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eric pebble

The Reckless Plunge Into Mortgage Mania That Still Hangs Over Britain

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Superb article:

Stating the absolute obvious - which, for some bizarre reason, became an Elephant which everyone refused to admit or even acknowledge has been sitting in the Room for ages -- and which is now a Mammoth - not just an Elephant....
And, incredibly, normally intelligent, supposedly rational and "normal" people still continue to deny that the Mammoth is sitting RIGHT THERE - RIGHT NEXT TO THEM in the Room......

The reckless plunge into mortgage mania that still hangs over Britain:

.....[a] reckless plunge into mortgage mania that still hangs over Britain today - with homeloans that borrowers will struggle to ever repay and high house prices that leave the economy hamstrung.

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-3195404/The-reckless-plunge-mortgage-mania-hangs-Britain.html#ixzz3jFWroH8T

Edited by eric pebble

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The general concensus around my generation (30-35 years old) seems to be 'my parents paid X for a house and it is now worth 10 times X! so I must get involved!!'

When you point out the implication that, if that trend is continued then an average 3 bed semi will be 2 million quid in 20 - 30 years time they never question that this seems unlikely, they just think 'wahooo I will be a millionaire.'

So the mortgage to them just seems a moot point, '£3000 a month now to be a lottery winner by the time I am 60'

Points that we are likely to be in a low wage qrowth, low inflation environment, bank rates can't get lower are just met with looks of pity and 'he doesn't get it glances'.

In relation tot he article, people that do themselves over with IO mortgages get less than f*** all sympathy from me. They wouldn't have been complaining if their bet had come off.

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When you point out the implication that, if that trend is continued then an average 3 bed semi will be 2 million quid in 20 - 30 years time they never question that this seems unlikely, they just think 'wahooo I will be a millionaire.'

If that actually happened, how could anyone service those kinds of mortgages unless wages keep up with HPI? With stricter lending, ZIRP, H2B - every trick in the book thrown at the housing market just to keep it at a low volume turnover, no way would banks lend out crazy-size mortgages with wages having not kept up for decades before (I get they've done this up to now, but come on, 30 more years of HPI outstripping wages??!).

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The eventual bottom of this cycle is going to be eye wateringly cheap, in more than a decade's time

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The general concensus around my generation (30-35 years old) seems to be 'my parents paid X for a house and it is now worth 10 times X! so I must get involved!!'

When you point out the implication that, if that trend is continued then an average 3 bed semi will be 2 million quid in 20 - 30 years time they never question that this seems unlikely, they just think 'wahooo I will be a millionaire.'

And the rest - my Dad's place has gone up more than 200 times in value in 45 years. If that happened again, we'd be looking at about £40M for the average house.

On the plus side, if we just wait 80 years houses will be worth £8Bn each and we could pay off the national debt by selling a row of terraces in Nottingham. In fact, I'm surprised no one has picked this up as a policy.

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The worst thing is interest rates have been dropped to near zero so these people can service the massive debts on interest only.If rates were in normal range a lot of these idiots would go under,house prices would fall and young people could buy a house and have some form of life.

Its crazy we all know because at some point that mortgage debt will be called in,or at least it should be.My daughter is looking at the moment in the north east and i go to see each one she wants a second look at.There is hardly anything up decent because nobody is moving up due to the big price difference.The market seems dead.

That is in an area with some of the lowest house prices in the country.(even though still over priced by 30%).Down south is beyond crazy.It makes tulip mania look like a tea party.

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Guest eight

The worst thing is interest rates have been dropped to near zero so these people can service the massive debts on interest only.If rates were in normal range a lot of these idiots would go under,house prices would fall and young people could buy a house and have some form of life.

Its crazy we all know because at some point that mortgage debt will be called in,or at least it should be.My daughter is looking at the moment in the north east and i go to see each one she wants a second look at.There is hardly anything up decent because nobody is moving up due to the big price difference.The market seems dead.

That is in an area with some of the lowest house prices in the country.(even though still over priced by 30%).Down south is beyond crazy.It makes tulip mania look like a tea party.

See my posts on the "viewings" thread. Apparently the average price in the UK just hit £290,000 - we're struggling to give a nice place away for less than half that here in snooze central. I think there's barely anybody in the north east capable of buying property by what you might consider conventional means. It is, as you say, dead dead dead.

Having said that, can I sell you a house?

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In 2008 we had the financial crisis and had to reduce interest rates to 400-year lows and impose so-called austerity .... house prices in London are up by 40 to 60% and the 1% have doubled their wealth. Think about how prices will recovery when the economy is fixed!! Some people in London have only known financial crisis and rampant property price increases so of course that is what they believe is normal.

I know a guy who bought 2011/12 for near £400K who believed it would be worth at least £1m by the time he retires - although he is on £100K a year. Anyway who is the victim when identical house (although fully modernised) across the road is now on market at near £800K.

Perhaps you all need to begin donating money to the owner side to help prevent HPC. Hand your saving over to those paying higher peak prices today, to give them more of a cushion. Send your kids down the mines and donate all income to the very people who outbid you by fortunes with forever hpi mindsets. If I had my way this house would HPC to £170K or less, but then I'm not a champion of the outbidders.

A decade ago, the Kauffmans, from Oundle, near Peterborough, had £100,000 in savings. Music teacher Richard and Rita, an acclaimed singer, were looking at ways to slow down. They had a £158,832 interest-only mortgage for their £450,000 home.

Bought for £235,000 in 1999

http://www.rightmove.co.uk/house-prices/PE8/Spinney-Close.html

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^ The "immoral housing bubble" article highlights the endemic wickedness of the house price policy - in a country supposed to be civilised.

Edited by billybong

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Look, if banks weren't able to be so lax with the lending and actually properly took risk of being repaid into account, property prices would be nowhere near the levels they are now. It was more the supply of credit, not under-building that was the real problem.

If the need was there the houses would have been built. Even now, houses are only getting build because of the subsidies. It is that that has to stop to allow the market to properly function for ordinary people, not the spivs and banks.

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The eventual bottom of this cycle is going to be eye wateringly cheap, in more than a decade's time

Exactly what we were saying on this site a decade ago.

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Exactly what we were saying on this site a decade ago.

I've only been on this site this in 2015, but it feels like it's always "going to happen", but never really will. What if the market "crashes" 15 or 20% - would it have been worth the wait - especially after the 15-20% drop is from extreme highs?

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I've only been on this site this in 2015, but it feels like it's always "going to happen", but never really will. What if the market "crashes" 15 or 20% - would it have been worth the wait - especially after the 15-20% drop is from extreme highs?

A 20% drop would be huge. My opinion is that is what is needed but in reality is unlikely. Put it this way, a 33% drop requires a 50% gain to recover.

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In 2008 we had the financial crisis and had to reduce interest rates to 400-year lows and impose so-called austerity .... house prices in London are up by 40 to 60% and the 1% have doubled their wealth. Think about how prices will recovery when the economy is fixed!! Some people in London have only known financial crisis and rampant property price increases so of course that is what they believe is normal.

Meanwhile my cousin in Doncaster has bid 61k on a house bought for 78k in Q1 2008, he's a bit worried he might be overpaying and is thinking of pulling out.

The perception of whether we are in a boom depends on where you live. My main winner over the last ten years has been my cash yielding over 100k, house wise absolutely zero.

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I've only been on this site this in 2015, but it feels like it's always "going to happen", but never really will. What if the market "crashes" 15 or 20% - would it have been worth the wait - especially after the 15-20% drop is from extreme highs?

A drop of that magnitude will only take us back to the price levels of 2012-2013 (ie, before the Funding for Lending scheme and Help to Buy were implemented).

I agree though that groupthink on this site usually puts Nirvana (lower house prices) at about six months away. The list of false dawns since I joined in 2010 has certainly been impressive (back then, the Tories coming to power was greeted as the answer to our prayers). I'm not intending to insult other posters by saying that though - far from it. In a world seemingly gone mad with 'forever HPI', this site keeps me sane. The level of analysis and insight here is far above anything else I've come across to explain the crazy times we're living in. Ultimately I think our hive-mind will be proved correct - we called the Credit Crunch correctly when very few others did. Whether each of us will at that point still have enough time left to benefit from a sane property market remains to be seen though.

Incidentally, the mainstream media has over the last five years also put the first rise in interest rates as being six months away...

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Exactly what we were saying on this site a decade ago.

but then the crisis was far bigger than we expected and ZIRP led to weird things happening

you stick to your headline-oriented logic, I'll stick to the details

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The general concensus around my generation (30-35 years old) seems to be 'my parents paid X for a house and it is now worth 10 times X! so I must get involved!!'

When you point out the implication that, if that trend is continued then an average 3 bed semi will be 2 million quid in 20 - 30 years time they never question that this seems unlikely, they just think 'wahooo I will be a millionaire.'

So the mortgage to them just seems a moot point, '£3000 a month now to be a lottery winner by the time I am 60'

Points that we are likely to be in a low wage qrowth, low inflation environment, bank rates can't get lower are just met with looks of pity and 'he doesn't get it glances'.

In relation tot he article, people that do themselves over with IO mortgages get less than f*** all sympathy from me. They wouldn't have been complaining if their bet had come off.

You might want to show them this chart:

PyramidSchemeMS.jpg

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I know a guy who bought 2011/12 for near £400K who believed it would be worth at least £1m by the time he retires - although he is on £100K a year. Anyway who is the victim when identical house (although fully modernised) across the road is now on market at near £800K.

Perhaps you all need to begin donating money to the owner side to help prevent HPC. Hand your saving over to those paying higher peak prices today, to give them more of a cushion. Send your kids down the mines and donate all income to the very people who outbid you by fortunes with forever hpi mindsets. If I had my way this house would HPC to £170K or less, but then I'm not a champion of the outbidders.

Bought for £235,000 in 1999

http://www.rightmove.co.uk/house-prices/PE8/Spinney-Close.html

I notice from your link, what sold in 2013 for £770k is now for sale at £495K

8 Spinney Close, Warmington, Peterborough, Northamptonshire PE8 6TF

£770,000 Detached, Freehold 29 Aug 2013 3 bedrooms

3 bedroom barn conversion for sale Warmington, Oundle, PE8 £495,000

http://www.rightmove.co.uk/property-for-sale/property-54158522.html

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You threw me there for a while.

There had to be a reasonable explanation. I think that's a glitch, and the listing pics activated for no.8 on RM Sold Data, is actually for no.5.

If so, good to see them actually try and sell it now, even if it's a confident £495K asking price.

Here's another article for the same couple, with more pics.

http://www.thisismoney.co.uk/money/mortgageshome/article-3194312/The-heart-breaking-mis-selling-scandal-s-costing-Richard-Rita-Kauffman-home-thought-NOT-mortgage.html

The RM listing pics seem enough of a match for me.

And this led me to them at no.5. http://www.ritacullis.co.uk/contact.php

I think it's more likely a glitch. That in fact the house on RM showing 'currently on the market' for that postcode, is more likely their house, no.5. Compare article photos to listing pics. And musical inside, 'acclaimed singer' - and even a pic of a woman in dressing gown!), rather than no.8. Streetview link is where I think no.5 is. I suspect no.8 if the larger house by itself further down the lane, and just a RM glitch for listing pics activated for.

https://www.google.co.uk/maps/@52.5057501,-0.4169756,3a,38.5y,316.85h,84.58t/data=!3m6!1e1!3m4!1sTy1E0ZVVbEPxyjAHCXsG3A!2e0!7i13312!8i6656

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A 20% drop would be huge. My opinion is that is what is needed but in reality is unlikely. Put it this way, a 33% drop requires a 50% gain to recover.

You are only talking about the London and SE bubble I assume ?

Up North and in Scotland, there are places that have dropped 25% on their 2007/8 price and haven't moved since or are still dropping.

Check out prices in Northern Ireland. In reality , it just hasn't happened near you yet.....

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A 20% drop in greater London would barely wipe out the rises of the past year.

Some areas have ALREADY dropped that much in 9 months.

What happens when you get an insane speculative bubble based on "free" money and new build flats being sold to foreign buyers is well documented......

I never get bored of saying this........When london goes, it all goes.

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As house prices soared from 2000 to 2007, banks competed to lend borrowers more and more money

This short paragraph is a perfect example of the failure of joined up thinking that allowed this madness to continue- even now there is barely any recognition that bank lending was not a response to the rising bubble in house prices but was a contributing cause of that bubble.

There is this persistent illusion that however insane prices might get they also-somehow- represent 'fair value' in the sense that they are the product of an underlaying reality due to lack of supply ect.

Very few seem to grasp the fact that once an asset class begins to rise speculation based on those rising prices can create an entirely false market in which the value of the asset is generated by expectations of future gains on resale rather than fundamentals like supply and demand.

I guess the very definition of a bubble is that it does not look like a bubble to those contained inside it- there is always a 'legend' that supplies a seemingly rational reason for the rising prices.

Watching the Matrix movie the other night it's hard not to make the analogy- from the viewpoint of those inside the housing matrix those crazy prices are 'real'- only when one 'wakes up' and gets the bigger picture does the true reality become apparent- that those prices are an artifact of the system, an illusion sustained only through the ability of the financial sector to conjure vast amounts of non existent 'wealth' via their ability to create credit from nothing.

Sadly we are still waiting for 'the one' who will finally wake up the sleeping masses to the gigantic deception that has been inflicted on them by the agents of the financial system- reducing them to the financial equivalent of the human batteries that powered the machine overlords of the Matrix universe.

Edited by wonderpup

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It`s horses for courses ,it`s all down to the area you live in the section of the market you are looking at top/middle /bottom

I would say for most of the country the middle of the market is a wasteland ,the bottom is now being propped up by BTL io money with the top left to the equity rich swapping equity which has and will continue to skew the house price indices for as long as volumes are bouncing around all time lows

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You threw me there for a while.

There had to be a reasonable explanation. I think that's a glitch, and the listing pics activated for no.8 on RM Sold Data, is actually for no.5.

If so, good to see them actually try and sell it now, even if it's a confident £495K asking price.

Here's another article for the same couple, with more pics.

http://www.thisismoney.co.uk/money/mortgageshome/article-3194312/The-heart-breaking-mis-selling-scandal-s-costing-Richard-Rita-Kauffman-home-thought-NOT-mortgage.html

The RM listing pics seem enough of a match for me.

And this led me to them at no.5. http://www.ritacullis.co.uk/contact.php

I think it's more likely a glitch. That in fact the house on RM showing 'currently on the market' for that postcode, is more likely their house, no.5. Compare article photos to listing pics. And musical inside, 'acclaimed singer' - and even a pic of a woman in dressing gown!), rather than no.8. Streetview link is where I think no.5 is. I suspect no.8 if the larger house by itself further down the lane, and just a RM glitch for listing pics activated for.

https://www.google.co.uk/maps/@52.5057501,-0.4169756,3a,38.5y,316.85h,84.58t/data=!3m6!1e1!3m4!1sTy1E0ZVVbEPxyjAHCXsG3A!2e0!7i13312!8i6656

Thanks for investigating...interesting article ..Frankenstein investments :rolleyes:

A 20% drop in greater London would barely wipe out the rises of the past year.

Is that asking prices or sold prices ?

This short paragraph is a perfect example of the failure of joined up thinking that allowed this madness to continue- even now there is barely any recognition that bank lending was not a response to the rising bubble in house prices but was a contributing cause of that bubble.

There is this persistent illusion that however insane prices might get they also-somehow- represent 'fair value' in the sense that they are the product of an underlaying reality due to lack of supply ect.

Very few seem to grasp the fact that once an asset class begins to rise speculation based on those rising prices can create an entirely false market in which the value of the asset is generated by expectations of future gains on resale rather than fundamentals like supply and demand.

I guess the very definition of a bubble is that it does not look like a bubble to those contained inside it- there is always a 'legend' that supplies a seemingly rational reason for the rising prices.

Watching the Matrix movie the other night it's hard not to make the analogy- from the viewpoint of those inside the housing matrix those crazy prices are 'real'- only when one 'wakes up' and gets the bigger picture does the true reality become apparent- that those prices are an artifact of the system, an illusion sustained only through the ability of the financial sector to conjure vast amounts of non existent 'wealth' via their ability to create credit from nothing.

Sadly we are still waiting for 'the one' who will finally wake up the sleeping masses to the gigantic deception that has been inflicted on them by the agents of the financial system- reducing them to the financial equivalent of the human batteries that powered the machine overlords of the Matrix universe.

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