Saturday, Mar 22, 2008
Negative Equity has arrived with a vengence - and so soon
The Guardian: The families who bear the brunt
I must admit, I did not expect to read about real life negative equity stories just jet, I thought this would be a story by September. These poor people have suffered quite significant falls in the value of their modest properties and thus cannot renegociate new mortgage deals. I think the collapse in property has 3 years to run. This is going to get messy.
Posted by iskandar @ 12:39 PM (1080 views) Add Comment
9 Comments
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1. mark wadsworth said...
Yup. Are those of us rubbing our hands gleefully supposed to feel sorry for people like this? Would it make any difference whether I feel sorry for them or just think 'Serve you right'?
2. confused76 said...
I am neither sorry nor happy. Just think they should have known better.
Seldom these characters find themselves in the sh|t for having made ONE mistake - in response to Fabio.
The folks of the previous article bought THIRTY new flats! Not one, THIRTY!
The family in the Guardian article has bought a property for 20 grands more the surveyor told them it was worth!
With a couple of unsecured loans in the process.
But of course, they knew better than the surveryor, and they are financial wizards, otherwise how do you get two loans on top of a overstretched mortgage? And of course they MUST buy the property near the good school and the deli and the Starbucks. And how can they go wrong with that latte or cappuccino the property value will double like milk foam
Well, they deserve what they get!
Now just declare bankruptcy and move on!
3. confused76 said...
This article (posted separately) best summarizes UK borrowers' situation
http://www.nytimes.com/2008/03/22/business/worldbusiness/22debt.html?ref=business
Fabio,
do you wanna be sorry for these characters?
No way! Stop spending start saving
4. techieman said...
But confused where is their real pain? At the end of the day they can throw the dice and if they land double sixes - as they have been for the past 10-15 years then all well and good. If they dont though - well just go bankrupt - scr*w the creditors and wipe the slate clean after 3 years. Whether you go bankrupt owing 100k or 6 bars dont make much difference.
5. Jim said...
..am I being dim here? If they bought the house in the summer for £151,500 and it is now worth £152,000 they surely arn't really a good example of negative equity as they must have knowingly put themselves in negative equity rather than it "happening" to them.
6. dohousescrashinthewoods said...
I guess NE hits a lot quicker this time round because people pushed so hard, so far, with such big loans and such leverage that the slightest blip starts throwing casualties.
Confused, I agree in principel, but with the amount of money being printed, is saving pounds prudent, given it will be inflated away in a flash? My wife is very happy to save in gold but doesn't want to save fiat currency any more. Then again, if the scale of the losses, which far outweigh the central bank injections, turns out to be deflationary, then holding on to a few quid could prove a wise move.
Techieman, I agree, and it makes me livid. Then again, if too many people start riding the bankruptcy bandwagon, as they did with IVAs, I think the wheels will come off, no matter how much the government try to flog free tickets to financial amnesia. (get ballistically drunk on credit and forget all about it after a 3 year hangover and a morning-after pill of an economic bust to match Gordon's unbroken boom, engineered by yanking the nation's collective property foreskin.. [apologies for the grim imagery if anyone is eating])
7. enuii said...
"They cannot find another lender willing to take them on, because they have a Northern Rock Together mortgage and owe more than the value of their home. But if they stay with the newly nationalised bank, they face a hefty hike in their monthly payments."
Well I never, Gordon "Slugworth" Brown's nationalised Northern Rock turning the screw on helpless citizens up to their eyes in miracle economy debt.
Unfortunately, you couldn't make it up if you tried!
8. Orwell said...
"...They borrowed £169,630 from Northern Rock last summer, made up of a £139,630 traditional secured mortgage and a £30,000 unsecured personal loan. They also have a £15,000 secured loan on the house from a company called Welcome Finance that is costing them a further £307 a month..."
Well, OK the Welcome Loan apart (probably debt consolidation which in itself should have set alarm bells ringing for any prudent bank), how did they manage this? Perhaps above all, what are (or can) the government going to do about this? I just think assistance is impossible unless Krusty, Fool et al can perhaps elaborate..
9. Ju5tin said...
This is the trouble with todays culture, people want what they haven't worked for. For example the 'housing ladder' is a ladder, I started in a one bedroom flat and moved up the ladder every few years until I went from a flat to a house etc. Northern Rock and 100% mortgages didn't exist in those days, 3 times your wages and a 10% deposit was the norm for all property purchaces. Cut up the plastic, stick to a budget and after a few years your mortgage will start to go down ! If you are took a horrendous mortgage deal- you signed for it, its your responsibility!