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munimula

The Reason Prices Will Come Down

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DEPOSIT

I was thinking last night, lets say the 1-bed flat I rent cost £90K in 1997. I would need to save 'only' £9K for a 10% deposit and would need 'only' an £81K mortgage, just over 3X average wage (assuming £25K).

Today the flat is valued at £200K, at 4X average salary I get a mortgage of £100K so I need a deposit of £100K. Even a 6 X average salary mortgage requires a £50K deposit.

These sums are huge and totally outside the posibility of most people to save, in fact it looks like most young people, faced with these ridiculous amounts have given up trying to save for a house deposit.

Now whilst house prices rose, people were able to MEW etc and use the money for deposits for holiday homes and BTL etc. Now that prices are not rising this money has dried up. If the housing market is now reliant on FTBs and BTLers putting hard earned cash down as deposits it has nowhere to go but down and it will have to go down A LOT.

What deposit would you need for your home at todays prices?

Edited by munimula

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To make this a bit more interesting why don't you post what deposit you would need to buy the place you live in assuming you got a (let's be generous) 5 X £25K average salary mortgage of £125K.

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DEPOSIT

I was thinking last night, lets say the 1-bed flat I rent cost £90K in 1997. I would need to save 'only' £9K for a 10% deposit and would need 'only' an £81K mortgage, just over 3X average wage (assuming £25K).

Today the flat is valued at £200K, at 4X average salary I get a mortgage of £100K so I need a deposit of £100K. Even a 6 X average salary mortgage requires a £50K deposit.

These sums are huge and totally outside the posibility of most people to save, in fact it looks like most young people, faced with these ridiculous amounts have given up trying to save for a house deposit.

Now whilst house prices rose, people were able to MEW etc and use the money for deposits for holiday homes and BTL etc. Now that prices are not rising this money has dried up. If the housing market is now reliant on FTBs and BTLers putting hard earned cash down as deposits it has nowhere to go but down and it will have to go down A LOT.

I thought you were going to say DEBT which is another reason why prices will fall...

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I thought you were going to say DEBT which is another reason why prices will fall...

debt is one reason often talked about a lot, obvioulsy whilst young people today pay off high levels of debt it impacts on how much they can save but ultimately the housing market stack of cards at the moment relies on very large deposits being put down - where is this money going to come from?

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debt is one reason often talked about a lot, obvioulsy whilst young people today pay off high levels of debt it impacts on how much they can save but ultimately the housing market stack of cards at the moment relies on very large deposits being put down - where is this money going to come from?

Indebted people trying to save money is ludicrous. Use the savings to pay the debt.

You wipe the debt far quicker. The interest from the debt will wipe away any savings

interest (+ a bit more).

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Never a truer word spoken.What the blindfolded and blinkered masses dont seem to ever understand is the numbers involved.Whenever I have had conversations with people involving the sort of numbers involved for ftbs to scrape in at the very bottom the reaction is one of total denial.They just dont get that it gone from difficult at the beginning to just downright suicidally impossible now unless you bend the rules and self-cert.I think the level of self-certing that has gone on during this period of the boom is going to be the next mis-selling scandal that we get to hear of in a few years from now.But where as the endowment victims of the early eighties have a leg to stand on as far as being duped is concerned these stupid twonks are going to be up shit creek without a paddle and dont they deserve it I say.

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To make this a bit more interesting why don't you post what deposit you would need to buy the place you live in assuming you got a (let's be generous) 5 X £25K average salary mortgage of £125K.

I have always been advised to put down 15% deposit as the rates become more competitive at that stage.

Operating under the aegis of 4xjoint salary that should allow I and partner a £240K mortgage.

We are looking to buy somewhere for approx 250k-270k (depending on falls) in 2007. I am anticipating being able to buy the sort of place that currently costs £300k for £270k in 2 years time.

15% of 270k = £40.5k deposit.

It's a lot of money, but we have twice that at the moment from saving like crazy for the last 5 years.

I'd rather wait for 18-24 months and see how the market pans out. As I said, I'm expecting modest falls of 5% per year for the next 2 years. Anything more would be a bonus to me.

Meanwhile, we'll continue saving and probably accrue another £20k in savings and interest in that time.

Hopefully, if interest rates do go crazy for a while then we will have enough in reserve to afford the repayments.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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