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JustAnotherProle

Negative Equity Timebomb For Banks

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https://www.telegraph.co.uk/business/2018/04/26/negative-equity-timebomb-banks-baby-boomers-cash-housing-wealth/

I haven't seen this mentioned here yet so thought I'd post this for your enjoyment.

Quote

A negative equity time-bomb is growing under Britain's banks and insurers as baby boomers are unlocking unprecedented sums of cash from their homes in equity release schemes at ever-younger ages.

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“The experiences of, for example, the Japanese property market between 1990 and 2010 and the Italian property market between 2007 and 2017 show that it is possible for house prices in an advanced economy to fall over a period of decades.”

The warning comes at a time of slowing house price growth.

Property prices in London have fallen over the past year in the first annual fall since the financial crisis, as stretched valuations, slow-growing wages, restrictions on landlords and the prospect of higher interest rates all combined to limit buyers’ offers.

The amount of equity withdrawal ads I've seen, it's not going to surprise me if this all goes horribly wrong...

Edited by JustAnotherProle

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Noticed both the increase in advertising for equity release and sellers starting to accept negative equity.

Here's an example from St Alban's:

http://www.rightmove.co.uk/property-for-sale/property-62751883.html

Market info tab shows previous sale in 2016 at £622k. Now asking £600k. Final sale 10% below asking would leave negative equity of £82k.

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4 minutes ago, darkmarket said:

Noticed both the increase in advertising for equity release and sellers starting to accept negative equity.

Here's an example from St Alban's:

http://www.rightmove.co.uk/property-for-sale/property-62751883.html

Market info tab shows previous sale in 2016 at £622k. Now asking £600k. Final sale 10% below asking would leave negative equity of £82k.

that would assume 100% mortgage

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1 minute ago, hurlerontheditch said:

that would assume 100% mortgage

Indeed, let's say it's not HTB and call it 90%, still not a great two years. Banks will be shielded somewhat by HTB, taxpayers less so.

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11 minutes ago, darkmarket said:

Noticed both the increase in advertising for equity release and sellers starting to accept negative equity.

Here's an example from St Alban's:

http://www.rightmove.co.uk/property-for-sale/property-62751883.html

Market info tab shows previous sale in 2016 at £622k. Now asking £600k. Final sale 10% below asking would leave negative equity of £82k.

Negative equity is only when the property is "worth" less than the outstanding mortgage. 

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11 minutes ago, darkmarket said:

Noticed both the increase in advertising for equity release and sellers starting to accept negative equity.

Here's an example from St Alban's:

http://www.rightmove.co.uk/property-for-sale/property-62751883.html

Market info tab shows previous sale in 2016 at £622k. Now asking £600k. Final sale 10% below asking would leave negative equity of £82k.

That is a joke surely.......who in their right mind would want to live there.....what can it offer at that price that many other places can offer more for half that price or less......a fool and their borrowed money are easily parted.....;)

 

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1 minute ago, Monkey said:

Negative equity is only when the property is "worth" less than the outstanding mortgage.  

Are you saying it's ok to lose more than a £60k deposit in two years?

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29 minutes ago, winkie said:

That is a joke surely.......who in their right mind would want to live there.....what can it offer at that price that many other places can offer more for half that price or less......a fool and their borrowed money are easily parted.....;)

 

Six Hundred ******ING thousand pounds for that? That means that some imbecile on six figures is prepared to sign on a mortgage for that. Unbelievable. 

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44 minutes ago, darkmarket said:

Noticed both the increase in advertising for equity release and sellers starting to accept negative equity.

Here's an example from St Alban's:

http://www.rightmove.co.uk/property-for-sale/property-62751883.html

Market info tab shows previous sale in 2016 at £622k. Now asking £600k. Final sale 10% below asking would leave negative equity of £82k.

Slightly OT, but I see 3 bedrooms... and a bed in a shed! Bargain for 599 that!

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4 minutes ago, stuckmojo said:

Six Hundred ******ING thousand pounds for that? That means that some imbecile on six figures is prepared to sign on a mortgage for that. Unbelievable. 

How can sane people compete with this madness? Bozo's who rush to get on the ladder without stopping for a moment to look more than 1 year down the road.

I wouldn't mind being a fly on the wall in their household at the moment. Looking at whats one offer in the surrounding area they know they're taking a £100k hair cut at best. Wouldn't be surprised if the house end's up being sold as part of divorce proceedings.

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53 minutes ago, darkmarket said:

Noticed both the increase in advertising for equity release and sellers starting to accept negative equity.

Here's an example from St Alban's:

http://www.rightmove.co.uk/property-for-sale/property-62751883.html

Market info tab shows previous sale in 2016 at £622k. Now asking £600k. Final sale 10% below asking would leave negative equity of £82k.

£622k for a terraced house 😄  too far away from W1 for silly money like that.

350k tops 

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42 minutes ago, CanAffordWontPay said:

Wouldn't be surprised if the house end's up being sold as part of divorce proceedings.

Think the forced sellers will be joined by the reluctant sellers now that recession is on the cards. Glad we're all agreed 600k is fantasy, even if they are brave enough to accept a loss upfront.

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"Negative Equity", and this is what it is all about, the dozens of bad UK policies we are now living with in order to prevent this. We cannot build badly needed homes, saving corrupt banks, and those heavily in debt to name just three. And the more we delay negative equity and the recession that will run parallel to it the worse the inevitable crash will be one day. 

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Well ....... I dont think he reporter.fully understands the equity withdrawal market.

One, they dont pay 100% of the 'Its worth xxxk' price. EW will only offer about 30-50% of a a very very very low market valuation.

If Mr Boomer thinks his house with worth 1m, then the EW will value at 700 and offer ~350k.

Im not aware of a person 'winning' against a EW company - their cards, their rules, their dealer.

My advice on withdrawing equity remains  sell and buy somewhere cheaper.

 

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4 minutes ago, spyguy said:

 

My advice on withdrawing equity remains  sell and buy somewhere cheaper.

 

The boomers want to have cake and yours and still have have cake after they have eaten it. 

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7 hours ago, spyguy said:

Well ....... I dont think he reporter.fully understands the equity withdrawal market.

One, they dont pay 100% of the 'Its worth xxxk' price. EW will only offer about 30-50% of a a very very very low market valuation.

If Mr Boomer thinks his house with worth 1m, then the EW will value at 700 and offer ~350k.

Im not aware of a person 'winning' against a EW company - their cards, their rules, their dealer.

My advice on withdrawing equity remains  sell and buy somewhere cheaper.

 

Exactly, and then on that EW loan of £350K, the interest is such that Mr Boomer will end up paying back £700K! :)
 

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13 hours ago, Slimline said:

Bail in anyone ? 👀

Its not really a bank loan or a bank.

Not 100% but its normally insurer, hedging some mortality thing.

Ive never seen a reason to get worried about ukgov bailing out an EW co.

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8 hours ago, mrtickle said:

Exactly, and then on that EW loan of £350K, the interest is such that Mr Boomer will end up paying back £700K! :)
 

EW always reminds me of Homer going to Mr Burns for a loan to buy Lisa a pony.

Do you know the meaning of the word 'usery'? No, excellent....

Only a few percent of uk pop grasp compounding interest. People who do EW arnt them.

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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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