Thursday, Aug 13, 2009
UK Sub Prime starts to surface
Mortgagestrategy: 3.5 million households unable to move
Research from John Charcol has found that 3.5 million households, a third of all those with a residential mortgage, are unable to move due to a lack of equity in their property and/or restrictions on access to mortgage finance. It says there are currently around 2 million households either in negative equity or with equity of less than 10%, 500,000 households with equity only between 10% and 15% and a further 1 million households who have either sub prime or self-certified mortgages. Furthermore, there are very few mortgage deals available for people with less than 15% equity.
Posted by jack c @ 03:30 PM (989 views) Add Comment
8 Comments
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1. jack c said...
Another factor to add to the stagnation - Struggling home owners too proud to downsize
Home owners are determined not to downsize their properties even in the face of serious financial problems, shows research from Moneyextra.com. The price comparison website polled 1,000 to find out whether they’d be prepared to downsize to lift themselves out of debt.It found that while 56% of home owners admit that they are in financial difficulties, some 37% would not want to downsize in order to reduce their debt.
A further 59% of respondents felt that others make judgements on the size and value of a person’s home.
Over half of Londoners polled believed downsizing to pay off debt was an indication of failure, while in Northern England 40% believed this to be the case.
Richard Mason, from Moneyextra.com, says: “It’s absurd that struggling home owners aren’t prepared to downsize simply to save face.
“Surely it’s better to downsize on your own terms than face repossession and risk losing everything.”
SOURCE :- www.mortgagestrategy.co.uk/cgi-bin/item.cgi?id=191735&nl=MS_DN&dep=webops&dte=130809
2. Fly By Night said...
The property becomes a prison. Another downside to 'owning' property which makes its appearance during the collapse of a bubble, but which buyers never seem to think of when the bubble is inflating. This will impinge on sentiment and propel the collapse.
3. fahrenheit451 said...
Seems like some serious stagnation ahead. Of course there is a cost to moving, in both financial and time, and don't forget that anyone with negative equity is just stuck anyway. It's nice to blame the banks (and they are at fault for not lending to small businesses, even good ones) so unemployment will now start to rise even more sharply.
Perhaps stagflation is coming to an end, it's serious inflation that is next on the agenda. We are predicting base rates over 8% in 2011, for many different reasons this is going to be inevitable, But IF wages match inflation then we could head out of trouble more quickly. I'm off to buy some gold as a side bet.
4. quiet guy said...
@jack c
Speaking of absurdity, I found myself agreeing with Ray Boulger about this bit of the article:
"He says another element missing from the Treasury Select Committee report is any comment on the impediment to access to mortgage finance created by lenders who carry out a full credit check when they receive a request for a Decision in Principle rather than a full application.
This leaves a footprint on the customer’s credit file, inhibiting their ability to shop around because their credit score is negatively impacted by too many searches."
This does appear to be a bit loopy.
5. quiet guy said...
@fahrenheit451
"IF wages match inflation"
At a time when there will be millions of unemployed people who would like to work? That seems rather unlikely except for self employed and others who can pass on costs.
6. quiet guy said...
@jack c
"Over half of Londoners polled believed downsizing to pay off debt was an indication of failure"
Remarkable. So debt is success and solvency is failure. If our nation is that stupid then the we deserve everything coming to us.
7. krustyatemyhamster said...
He says: "It’s extremely worrying that someone who is helping to shape government policy has such a dangerously naïve understanding of current conditions.”
Talking about yourself there Ray methinks.
Anyway, how about all those millions that would like to buy but have their ambition currently thwarted by savings rates. A potential FTB saving for a loan deposit over a few years now has to spend around 50% longer saving to end up with the same amount of cash in the bank as before IRs were slashed (I did do some calulations to back this up but don't have them to hand). FTBs put the bottom under house price crashes (not landlords with the forthcoming rental collapse) . Alternatively, FTBs will have saved less over the same time period (as compared with before blanchflower mania set in), meaning demand is more greatly diminished and prices will fall lower, as happened after rates were slashed in the early 90s in response to that crash - prices fell to a post-war record of 2.9 x salary - a record that will be beaten in a few years. No doubt someone will point out why my simplistic theory is wrong, but I just thought i'd offer a counter argument to the standard prices won't crash as IRs are low argument.
8. jack c said...
quiet guy - RB is correct on the point you highlight and for once I pretty much agree wholeheartedly with his input on this article
fahrenheit451 - I'm very interested in your comment "We are predicting base rates over 8% in 2011, for many different reasons this is going to be inevitable" - care to expand?