stbroker

A close friend of mine is the Head of Retail Credit Risk Appetite at Barclays. He told me this morning that the Executive Comittee are finally taking action to mitigate the high risk retail credit portfolio ie. BTL, interest only and credit cards. He's putting a report together at the moment and he is actually very risk averse, so I can only see it going one way....they are going to cut back massively on lending in these areas. I'm sure all the other banks will be doing the same thing as well. Barclays high risk retail credit portfolio is pretty good quality compared to many of the other lenders, because their max LTV has been 90% rather than 100% or 125%. Northern Rock, Bradford & Bingley and Alliance & Leicester obviously have the worst portfolios. Credit standards are only going one way from here and that is a massive tightening, so I would certainly expect most interest only products to be withdrawn over the next few months.

Ironically for bears, the stock you should be buying for exposure to gold is BULL.L (ETFS Physical Gold). Traded on the London Stock exchange. Much lower transaction costs than buying gold coins or bullion yourself.

I live and work in Peterborough and I can confirm that it is indeed a hole. It has definitely got worse in the last few years due to unprecedented levels of immigration, which has seemingly coincided with an increase in unemployed Chavs hanging out in the City centre. Maybe all the immigrants have taken the Chavs' jobs and left them free to terrorise the streets? I work close to the city centre, but I avoid walking around town if at all possible. I think the city has always suffered from not having a university. It means that the vast majority of young people here are Chav scum and most of the young graduates who move to Peterborough for their first jobs only stay for a couple of years because it is such a sh1t hole.

That's the problem with supply. People are stuck where they are because of HPI. They can't move up the ladder because they would need at least an extra 200k mortgage to get a significantly better property, and it doesn't matter how much equity you have in your house, most salaries will just not stretch to this. They can't move sideways because there is no point of incurring £20k+ transaction charges to have the same quality of property. They don't want to move down, because the lesser properties are not as desirable and there is very little incentive to downsize until much later in life. It's not exactly a great state for the housing market to be in, is it?

270*12 = 3,240. 3240/235,000 = 0.0138 In that case the rental yield on your flat is less than 1.4%. I know that yields are low, but I didn't think they were THAT low! Well done for finding that. Where the hell do you live? If you're waiting for the mortgage on a 235k flat (at today's value) to be less than £270pcm, I think you will be waiting a long time. If your rent remains static, the value of the flat would have to fall by nearly 80% for an IO mortgage (at 6%) to be cheaper than the rent. I was working on the assumption of a rental yield of 4% on his house, which would be rent of approx. £800pcm, then cost of running 2 cars at £150pcm each (his insurance will be very high if he is only 20), which would be a total of £1,100pcm. This is more than 50% of the net pay from a 35k salary.

Yeah, 35k is bloody good going for a 20 year old. I was still at uni when I was 20 and didn't start making decent money until I was 26. I don't know anyone of that age that could be earning 35k. I thought 20 year olds would be doing well to be earning 20k. I suppose the rent on a 235k house and the costs of running 2 cars must wipe out nearly half your salary though.

The numbers only add up because you're not comparing like-with-like! Firstly, I wouldn't want to use all of my savings as a deposit, because that would leave me with no money for anything else. Secondly, I'm obviously getting some return from my savings and this has got to be factored in. Most of the savings are in ISAs, so we'd be losing about £250/month in income as well as the £50 difference between the rent and IO mortgage. You can add maintenance and building insurance of of say £100 month that I'm saving on, so now we are up to a saving of £400 a month compared to buying with an IO mortgage. There is also an upfront saving on stamp duty/legal fees/EA fees of around £3,000, so I reckon renting saves us about £7,800 over the first 12 months. We've got a 12 month contract, so the landlord can't just kick us out any time he wants. Rent might go up in the future, but not by very much, and I do intend to buy at some point, but not while house prices are 40% overvalued relative to renting.

Seems like quite a few people in a similar position, and my situation is much the same: I'm 28 and my girlfriend 25. We earn 39k and 21k respectively and have combined savings of 50-60k. We could afford to buy a 200k house without stretching ourselves too much, but I just can't see the value in it when a repayment mortgage would be nearly twice the rent on the same property. We're currently paying £650/month rent on a property that was last on the market for 200k. I'm happy to wait until prices fall, and my girlfriend agrees that prices are ridiculous, but she's not happy that we might have to wait for 4 or 5 years until it is the right time to buy. I'm glad to see that other sensible people of my age are in the same situation. I'm sure that we are in the minority, but I'm also confident that we are doing the right thing. It just takes a hell of a lot of patience to get through this period where prices are still rising and it feels as though we are missing out.

Well, according to this model, you certainly shouldn't be thinking about houses in the UK as an 'investment' at any time within the next 25 years, but there will come a point, maybe around 2020-25 when house prices relative to the cost of renting will mean that it might be worth buying as a 'home'. Of course, it will be depreciating in real terms, but buying a house isn't about making capital gains is it?

This is probably the best study to look at for demographic effects on house prices. It is mostly related to the US, but there is a section on the UK on pages 30-31, and make sure you check out figure 16 on page 46. The model predicts house prices will peak at some point between now and 2010, then fall in real terms for around 25 years before levelling out in 2035. Interestingly the same model got the Japan cycle pretty much spot on, as shown in Figure 13 on page 45: http://www.federalreserve.gov/pubs/ifdp/2005/847/ifdp847.pdf

Are you drunk? You're arguments are completely incoherant. You come accross as either being chemically impaired or having very low intelligence. That applies to nearly every post you have made. Are you: a) Alcoholic IQ < 70 c) 10 year old child

I'm not whinging at all. I'll buy a house when I'm happy that house prices represent good value. In the meantime I'm quite happy renting my house at half the cost of a repayment mortgage on the same house. What would be the point in me accepting money off my parents just for it to sit in my bank account rather than theirs?

I'm 28 and haven't asked for any money from my parents since I left university (although I did live at home rent free for 2 years before I moved out to rent my own place). The thing is that my mother now keeps offering me money, even though I have a well paid job, at least 40k in savings and no intention to buy a house until house prices fall back to more sensible levels. My Mum says that she feels guilty because a lot of her friends have given large sums to their children in order to pay for deposits or cars, but she has never helped me and my sister out in this way. On one side of the argument I know my parents can afford it, and it isn't going to do me any harm, but on the other side, I simply don't need the money unless I buy a house. I can see how the temptation is there for people of my age to take the cash and run, and this is surely adding to the extended boom in house prices.

This is a very good point. It is necessary to spend a certain amount on a property in order to maintain it's value relative to the rest of the property market. Certain refurbishments such as new carpets, new paint, roof repairs, updating electrical wiring are required from time to time in order to maintain the absolute value of a property to perform it's main function (housing) at the same standard. Refurbishments such as new kitchens and bathrooms are also required on a less frequent basis in order to maintain the attractiveness of the property over time. As an annecdotal example of this (and from a renting perspective) I recently viewed a large two bedroom bungalow in an attractive village nearby where I live. It was on a large plot with a large garden and driveway and in an excellent location, but the interior had not been updated for about 25 years. The kitchen and bathroom and other dated fittings were enough to put me off renting the property despite the excellent location and relatively cheap rent, which I estimated at a gross rental yield of about 3.5%, before any haggling. Basically the property needed 20-30k spending on it in order bring it up to the standard of accomodation that it would have provided when it was last rennovated. Over a short period of time, this degradation is not easy to account for, but over a longer time period of say 20-30 years, the amount needed to be spent on a property in order to maintain it is substantial, and I would estimate that this would be approximately 1% of the value of the property per annum. Obviously, the majority of this might be spent in one 6 month period every 20 years or so, and the ability of people to afford this will depend on the economic conditions and housing market trends at the time. It has recently been more prevolent of course because of economic growth, cheap credit and booming housing market. In a falling market, this trend would be reversed and this could exaserbate house price falls in the event of a crash.

We're having to leave the 3 bedroom house we have been renting for the last 12 months, because the landlord has put the house on the market. Our current rent is £600 per month and the house is on the market for 198k. This equates to a gross rental yield for the landlord of 3.6%, so no wonder he is selling. In any case, we have been looking for a similar size property with a similar rent, but everything advertised around the £600 mark is much worse than our current place. We did find a house that we like advertised for £695 per month and coincidentally this house is also for sale and is on the market for 200k. I used our current rent and the fact that the houses are on the market for a similar price as a bargaining tool and initially offered £600 per month for the house. This was knocked back by the letting agent, because he told me there was no way the landlord would do £600, so I told him to offer the landlord £625 for a 12 month contract. The landlord rejected this, but said we could have it for £650 on a 12 month contract. I'm happy enough with that, because it was our first choice of house and a 6.5% discount off the advertised rent is a reasonable result. The gross rental yield on this house is still only 3.9%, so renting is at least 50% less than the cost of an interest only mortgage. I'm comfortable that I'm getting a much better deal than the landlord. I was in a position to offer 6 or 12 months rent up front, but I felt that this probably wasn't worth it for the potential danger of losing the money if the landlord got into financial difficulty. It is a big gamble to take if you don't know the financial position of the landlord. I also thought that it would only get me another £25 maximum per month off the rent, so not worth the hassle. I would say that it is always a good idea to haggle on the rent. You have nothing to lose, and the chances are that you will be able to obtain a discount of up to 10% without having to negociate too hard.

Great, so you've made money over 6 months. Well done. You made a good decision buying 6 months ago relative to buying today, but is it a good decision relative to buying in 5 years time? I doubt it. Time will tell though. You've only actually made a profit if you sell the flat. If you hold it for the next 5 years I fear you'll be sitting on a rather hefty loss. The London property market is the biggest bubble of all, but for the time being the cash is there to prop it up. Think of the exodus of cash once the market sentiment starts to turn. Ouch

Quite, and I don't suppose they would be given the chance. I think the Conservatives could take a few of their ideas and put them to some use though. If they are going to stop being spineless any time soon. I just can't stand Nu Labour much longer.

Yeah, but when the major political parties are so poor, it is not surprising that people are looking elsewhere for some decent policies. I'm not suggesting that I would vote for the BNP, or that they have a chance of getting into power, but their popularity does seem to have been increasing in recent years. With 87% of the population being 'white british', they have got a lot of potential support. The majority of people vote for who they are told to by the press and media. All of the major parties seem scared to tackle immigration though.

Why not? The BNP are the only party that have correctly identified the problems of modern Britain and are brave enough to have policies that would attempt to deal with them. They are far from being 'racicts'. Go and look at their website. I was amazed that I agreed with just about all of their policies, ranging from education to transport to crime and punishment. Immigration will completely destroy this country if it allowed to continue as it is. It's a disgrace that the major political parties are not prepared to tackle the problem.

I really can't think of a good reason to live in London other than that you work there. It is a sh*thole of the highest order. I have a lot of friends that live in London and every time I visit it seems to get even less desirable....more crowded, more polluted, more immigrants, more expensive. Sure, it's great being 'right in the middle of things', but it still takes between half an hour and an hour on awful public transport for my friends to get to work, visit each other or go anywhere interesting. House prices are crazy. A mate of mine bought a flat in Fulham for just under 300k earlier this year and I think he wanted me to be impressed when I visited him there for the first time. Oh dear. It's small, poorly maintained and on a busy main road. Put simply, i wouldn't choose to live somewhere like that even if money was tight. I can't believe that house prices there are going to increase at the current rate for much longer. IMO, few places are less desirable, but then I'm not a Londoner.

£80 a week rent for a student? No wonder they leave uni with such massive debts nowadays. When I was in student halls in 1997-98 the rent was £37 a week including utility bills, and we only had to pay during term time (30 weeks a year). £80 a week is ridiculous for a student, especially for that rubbish.

Because I'm going home now. Got to start planning my 350k house purchase with my girlfriend

Is that supposed an argument? Or did you just spill your ribena all over your keyboard and press a load of random buttons by mistake while wiping it up?

Of course house prices are linked to wages. Are you suggesting that there is no correlation? However, I didn't suggest that house prices should rigidly stick to a multiple of wages. There is evidently massive variation around the average trend. As I stated, my previous comment was a 'broad generalisation'. The average first time buyer cannot comfortably afford the average starter home at current prices.

What have my arguments been rubbished by? Certainly not your incoherant waffle. The burden of proof is on you my pea-brained friend, because the factual evidence of history points to house prices falling significantly from their current bubble levels.