Thursday, Apr 26, 2007
Is fate of the housing market sealed?
Guardian: Repossession fears sparked by rate rises
"Even if the base rate stayed the same next month (scenario one) debt write-off rates would still reach 4.1% by 2009, which would be the highest rate since 1992. Our analysis shows that we might not be that far away from record, or near record, highs for write-offs and repossessions". Thus, it is neither supply nor demand, neither Russians nor Poles, neither marriages nor divorces, neither building permits nor developers... it's a simple 'cash squeeze' that will take the house of cards down!
Posted by confused76 @ 09:40 AM (366 views) Add Comment
11 Comments
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1. waitingfor hpc said...
it's coming - and fast - no stopping it now.
2. sold 2 rent 1 said...
waitingfor,
You may be getting more than you bargained for...
3. p. o. o. r said...
So what will the repossession rate be if interest rates reach 7.5%, 10%, 12.5%, this does not take into account what happens if unemployment doubles, trebles, etc. I agee it's like a train coming fast, and I fear the brakes are being applied too late, and have failed. However, the train is still on the downhill run and will pick up even more speed for a while. The end result is inevitable. So do you jump of the train now, and risk a few bruises or hold on tight and wait knowing there is a possibility you could lose everything.
4. dohousescrashinthewoods said...
Supply-side issues are minor by comparison and have been used as a smokescreen to hide the facts.
It was demand-conversion stimulation with cheap credit and easy lending.
Most people want a house (demand) and for a while any fool could buy a house (demand-conversion).
Now that is changing and those who followed their "want" without doing the sums are in danger.
Fools, yes, but children brought up and educated by the meeja (most under-30s?) are taught by advertisers to do exactly this - respond to their desires and impulses and "get what you want".
The ability to delay gratification for greater gain (the "two marshmallow" test) is sorely lacking. This ability can also be called "character" or "spine" and seems to have been systematically bred out of those socialised by remote control.
(I know, I know, sweeping generalisations. Sorry)
5. confused76 said...
In response to p.o.o.r.
Expect the default rate to grow not linearly but exponentially with interest rate changes, as well as unemployment.
Plus, these effects will be amplified by two factors:
- the negative equity issue (voluntary defaults when BTLers realize it takes 10 years to be back "in the money"). You will see that starting with UK investors in Spain
- chain-defaults. We know the average BTLer has more than one property, therefore as soon as the BTLers start defaulting, for every individual you will have 3/4 repossessions. That is even worse if you think of the "negative selection" issue, i.e. the more property I have the more likely I will default
6. nearly30 said...
In just 1 week the media is hitting the panic button over reposessions - goes to show that even a small and modest rise in IRs could unstable the status quo. Shows exactly that everyone was complicit and knew that they had and were borrowing too much.
Small IR rises are more like 1-2% rises 15 years ago.
Bet there are a few 'media types' who are peddling this 'news' in an attempt to prevent the .5% rise in May - as they live in the Democratic Republic of London and have BTL Ealing Flats and massive mortgages for homes in Primrose Hill to find money for.
It won't work - and if it does - I smell a fudge!
7. sold 2 rent 1 said...
poor,
"So what will the repossession rate be if interest rates reach 7.5%, 10%, 12.5%"
IR will be lucky to hit 7.5% before the economy goes into recession and they start cutting again.
The debt levels are way too large for the economy to be bailed out like it was in 2000-2003
8. Manjit1966 said...
Hi All,
There is no doubt we wil see repos increase qtr on qtr for perhaps 1-3 years
Whilst I would like to see a slow down and perhaps prices coming off about 20-25% from where they are now
They will still be fairly high in comparison to 1995 trough levels.
What will all you bloggers do if this does not happen and they simply level off and go up slighty each year?
There are too many "hopers" here. Sorry guys it is still a big if , given net migration into the UK and other dynamics of this economy.
What really needs to happen is BTLers with over 3 properties need a more progressive CGT system and much more monitoring of transactions. There is still an element of people not paying CGT on profits because they dont report them. Does anyone know what the govt is doing on these ?
9. David20040_0 said...
They won't crash becuase if people are repossessed there are many waiting in the wings to snap up their property.
10. C'mon Correction said...
I agree s2r1 - interest rates will rise further over the next two years but won't breach 7% (well not with known factors at present) simply due to the fact that'll we'll have a HPC and/or recession before then. We've got £1.4 trillion worth of debt for christ sake, it's gotta be paid back with interest !
I intend to buy once house prices have fallen and interest rates have followed. I'll just rent cheap and save until then.
11. Fedupwithhouseprices said...
This is all very encouraging. Roll on the house price crash! I've been waiting for this since the mid 90s when I lost my house in the last recession, never able to recover. It has felt like a life long sentence with no reprieve. I've even written to Tony Blair with no reaction from him at all (I've gone right off him!). If the housing market crashes so many people will breath a sigh of relief.