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Topher Bear

Am I Crazy?

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Hi there all,

I've finally returned after our forced move, but not with good news.

We are all fine and Topher Bear Jnr is well and Happy, arriving the day after our move!

I should soon be going Permanent at Airbus, leaving behind the Contracting I never wanted to do in the first place.

Now for my dilema!

Right now My salary is high, and I could get a mortgage which would enable us to buy a modest 3 bed here in Chippenahm, a place which seems to have avoided any price falls at all!! Repayments would be a little higher than our rent at the moment. If we buy now, we pay no stamp duty, thus saving a little more money. If we wait, then my salary drops something in region of 5 or 6 thousand, which at lending multiples of 4.25 (Britannia exclusive on Share to Buy), that is ~25K, which would dump us out of being able to afford anything we would want to live in until prices re-balance or my Wife goes out to work.

If I was certain that prices were going to fall 20%, then its a no brainer, but at 10%, it might not be enough falls for us, even if the repayments were lower. If price remain static, then we really are stumped.

Right now I am pulled in two directions on house prices. My halifax charts still tell me we are 20% over valued and we should get further falls, but the shapes of the graphs do suggest a general sideways movement for several years to come. Also with all the agencies (Halfax,Nationwide, CML, etc,) telling us to be wary of recent price rises, my contrarian nature tells me maybe we have hit the bottom, as unbelievable as that is. Add into that mix the local situation that prices have not fallen, just stabilised at the high value (checking out nethouseprices for recent purchases I know our old place achieved asking price!!), will we get a fall here, even if it arrives nationally?

In my investigations of mortgages I have found that although deposit reqs are high, the income multipliers are still high and 4x is still the norm, which might explain why prices have stablised right now at an overvalued position. If banks drop back that multiple, then price will drop accordingly....but so will my borrowing potential, especially combined with a drop in salary.

What do you guys think?

I know I'm going to get slammed by many hardliners here, i'm not interested in those, only reasoned debate. I do feel uneasy about buying, but also want to be pragmatic about it. We may have seen the majority of the falls already, and don't forget this was already twice as bad as the last crash, and even then not all areas fell.

See ya Tomorrow!

Topher Bear

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From Flight International today:

"Investment bank UBS predicts there will be a surplus of 1,400 airliners at the end of this year, necessitating production cuts at both Airbus and Boeing."

Essentially the aircraft manufacturers are in the same dire straights as the car makers, maybe the government will offer a "cash for clunkers program."

p.s. I'm in the same boat/airplane, sitting tight and saving like a Chinaman...........

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Decide whether you want to build a home for your kid or you are buying an investment.

If you decide on home then protect yourself by buying mortgage protection insurance and enjoy building a home for your child to enjoy and plan to live there for the next 18 years of your childs school life so hyour child has a stable base for thier upbringing.

You want my bet any house you buy now will be worth more money in 18 years time and if you do the sensible thing and get a repayment mortgage after 18 years there should not be alot left.

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IMO the full effect of the shockwaves that reverberated through the banking system in 2008 are yet to fully impact housing in the UK. We've merely felt the tremors, the real shake down is yet to happen.

Only you know your detailed personal circumstances and when the time is right differs for each individual/family.

Ask youself what results in the worst outcome, going now? or going later?

Personally I can wait this one out until there's simply no uncertainty left.

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In similar boat to you - but am basically preparing to buy when a suitable place comes up.

For following reasons:


  • The govt have shown that they will do almost anything to prevent house prices from falling any more than they already have. This includes debasing the currency and triggering high inflation. The state of the bank balance sheets means the consequences of severe asset deflation are too terrifying to contemplate. They will just keep on printing to prop everything up. 10-15% off house prices maximum from here on in (and i'd be surprised at more than 10%)
  • Everyone, including the government, is up to their neck in debt. The majority nearly always comes out on top.
  • When the bond markets collapse and the S hit really hits the fan, I want to be an owner of property, not a renter.
  • In nicer areas, prices have only fallen a little and the nature of these places means that if you see something suitable, and you don't buy it, you may be waiting a long time (unless your area contains a large number of quality properties with high turnover of stock - unlikely) until something else comes up that's suitable for your family.
  • I'm sick of waiting for more falls and my children need a sense of long term stability after 2 years renting.
  • I already own precious metals.
  • I can buy with a 3x salary mortgage and would be able to afford repayments with rates at 12%.
  • I'm not a natural investor/gambler and am sick of a lot of my time being spent thinking about house prices - i don't like what it's 'turned me into'.

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Decide whether you want to build a home for your kid or you are buying an investment.

If you decide on home then protect yourself by buying mortgage protection insurance and enjoy building a home for your child to enjoy and plan to live there for the next 18 years of your childs school life so hyour child has a stable base for thier upbringing.

You want my bet any house you buy now will be worth more money in 18 years time and if you do the sensible thing and get a repayment mortgage after 18 years there should not be alot left.

I have never met anyone who actually managed to get the mortgage protection insurance to pay out, has anyone ever received any money from these schemes? Just curious.

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I have never met anyone who actually managed to get the mortgage protection insurance to pay out, has anyone ever received any money from these schemes? Just curious.

Yep mine paid out in a previous life.

But it really is a case of reading the small print, whcih I did.

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You had a micro-dot reader? :lol:

You are the first person I have heard of receiving any money. I would be interested to know the pay-out rate. For car insurance it's about 80% for personal loan protection it's about 10%, so it would be interesting to see the number of claims that get settled.

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... This includes debasing the currency and triggering high inflation. ...

Doesn't high inflation mean high interest rates?

Are you saying inflation takes off but they don't raise interest rates?

All this talk of "debt being inflated away", isn't it just fantasy?

I think that if inflation takes off and they

A -- Don't control it.

Our economy is nuked.

B -- Do control it,

Interest rates do go up, and the over leveraged are screwed. House prices drop in nominal values.

Are you saying they are going with A?

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You had a micro-dot reader? :lol:

You are the first person I have heard of receiving any money. I would be interested to know the pay-out rate. For car insurance it's about 80% for personal loan protection it's about 10%, so it would be interesting to see the number of claims that get settled.

I took the policy out for 1500 per month and the mortgage was about 500 at the time as they said you have other bills and so on. ~It cost me 25 pounds per month in premiums. This was the boom times 2004. So I assume they thought nobosy would lose thier job. Well I did, via a takeover and I execised a change in control clause in my contract, which meant I got paid a shed load of money and it was classified as redundancy. so I claimed, they paid the fisrt 4 months no problem then got vey aagressive and wanted to se all jobs I had applied for and check I had been for inteveiws, etc.

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Hi there all,

I've finally returned after our forced move, but not with good news.

We are all fine and Topher Bear Jnr is well and Happy, arriving the day after our move!

....

What do you guys think?

I think

- If you find a house you like

- and you're not interested in the investment potential

- and you are happy to stay there indefinitely

- and you cover the prospect of losing your job financially

- and you cover the prospect of a 10% interest rate

then if you want to buy a house, it's a great idea.

Don't look at the current 'recovery' or any of the daft chatter that surrounds it as any kind of indication at all. This recession is caused by serious fractures in our economy, not sentiment. It will find its way down, a fair bit more in my opinion. I think prices have further to fall again than the 20% they already have.

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I have never met anyone who actually managed to get the mortgage protection insurance to pay out, has anyone ever received any money from these schemes? Just curious.

Don't mean to accuse you of thread hijack, but you're hijacking the thread - it's such a good question though, that I think you should open a brand new thread to discuss - I'd also like to know people's experiences.

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Don't mean to accuse you of thread hijack, but you're hijacking the thread - it's such a good question though, that I think you should open a brand new thread to discuss - I'd also like to know people's experiences.

these schemes pay the lender, not the borrower, so there wont be any "payout"

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The credit crunch house price crash is over. Mortgage availability and low interest rates are sufficient to support house prices at current levels.

Long live the unemployment house price crash. That seems to have an 18 month response time to changes in house prices.

VMR.

P.S. My uncles mortgage payment protection paid out twice, for two years each time (Nationwide). One house was a BTL so he sold that and the insurance policy kept paying out for the rest of the term (legal) so he took a year off.

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I woudn't buy now. I see no reason for prices to rise before next year - and may be not then either.

Plus there is a small chance of losing your new permanent job - last one in etc etc.

Having said that with a new family the pressure to buy will be enormous and difficult to ignore. We found that schooling decisions became the deciding factor. Personally I found renting with a young family no problem, but the thought of not having a stable base once schools were decided was a problem for me.

So, rent if possible for a few years would be my opinion.

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Doesn't high inflation mean high interest rates?

Are you saying inflation takes off but they don't raise interest rates?

All this talk of "debt being inflated away", isn't it just fantasy?

I think that if inflation takes off and they

A -- Don't control it.

Our economy is nuked.

B -- Do control it,

Interest rates do go up, and the over leveraged are screwed. House prices drop in nominal values.

Are you saying they are going with A?

Yes, I think they are short sighted enough to think that they can 'play' with high inflation without nuking the economy.

The risks of a 'terminal deflation' resulting in complete seizing up of growth are too high in their minds, I think, so they minimise the risk of currency collapse caused by high / hyper inflation.

They will keep interest rates lower than they should be in order to do this - and the fact that inflation figures can be manipulated means that it will 'look' OK.

The behaviour of the stock market over the next year should tell us which way it is going. House prices will follow - either static or higher (inflation) or lower (deflation). I don't discount a further leg down in house prices before the end game play out though - although I don't really have a clue which way it will go - it's just what I think is most probable.

Scary times for people holding any asset paid with debt or currency. Those with mortgage free property and liquid assets that they can move between cash and PMs are best placed IMO (and I'm not one of those!)

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Don't mean to accuse you of thread hijack, but you're hijacking the thread - it's such a good question though, that I think you should open a brand new thread to discuss - I'd also like to know people's experiences.

Apologies, never had any mortgage/loan insurance (beyond life insurance), but I do have income protection provided through work. I'm not entirely convinced that such a thing would provide any real protection in the reality. Therefore purchasing any property now with the understanding that the insurance will cover any future problems is not all that wise. From personal experience insurance companies don't make money from paying out so I would suggest saving the premium in a savings account (or under you mattress).

Which goes back to the basic question, "is it crazy to purchase property with a mortgage right now?" I think it remains a high risk strategy even with so-called "insurance".

The debt is the problem, not the property.

Edited by SMAC67

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I woudn't buy now. I see no reason for prices to rise before next year - and may be not then either.

Plus there is a small chance of losing your new permanent job - last one in etc etc.

Having said that with a new family the pressure to buy will be enormous and difficult to ignore. We found that schooling decisions became the deciding factor. Personally I found renting with a young family no problem, but the thought of not having a stable base once schools were decided was a problem for me.

So, rent if possible for a few years would be my opinion.

Well having rented for the last 12 and a half years in 10 different houses, the urge to buy is strong! Our daughter has already had her school changed once (although it was for the better).

For those reminding me it is a home not an investment. I know, trouble is I don't think we can find a "settle down house" at a price we can afford!

Personally, I think it is a red herring, I don't think our parents offer of money is going to come good, I do think we will end up not buying and then back to wishing for further falls, but we so don't want to spend long in this house, although its big, having people throw metal bars at your bedroom windows of a saturday night does not help it being a happy home, but I really, really, really do not want to move again except for going into our own place!

Going to look at a few places on friday, we'll see what we think of them.

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