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munimula

Affordability 30% Worse Today Than 2007

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They bought a house in Bristol for £190k in 2007 with a 10yr fixed mortgage at 5%, FTB mortgage with just 5% deposit so mortgage of £180k. Mortgage is around £1050pm repayment.

The property fell in value, on their street nothing was selling in 2008 and everything was having the price slashed.

Turn to 2009 and thanks to a mini boom the house has been valued at £225k (higher than peak 2007!!) and they'd probably achieve it as everything selling.

It looks like best deal would be 6.49% with 10% deposit. (http://www.guardian.co.uk/money/2009/sep/19/first-time-buyers-mortgages)

So FTB today would need nearly £25k deposit and would need a £200k mortgage and have to pay £1365pm!!!

2007 - mortgage £1050 deposit £10k

2009 - mortgage £1365 deposit £25k

So the monthly cost for the same property today for a FTB paying the min deposit is roughly 30% more

I'm just totaly bemused as to how we find ourselves in this situation. Can anyone please explain?

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They bought a house in Bristol for £190k in 2007 with a 10yr fixed mortgage at 5%, FTB mortgage with just 5% deposit so mortgage of £180k. Mortgage is around £1050pm repayment.

The property fell in value, on their street nothing was selling in 2008 and everything was having the price slashed.

Turn to 2009 and thanks to a mini boom the house has been valued at £225k (higher than peak 2007!!) and they'd probably achieve it as everything selling.

It looks like best deal would be 6.49% with 10% deposit. (http://www.guardian.co.uk/money/2009/sep/19/first-time-buyers-mortgages)

So FTB today would need nearly £25k deposit and would need a £200k mortgage and have to pay £1365pm!!!

2007 - mortgage £1050 deposit £10k

2009 - mortgage £1365 deposit £25k

So the monthly cost for the same property today for a FTB paying the min deposit is roughly 30% more

I'm just totaly bemused as to how we find ourselves in this situation. Can anyone please explain?

Who valued it.

which FTBS en mass can afford £1365 pcm?

wouldnt surprise me if bank shells are buying everything in sight....didnt BMW dealers used to do this....to keep used prices high? and therefore new prices high....

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Who valued it.

which FTBS en mass can afford £1365 pcm?

wouldnt surprise me if bank shells are buying everything in sight....didnt BMW dealers used to do this....to keep used prices high? and therefore new prices high....

Local EA valued it but it ties in with what other properties 'appear' to be selling for

They are now wating until the spring to sell the property which I find interesting. If that represents a lot of thinking of house sellers then maybe the spring could see a deluge of pent up sellers :lol:

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Local EA valued it but it ties in with what other properties 'appear' to be selling for

They are now wating until the spring to sell the property which I find interesting. If that represents a lot of thinking of house sellers then maybe the spring could see a deluge of pent up sellers :lol:

begs the question...why are they selling?

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Been redundant for about 6 months this year and having to move for new job.

why get a job elsewhere? they are getting their interest paid? its gonna cost £5k just to move.

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why get a job elsewhere? they are getting their interest paid? its gonna cost £5k just to move.

when you've been out of work for 6 months and only a handful of jobs come up in that time - none of which you got then staying where you are isn't an option anymore

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when you've been out of work for 6 months and only a handful of jobs come up in that time - none of which you got then staying where you are isn't an option anymore

why? are they not geting the full benefit of the mortgage holders bailouts....or were they really so overstretched with other debt that THAT is the problem......which I think is where all these "keep them in their homes" schemes actually fail...its not the mortgage, its the credit cards and car loans.

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why? are they not geting the full benefit of the mortgage holders bailouts....or were they really so overstretched with other debt that THAT is the problem......which I think is where all these "keep them in their homes" schemes actually fail...its not the mortgage, its the credit cards and car loans.

To be honest I don't know what was available to them but they didn't get any help with mortgage.

After a short period on job seekers he took up some paid work at £7ph with the council to tide them buy. I know it wasn't enough to pay the £1050 mortgage

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To be honest I don't know what was available to them but they didn't get any help with mortgage.

After a short period on job seekers he took up some paid work at £7ph with the council to tide them buy. I know it wasn't enough to pay the £1050 mortgage

I thought the current schemes were to help people just such as these....not necessarily losing jobs, but suffering a reduction in income...or maybe that was the scheme which managed to help just 3 since its inception.

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2007 - mortgage £1050 deposit £10k

2009 - mortgage £1365 deposit £25k

mini boom
everything selling

amazing to watch isn't it - the more expensive things become the faster they sell. stomach for a new bubble anyone?

when will this madness end? - when it does end it's not going to be pretty that's for sure.

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This is the point of a bull trap.......

amazing to watch isn't it - the more expensive things become the faster they sell. stomach for a new bubble anyone?

when will this madness end? - when it does end it's not going to be pretty that's for sure.

House Prices Tipped to Fall After End of Irrational Rally

Does the 'W' Effect Have To Spell Woe

UK House Prices Have Further to Fall

... although there's been a big brouhaha about the latest HSBC 1.99% home loan offer, don't expect many other lenders to follow suit. A lot of lending power has now left the market for good. Almost £300bn of UK mortgage debt was securitised, i.e. packaged up and sold off from bank balance sheets onto the bond markets, between 2005 and 2007.

"That represents more than 90% of the growth in mortgage debt over that period", says CreditSights. And "the world isn't exactly clamouring for British securitised mortgages anymore, and won't be for a long time", says Matthew Lynn on Bloomberg. "With less money coming into the market, there won't be the same kind of demand for houses".

Yet a Rightmove survey at the end of August gave the "encouraging" signal that 78% of respondents reckoned UK house prices won't fall any further this year. And also that "the UK property industry is now seeing a virtuous circle of confidence building upon confidence".

Why's this another worry? Well, as Fidelity's Anthony Bolton explained in the weekend's FT about the stock market, "if everyone is positioned for the market to rise, it means these bullish expectations are already discounted" – i.e. factored into the price. As a result, "the market often moves to make the majority wrong and does the unexpected… so at turning points especially, the correct is the minority view".

And while there are plenty of differences between shares and houses, the principles of crowd behaviour are the same for every asset class. When almost everyone is bullish, get ready for a price fall. The near-8.5% bounce in property prices within the last six months (using Nationwide's figures at least) now looks ripe for a reversal.

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....

So the monthly cost for the same property today for a FTB paying the min deposit is roughly 30% more

I'm just totaly bemused as to how we find ourselves in this situation. Can anyone please explain?

First time buyers are no longer of any relevance. I think the industry accepts that they are, by and large, priced out the market unless they have a large deposit (typically from family - see the Fairview deal for example). The family deposit is based on the idea from mum and dad that prices only go up and you need to get on "the ladder". Ergo mom and pop buy into that idea and kiddies buy house at higher than 2007 prices proving that they are "going up".

(Since HPI is the transfer of money from the young to the old perhaps all these old gits throwing money away on kiddies' deposit is not a bad thing :D)

The UK market is, as far as I can see, currently made up of existing homeowners (mortgage payers if you prefer) buying and selling to one another. FTB affordability only becomes important as and when the market needs them. On current sales volumes they are not needed. It is the builders that are hurting - hence the Fairview scheme to sucker in mom and pop's money.

Bank or lender possessions are being sidelined into holding companies to keep the price up so the asset disposal brings as much back as possible (fair enough). Personally I think the overall market prices will begin to drop when the possession orders come from other creditors who do not need to hold prices up. One such party being the Inland Revenue. These properties will be auctioned. If there is enough supply at the auctions then prices will drop quickly as there isn't enough cash around to buy that volume of stuff. This will feedback into the general public's sentiment and mom and pop will stop stumping up their nest egg to buy kiddies' new build. This is a classic feedback loop that will (if it occurs) lead to a sharp downward price correction.

As it stands at the minute a serious crash of say 25% would blow the economy out the water. This will take what's left of the banking sector out. Since the taxpayer owns half the banking sector the government doesn't want this, the banks don't want it and needless to say existing homeowners don't want it. Against such opposition a few moaning FTBs are of zero consequence, in fact the more they express desperation the more they feed the flames of prices going back up.

The sad reality is therefore if the current situation goes on into the New Year HPI will be back on and the underlying economics make a second and far bigger crash inevitable. Much better to have a slow wind-down now and over a few years. My view is that 2010 is crash year, probably for the pound too so double whammy for anyone with international interests. I reserve the right to change my mind as the facts change :D

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First time buyers are no longer of any relevance. I think the industry accepts that they are, by and large, priced out the market unless they have a large deposit (typically from family - see the Fairview deal for example). The family deposit is based on the idea from mum and dad that prices only go up and you need to get on "the ladder". Ergo mom and pop buy into that idea and kiddies buy house at higher than 2007 prices proving that they are "going up".

(Since HPI is the transfer of money from the young to the old perhaps all these old gits throwing money away on kiddies' deposit is not a bad thing :D )

The UK market is, as far as I can see, currently made up of existing homeowners (mortgage payers if you prefer) buying and selling to one another. FTB affordability only becomes important as and when the market needs them. On current sales volumes they are not needed. It is the builders that are hurting - hence the Fairview scheme to sucker in mom and pop's money.

Bank or lender possessions are being sidelined into holding companies to keep the price up so the asset disposal brings as much back as possible (fair enough). Personally I think the overall market prices will begin to drop when the possession orders come from other creditors who do not need to hold prices up. One such party being the Inland Revenue. These properties will be auctioned. If there is enough supply at the auctions then prices will drop quickly as there isn't enough cash around to buy that volume of stuff. This will feedback into the general public's sentiment and mom and pop will stop stumping up their nest egg to buy kiddies' new build. This is a classic feedback loop that will (if it occurs) lead to a sharp downward price correction.

As it stands at the minute a serious crash of say 25% would blow the economy out the water. This will take what's left of the banking sector out. Since the taxpayer owns half the banking sector the government doesn't want this, the banks don't want it and needless to say existing homeowners don't want it. Against such opposition a few moaning FTBs are of zero consequence, in fact the more they express desperation the more they feed the flames of prices going back up.

The sad reality is therefore if the current situation goes on into the New Year HPI will be back on and the underlying economics make a second and far bigger crash inevitable. Much better to have a slow wind-down now and over a few years. My view is that 2010 is crash year, probably for the pound too so double whammy for anyone with international interests. I reserve the right to change my mind as the facts change :D

500 words to agree "bull trap"

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Local EA valued it but it ties in with what other properties 'appear' to be selling for

They are now wating until the spring to sell the property which I find interesting. If that represents a lot of thinking of house sellers then maybe the spring could see a deluge of pent up sellers :lol:

Is this a hypothetical or real scenario? Because if it IS the latter, then I'm very confused.

If they've been out of work for 6 months, why wait another 6 months before selling the property? If places ARE selling now at the prices quoted, sell it, pay off the mortgage, move to where they think the job prospects will be better and rent.

If the spring DOES see a deluge of pent-up sellers, the prices can and will go only one way and that is down.

So am I missing something?

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i very much doubt this place will sell for more than the 2007 price.

sounds to me like a classic situation where those horrible killjoy surveyors will return a value that is very significantly less than the house "is worth".

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Who valued it.

which FTBS en mass can afford £1365 pcm?

Probably not many, but I would guess that in Bristol there a quite some FTB who would be able to afford GBP 1400 per month without too much trouble. In particular as decent family homes in good neighborhoods to rent are hard to find...and if available are in this kind of price-range.

*) However I doubt that people that have that kind of money available would want to live in neighborhoods in the <190K price-range. Nothing in the area that has my interest in Bristol would be in this price-range as far as I can tell.

**) I assume that FTBs with this kind of money available per month are looking for decent family-homes. Not 1 or 2 bedroom flats!

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I thought the current schemes were to help people just such as these....not necessarily losing jobs, but suffering a reduction in income...or maybe that was the scheme which managed to help just 3 since its inception.

I beleive there is a limit to the size of mortgage that the DSS will fund, and 180K is still an awfull lot of money.

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Is this a hypothetical or real scenario? Because if it IS the latter, then I'm very confused.

If they've been out of work for 6 months, why wait another 6 months before selling the property? If places ARE selling now at the prices quoted, sell it, pay off the mortgage, move to where they think the job prospects will be better and rent.

If the spring DOES see a deluge of pent-up sellers, the prices can and will go only one way and that is down.

So am I missing something?

No, you're right and I've suggested that they sell and pocket the equity and buy at a later date. However, they would have to pay £5k penalty on mortgage because is fixed rate for 10yrs. Also it's pretty good at just 5% with about 7yrs remaining. But mainly they don't have the combined salary they had to get that mortgage and due to job loss and taking new job on a lower salary they couldn't afford to buy a comparable house again, even with the equity now in the property. Therefore it is possibly the best option that they sell and buy another house in the new year when they know where they want to live thus transferring the mortgage. If prices fall then so will the price of the property they buy.

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First time buyers are no longer of any relevance. I think the industry accepts that they are, by and large, priced out the market unless they have a large deposit (typically from family - see the Fairview deal for example). The family deposit is based on the idea from mum and dad that prices only go up and you need to get on "the ladder". Ergo mom and pop buy into that idea and kiddies buy house at higher than 2007 prices proving that they are "going up".

The UK market is, as far as I can see, currently made up of existing homeowners (mortgage payers if you prefer) buying and selling to one another. FTB affordability only becomes important as and when the market needs them. On current sales volumes they are not needed. It is the builders that are hurting - hence the Fairview scheme to sucker in mom and pop's money.

I think we can safely say the current housing market is running on cash buyers and low sales volumes. This is why price stability/rises can't be sustainable as the majority of 'new' money coming into the housing market to sustain rises with normal transaction levels has to come from FTB's and their 90%-95% mortgages.

At the moment the housing market seems to be simply feeding on itself rather than being fed a lovely plate of new FTB mortgages.

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I think we can safely say the current housing market is running on cash buyers and low sales volumes. This is why price stability/rises can't be sustainable as the majority of 'new' money coming into the housing market to sustain rises with normal transaction levels has to come from FTB's and their 90%-95% mortgages.

.....

This is, of course, true in the longer term. But for now the price is sustainable. Furthermore the bottom end of the market is being bought up by investors BTL and so on.

The more cash buyers that buy now the fewer there will be for the eventual fall. A sharp correction will bring economic disaster with it and a further credit shortage. The "opportunity" for the FTB will, for the large part, not occur as they will be unable to get a mortgage.

For the market to return to one more familiar to us all we need it to slowly fizzle out over time. This is what I have thought would happen but I am now moving toward the sharp crash scenario as the winter bankruptcies begin. If we had the US model where you can give the keys back we would already be there (as they are).

I fear next year will not be a very good one.

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