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The Bizarre Cases Of 3 Young Couples...

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I've now encountered 3 young, not so well off couples that find themselves (unintentionally) with two properties.

In each case they bought a flat in the boom years, found themselves in negative equity, and thought the most sensible way to move on with their lives would be to continue to service the mrtgage on the flat, and buy another house.

Couple 1 - Bought flat for £100k in 2005, split up, flat sits empty. Purchased new house with new partner servicing 2 mortgages

Couple 2 - Bought flat for £120k in 2005, had valued at £80k 4 years later. Needed more space, couldn't pay the negative equity, so decided with some pseudo logic they would be better off buying a new house and keeping the flat empty.

Couple 3 - Bought overpriced flat (on the advice of their parents, who thought renting was 'dead money'). Can't sell it, won't "give it away", and are in the process of buying another house.

What is this obsession with buying at any cost? The bank bailouts have simply allowed fools to get even deeper into trouble.

...

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I've now encountered 3 young, not so well off couples that find themselves (unintentionally) with two properties.

In each case they bought a flat in the boom years, found themselves in negative equity, and thought the most sensible way to move on with their lives would be to continue to service the mrtgage on the flat, and buy another house.

Couple 1 - Bought flat for £100k in 2005, split up, flat sits empty. Purchased new house with new partner servicing 2 mortgages

Couple 2 - Bought flat for £120k in 2005, had valued at £80k 4 years later. Needed more space, couldn't pay the negative equity, so decided with some pseudo logic they would be better off buying a new house and keeping the flat empty.

Couple 3 - Bought overpriced flat (on the advice of their parents, who thought renting was 'dead money'). Can't sell it, won't "give it away", and are in the process of buying another house.

What is this obsession with buying at any cost? The bank bailouts have simply allowed fools to get even deeper into trouble.

...

This is going on all over, in my experience it tends to be cases where single people in less than average jobs were able to buy flats here in Edinburgh (yes I know what a farcical idea I am glad BTL came along to stop this).

When they have met another half they have bought larger homes with two salaries but either will not or cannot sell (for a 'loss') the original flat so have kept them to either rent out or in one case I know it is sat empty waiting for the market to pick up and sell.

I guess this is what low IR's have done, the repayments on the 'next' property are very low and neglible on anything bought before the boom so it makes sense to hang on to them. They dont seem to consider what might happen when rates get back to normal.

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We have had inflation for the past 150 years, the prevailing logic in an inflationary environment that inflation erodes debt, and it has served the past 2 to 3 generations well. You have to go back along way to see someone who bought a house that wasn't rescued from negative equity within 10 years..... (obviously the people who couldn't hold on for 10 years lost out)....

Edited by AteMoose

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We have had inflation for the past 150 years, the prevailing logic in an inflationary environment that inflation erodes debt, and it has served the past 2 to 3 generations well.  You have to go back along way to see someone who bought a house that wasn't rescued from negative equity within 10 years.....  (obviously the people who couldn't hold on for 10 years lost out)....

The key thing here is that in all cases the couples have been able to keep the flats. No forced sales. Bank happy for them to run two mortgages (or at least, the bank hasn't found out yet). Until people can't move because they can't sell their original property (in all of your examples the couples could move), no HPC.

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How the hell can any of these young couples pay two mortgages? Or even pay one and get approved for another? We can barely afford one and are a young couple earning more than most of our friends.

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We have had inflation for the past 150 years, the prevailing logic in an inflationary environment that inflation erodes debt, and it has served the past 2 to 3 generations well.  You have to go back along way to see someone who bought a house that wasn't rescued from negative equity within 10 years.....  (obviously the people who couldn't hold on for 10 years lost out)....

There has been untapped sources of debt for the last 150 years. Who can borrow more now? Maybe couples could buy 3 houses each? 4 houses each?

No new credit, no inflation.

What happens to these people then?

The key thing here is that in all cases the couples have been able to keep the flats. No forced sales. Bank happy for them to run two mortgages (or at least, the bank hasn't found out yet). Until people can't move because they can't sell their original property (in all of your examples the couples could move), no HPC.

The very definition of debt peonage. Working to pay mortgage interest to a bank kept alive by tax money.

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How the hell can any of these young couples pay two mortgages? Or even pay one and get approved for another? We can barely afford one and are a young couple earning more than most of our friends.

All the ones I know bought pre boom, back then one bedroom flats around me were ~£60K 7/8 years later they are now worth ~£120K that means they have £60K+ as equity for the new place, and a second salary. The mortgage on the first place will be trivial so they are financially better off keeping it.

Everything revolves around timing, if one bought pre-boom (2001/2002 ish) you are laughing as you are benefiting from low rates and the potential to use your equity to buy. If you missed out (too young etc) you are fcuked as you will never have the deposit to get hold of the FTB type properties which are either being sold for BTL or hung onto by their owners.

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If all these people were incentivised to sell, where would the housing shortage be?

There is no such thing as a housing shortage.

A shortage of really truly affordable housing perhaps. But that's not the same as what you said.

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Everything revolves around timing, if one bought pre-boom (2001/2002 ish) you are laughing as you are benefiting from low rates and the potential to use your equity to buy. If you missed out (too young etc) you are fcuked as you will never have the deposit to get hold of the FTB type properties which are either being sold for BTL or hung onto by their owners.

Bingo. My reluctant landlord is inexactly this situation.

As far as I can see people like him will only sell if there is a massive rise in interest rates or unemployment.

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Oh this happens quite a lot!

Hanging onto that flat will be a lot less appealing when the interest rates go higher!

Let it or let it go!

Those maintenance charges are no fun! :o

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  • 140 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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