slower as far as I can see. Furthermore, if I had to rent my house instead of buying it, it would cost circa ?18k per year - so I'm quids in even if prices remain static or even decline. Whilst there remains not enough houses to go round I can't see much of a change.

Originally Posted by DanDare

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.

Originally Posted by Dave The Rave

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.

I'm in the fortunate position that I've not that long ago bought a house too. Two years ago actually, but our fixed rate is still valid for another 3 years yet.

If house prices fall, for people in my position, who cares? I'll probably be in this house for a good 20 years yet.

I have to say I agree with what Mr Squid was saying. If they do reposses houses, then who are they going to sell those reclaimed houses to? I would imagine that the people that have been evicted would appreciate having a house. All repossessions will do is lower the average house price (as the banks will slash prices in the attempt to recoup as much of their costs as they can).

I see it as following the generic supply & demand rules of business. That's great, for people like me, I just need to be careful about when I sell my house, then it makes no odds to me at all.

Unless the population starts dropping off fairly rapidly or stops coming into the UK from the EU I cant see any long term decline in house prices. The rates may rise the prices may fall a little but thats not a problem if you are in for the long term and have some form of plan in place.

Its winter and right now its a buyers market - people are cautious - this is an opportunity as well remember as it means sellers arent getting offers. Spring time comes and prices will rise again. Watch out for new build apartment estates as I cant see them increasing much... to many coming onto the market so they are harder to sell and normally over-priced. Think also about the buy to let option and wiegh up what a place would rent for.. it maybe back up plan should you be out of work for a while.