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Bearfacts

How Chains Are Completed Without Ftbs

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The fact that FTB numbers are down to 8% of purchases ( where they are normally about 45%) and yet transaction numbers have only dropped by 33% has had me puzzled. Clearly the BTL brigade had been filling the gap for the last year or two but as of the start of this year data showed that BTLs have been selling more properties than they have been buying, so they could no longer account for the gap being filled.

It ought to be nigh on impossible for chains to be built and completed with no-one at the bottom end.

Now I think I have an explanation which would also account for why mortgage approvals are dropping but their value increasing and why prices, according to some surveys, are still holding up.

Mrs B and I are looking for a new rental property. We viewed one last night, the owners where in residence as it is their family home. We asked the owner for some background, he explained that they wanted to move, had found a home they wanted and had had their offer accepted. He told us that they were going to hold onto their existing house as an investment, (you should have seen the smug look on his face, I had to stifle an laugh). What he didn’t know was that the letting agent had given us plenty of background already. They had been trying to sell their house for many months with no interest. At some point they decided to switch tactics and rent out their home instead, they have had little interest and have cut the rent twice. The agent told us they were now desperate as they feared loosing their new home.

My suspicion is that agents have been persuading people to hold on to their existing property as an investment ( ha ha !) in order to form completed chains with no need for a FTB to start it all off. I acknowledge that this is but one case but I have heard / read many times of similar stories. The consequence of that would be that people would have to borrow larger amounts of money to make their moves therefore the average mortgage made increases. Chains are shorter so there are less transactions and because the bottom end of the chain has effectively been removed average house prices appear to hold steady because it is the middle and higher end properties which are moving.

It is of course just a theory so feel free to shoot it down in flames.

Personally I can’t believe people can be that stupid; they are doubling their exposure to any downturn in prices as of course are the multitude of BTLs. This guy also made his living as a property lawyer so he’s completely f***ed if / when the market corrects big time. If he goes ahead with this daft scheme and finds he has void periods ( highly likely I would have thought as he has been unable to rent it out for several months ) he will be in deep dodo as he will have to pay two mortgages. ~So I just looked at his smug self satisfied grin and tried to picture him 18 months hence sinking deeper and deeper with two properties instead of one rapidly loosing value.

Edited by Bearfacts

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Now I could be wrong, but I think the exact same thing happened in relation to our rented home.

The owner ( v. badly lied) that this was to be an investment property.

Once moved in discovered the 'for sale' board shoved at the back of the garage......of course I could be wrong,*but* I don't think so :P

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In the 1974 crash it was common for many houses to be sold on bridging loans. The cost was bad but at least inflation eat prices away quickly enough so that most houses sold fairly rapidly with the loan repaid.

In the early part of the 1989 crash the same thing occured. People who wanted to move took bridging loans. However as time went on and Short term tenancies become more common people started letting their house out rather than sold (we did that in 1994 when we discover that our building society would happily transfer the mortgage into a BTL one).

This time round people are seeing BTL as an investment still so its probably an easier sell to get people to keep their old property and let it rather than taking out a bridging loan. Whether this will continue when prices start falling obviously is a different story.

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This is exactly what has happened with the last two properties I have viewed. When it came to talking price both sellers were absolutely matter of fact. They would not drop the price below x. Usually a max of £5,000 below asking price.

Otherwise they both said the property would be rented out. Good thinking up to a point. What happens if they can't rent it out or the grosss yield is less than the mortgage? Plus the liability of having two mortgages in the current economic climate. I would love things to turn and these pompous prats to be bitten in the bum.

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Yep, my brother did this with his flat in Hampstead-on at a stupid asking price despite the agent assuring him of a quick sale-after a few months of few viewings and no offers. He now has the flat rented out (no idea what for) and a large house in Radlett.

S.

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Can there be many people able to do this?

If you own a house worth say 300k and have a 150k mortgage - and buy a new house yet can't sell the old one. The new one is on a 100% mortgage - the old one the rent myght cover the mortgage and a bit more.

Don't know, you'd have to be on bloody good money to do this.

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This is exactly what has happened with the last two properties I have viewed. When it came to talking price both sellers were absolutely matter of fact. They would not  drop the price below x. Usually a max of £5,000 below asking price.

Otherwise they both said the property would be rented out. Good thinking up to a point. What happens if they can't rent it out or the grosss yield is less than the mortgage? Plus the liability of having two mortgages in the current economic climate. I would love things to turn and these pompous prats to be bitten in the bum.

I can understand your seeing them as stupid, but how do you conclude that they're pompous?

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Can there be many people able to do this?

If you own a house worth say 300k and have a 150k mortgage - and buy a new house yet can't sell the old one. The new one is on a 100% mortgage - the old one the rent myght cover the mortgage and a bit more.

Don't know, you'd have to be on bloody good money to do this.

You wouldn't do it like that. You'd MEW for the deposit on the new one. Perfectly feasible if you bought before or around 2000, with masses of equity and a relatively tiny mortgage.

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Can there be many people able to do this?

If you own a house worth say 300k and have a 150k mortgage - and buy a new house yet can't sell the old one. The new one is on a 100% mortgage - the old one the rent myght cover the mortgage and a bit more.

Don't know, you'd have to be on bloody good money to do this.

I doubt most people could do this. He is a very high earner. At some point in the future he may find out that the flat is worth a lot less than if he had dropped his asking price a bit and sold it now. There is also the lack of hassle when you move this way and not being in a chain allows you to negotiate a better deal with the person selling to you potentially. His theory is that if he holds it for long enough, it will regain whatever it loses, which may be right obviously given enough time. If he lost his job he might be in trouble of course because he has an enormous mortgage on the new place but I am hoping that does not happen to him.

S.

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Can there be many people able to do this?

If you own a house worth say 300k and have a 150k mortgage - and buy a new house yet can't sell the old one. The new one is on a 100% mortgage - the old one the rent myght cover the mortgage and a bit more.

Don't know, you'd have to be on bloody good money to do this.

If you have a house on the market for £300k which you have owned since before 2002 you probably have a mortgage around £80 k rather than £150k so a paper credit of £220k

If you see the perfect house for £300k you could MEW and raise the 30% (100k)self cert deposit required for the second home leaving a total mortgage on both properties of around £200k +£180k = £380k which will cost you around £1800 per month interest only.

Most people could not sustain that level of mortgage for long as you would need a total joint income of around £60k so they would need to sell within a year or rent out the first property probably for around £900 per month leaving a mortgage payment of around £900 per month.

If property prices fall just 20% (neglecting inflation) in the next couple of years the total value of their properties would be £480k so their paper credit would have reduced from £220k to £100k a loss of £120K.

In addition they would also have been paying £500 per month above what they would have been spending on their original £80k mortgage adding a further £12k to their loss.

So if you were in their position and could afford to throw away £132k in just a couple of years, go for it.

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excellent thread

lot of very good points about how your average working joe managed to become a property millionaire.

I think this is exactly how the paramid has been created, and if i rememer correctly how all pytamids and bubbles are created.

Simple everyone with the commodity buying and trading in it, putting upwards pressure on the price untill the house of cards tumbles down.

The trouble with this commodity is there is no other that causes such misery to so many people, ie when investers all fought each other over dot.com stocks it didint cause harm to anyone else it, with houses it does

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The trouble with this commodity is there is no other that causes such misery to so many people, ie when investers all fought each other over dot.com stocks it didint cause harm to anyone else it, with houses it does

Precisely why reform is required in my opinion. It is not in the national interest to have so much energy and attention devoted to something so basic as housing.

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Yep.

Friends of mine buying the bottom of the chain of 4. They are moving from 3 to 2. They had no intention of buying an investment property originally and have no experience or knowledge of the business.

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  • 301 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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