Mew - Elephant In The Room

[Si1]

Well it does...

...a lot of it is sat in the bank accounts of those wise enough to have bailed out of the market at the top.

no it doesn't - very little of it indeed rests in those bank accounts as relatively only a small % actually took useful profits

the rest was ponzi scheme froth that no longer exists - any spare cash people mewed got p*ssed up the wall on things that lost their value - holidays, cars, whatever. It is gone. Kaput.

[Markie6]

no it doesn't - very little of it indeed rests in those bank accounts as relatively only a small % actually took useful profits

the rest was ponzi scheme froth that no longer exists - any spare cash people mewed got p*ssed up the wall on things that lost their value - holidays, cars, whatever. It is gone. Kaput.

I reckon it's an absolutely miniscule %

IO mortgages were taken out with the express intention of just waiting for the price to rise....and cashing out. My only hope is the reckless mewers and soon to be bankrupts have such a dismal credit rating that when the market bottoms they aren't in any position to be able to jump back into property ownership.

I have a feeling that the banks are going to be a lot more careful to whom they lend in the future.

People have had the party...now it's time for the hangover

[crudeFool]

Funny, but you can always tell the people who've MEWED. The number 1 indicator is the "Is the car too good for the house" test. Where I live, if you went back 15-20 years, people would have had escorts etc, never BMW's. At the height of this, you'd see brand new Audi Q5's, Land Rover pimp mobiles (those ones with blacked out windows), BMW's and Mercs. 30K + cars outside houses worth at most maybe £160K!

crude.

[Greg Bowman]

Funny, but you can always tell the people who've MEWED. The number 1 indicator is the "Is the car too good for the house" test. Where I live, if you went back 15-20 years, people would have had escorts etc, never BMW's. At the height of this, you'd see brand new Audi Q5's, Land Rover pimp mobiles (those ones with blacked out windows), BMW's and Mercs. 30K + cars outside houses worth at most maybe £160K!

crude.

I was brought up in London and lived near Wood Green ,there are a set of roads in Haringay called the ladder lots of small terraces in a district of similiar roads our test in the eighties was whether their car was longer than the width of their house - crude but surprisingly accurate!

[Si1]

I reckon it's an absolutely miniscule %

IO mortgages were taken out with the express intention of just waiting for the price to rise....and cashing out. My only hope is the reckless mewers and soon to be bankrupts have such a dismal credit rating that when the market bottoms they aren't in any position to be able to jump back into property ownership.

I have a feeling that the banks are going to be a lot more careful to whom they lend in the future.

People have had the party...now it's time for the hangover

exactly - the fallout of the credit crunch will mean that the banking industry as a whole will just be unable to lend much for a decade or more

[interestrateripoff]

bearwithasorehead - I agree with you. However these prices could not be sustained. I think lots of people viewed their parents property 'goldmines' from 1970/80's and thought it would be the same for them. This has been a major part of the problem.

Going by the same time frame and percentage rise in price, let's assume you bought a house in 2006 for £200,000 it should therefore be worth £3.5 million in 2017. Ain't gonna happen.

This home owning culture is actually very new. Both sets of my grandparents (working class but reasonably paid jobs) spent their whole lives renting as did most people like them. My own parents did not actually buy until the late 1960's, which because of this time frame, made them mortgage free before they retired. They were in the right place at the right time.

Your not going far enough, take an average £100k house in 100 years with 10% YoY growth it's magically worth £1.38bn

Even at 2% YoY growth it would only take 365 years to reach that level and around 250 years at 3% growth YoY.

Our future children where going to inherit billions and now they will be penniless.

[jp1]

Just as MP's "topped up" their salaries for years using the expenses system, Britains homeowners have been topping up their relatively low incomes with MEW, with the expectations that in years to come, they just cash in their chips, downsize and clear off all the debt

No one suggested that they would actually have to pay the debt off with earned money - whodathunkit?

Edited July 1, 2009 by jp1

[bomberbrown]

Colleague of mine had an £80k house/mortgage 10 years ago. Now MEWed up to the tune of £180k. Most of it on holidays etc but did build a conservatory........so not all doom and gloom.

[eric pebble]

Just as MP's "topped up" their salaries for years using the expenses system, Britains homeowners have been topping up their relatively low incomes with MEW, with the expectations that in years to come, they just cash in their chips, downsize and clear off all the debt

No one suggested that they would actually have to pay the debt off with earned money - whodathunkit?

Sums it all up perfectly. As said above in another post -- the last 10 years have been complete and utter

LALALAND.

[Austin Allegro]

Annoying though it is for most people on here, such IO mortgages (particularly those of the self-cert variety) will undoubtedly emerge as a mis-selling scandal and the majority of these people will be compensated (with our money).

I'm not saying that they have been mis-sold, I'm just saying that they will have been deemed to have been mis-sold.

Oh completely. In 15 or 20 years it will be a staple subject for television (or holovision or whatever it is by then) with ashen faced, hoop-earringed middle Englanders saying 'we just signed where we was told ter sign. We would never 'ave done it if it 'ud been explained to uz proper, like...'.

[eric pebble]

Oh completely. In 15 or 20 years it will be a staple subject for television (or holovision or whatever it is by then) with ashen faced, hoop-earringed middle Englanders saying 'we just signed where we was told ter sign. We would never 'ave done it if it 'ud been explained to uz proper, like...'.

Excellent

[RufflesTheGuineaPig]

How did anyone ever think that this was going to work, unless we had large scale inflation..??

The MEWers are the boomers. Last time this happened, at the end of the 80s, the UK gov was able to devalue the £ by 50% as we were a net exporter thank to north sea oil.

So basiacally, yes they figured the debts would be inflated away, as that was what happened last time when the got a free ride.

We are a net importer now. Of everything. (Apart from debt)

The boomers will still expect their free ride though.

War is coming and it wont be between countries, it will be between generations.

[chevin]

The whole thing is total irresponsibility and greed by the banks.

At one time you couldnt mew unless you could prove the money was going on improving the place and you had to have a repayment vehicle to pay off the mortgage.What was wrong with that system ?

I hope they get hit with millions handing their keys back and citing the above change of rules as the reason.

In principle there is nothing wrong with people having financial autonomy. The problem was 'letting it out the bag' in one 'fell swoop'.

We must be careful we don't return to 'creeping socialism' where someone who doesn't know, but still thinks they know, what is 'best for people'.

[Si1]

The MEWers are the boomers. Last time this happened, at the end of the 80s, the UK gov was able to devalue the £ by 50% as we were a net exporter thank to north sea oil.

So basiacally, yes they figured the debts would be inflated away, as that was what happened last time when the got a free ride.

We are a net importer now. Of everything. (Apart from debt)

The boomers will still expect their free ride though.

War is coming and it wont be between countries, it will be between generations.

thing is - I think they're a bit too stupid to realise what will be taken off them until it is too late - ie assumption of comfortable state-paid retirement

I think that generation, unless they have already saved the cash for their retirement, or have a goodly public sector pension (and this will be infated away). will retire in poverty. the younger generations wil not support or vote for a govt that has it any other way.

[Ignorant Steve]

Colleague of mine had an £80k house/mortgage 10 years ago. Now MEWed up to the tune of £180k. Most of it on holidays etc but did build a conservatory........so not all doom and gloom.

But for everyone MEWing there's a proportion who are actively over paying.

To contrast your colleague above. 3 years ago our mortgage was £370K, it's now £60K.

We haven't built a conservatory though.

[MinceBalls]

We haven't built a conservatory though.

That's where you went wrong!

[Lepista]

MEWing created a fantasy lifestyle. Take as an example a man on £20,00 PA who MEWs an extra £5,000 PA for 10 years. He has had a lifestyle 25% above his income level during those 10 years and believes he is doing well. He has been able to purchase goods and services over and above his income level and this money has filtered into the wider economy.

Actually, if you're on £20k pa, your take home pay is maybe £15k, however for most people, maybe £12k of that is taken up in fixed costs (bils, etc.)

Thus their total disposable income is £3k pa.

Even just mewing £5k pa massively increases their disposable income. no additional bills to pay, no tax on the "income", no NI to pay, it's all extra.

Their disposable income is now £8k, not £3k... almost trebled.

Now, if they took out £10k in MEW per year (much more likely!), that increases their disposable income from £3k to £13k.... a serious 433% increase in disposable income. they lived like kings for a few years,

At the peak, MEWing accounted for 9% (if I remember correctly) of the UK GDP... 9%!!! No wonder we are paying the price now.

As for house prices, there's only one way they can go when the MEW party stops... 60% drops, here we come.

[bomberbrown]

But for everyone MEWing there's a proportion who are actively over paying.

To contrast your colleague above. 3 years ago our mortgage was £370K, it's now £60K.

We haven't built a conservatory though.

Where the hell did you find £310k in three years.

Oh, by the way, I used to live in 207 Tachbrook Road in the late 70's, opposite the AP and near the football ground. Happy days.

[Ignorant Steve]

Where the hell did you find £310k in three years.

Oh, by the way, I used to live in 207 Tachbrook Road in the late 70's, opposite the AP and near the football ground. Happy days.

Kept a close look out for loose change dropped in the street. Leamington is full of neanderthals who find it hard to hold onto cash.

[eric pebble]

Kept a close look out for loose change dropped in the street. Leamington is full of neanderthals who find it hard to hold onto cash.

Do they drag their knuckles on the street...?

[CrashConnoisseur]

Just as MP's "topped up" their salaries for years using the expenses system, Britains homeowners have been topping up their relatively low incomes with MEW, with the expectations that in years to come, they just cash in their chips, downsize and clear off all the debt

No one suggested that they would actually have to pay the debt off with earned money - whodathunkit?

...and in an era when earned money is harder to come by and more highly taxed.

[LiveAndLetBuy]

IO mortgages make sense for BTL because any tax on rental income can be offset against mortgage interest payments. So it's better to keep the mortgage interest payments high rather than trying to pay the mortgage off.

Also it's only important to pay off your mortgage on your primary residence. If a BTL comes to the end of its loan period, and the loan hasn't been payed off, then the landlord can simply sell the property (provided of course it is not in negative equity).

[lulu]

IO mortgages make sense for BTL because any tax on rental income can be offset against mortgage interest payments. So it's better to keep the mortgage interest payments high rather than trying to pay the mortgage off.

Also it's only important to pay off your mortgage on your primary residence. If a BTL comes to the end of its loan period, and the loan hasn't been payed off, then the landlord can simply sell the property (provided of course it is not in negative equity).

So exactly why they should not be allowed. Giving BTL any kind of advantage over potential owner occupiers is perverse on every level.

[Spark]

So exactly why they should not be allowed. Giving BTL any kind of advantage over potential owner occupiers is perverse on every level.

Rent from BTL is unearned income, so we need to fill out a tax form and pay tax on any "profit". Interest charges on borrowed money is one of the allowed deductions. We are paying tax on any profit we make, not the whole income. We still pay tax on our earned income too, so we aren't getting any advantage over an owner occupier.

Anyway, if you sell your primary house at a big profit you don't get hit with a capital gains tax bill. If you sell a BTL property at a big profit then any profit (over the CGT threshold) is taxed. So the government get you from all angles - nobody is a winner except HMRC!

[LiveAndLetBuy]

So exactly why they should not be allowed. Giving BTL any kind of advantage over potential owner occupiers is perverse on every level.

Generally BTL is at a disadvantage because BTL mortgages have lower LTVs and higher IRs. The banks that tried to make it easier to do BTL went bust, so it's reverting to being something that only the wealthy can indulge in. Regarding IO mortgages, I'm afraid you can't really stop people from taking out an interest only loan and using a BTL property as colateral - it's a pretty standard way of doing business.

Edited July 1, 2009 by LiveAndLetBuy