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House price correction and rent correction


Freki
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20 hours ago, Captain Kirk said:

Yes it is. 

If you rent you're only liable for the rent. You won't get handed an extra bill for £100,000 on top of rent.

If you buy and house prices fall, you will get handed a bill for an extra £100, 000 on top of your mortgage. 

The only issue is: will house prices fall? 

Directly they start falling, you'd be mad to buy so the first time buyer market stops completely. 

We seem to have arrived at that point now. So unless the government does something, eg 40% help to buy, the market is going to grind to a halt.

No prizes for guessing 40% help to buy is now here. This means the taxpayer is going to pay 40% of the losses as house prices go down . Get your cheque books out. 

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On 17/01/2019 at 09:46, Freki said:

 

View from a London-watcher is that 5-15% drops in rents would be the most you could realistically hope for over the next two years, but the important thing is not how that changes your rent/buy calculations but how it changes the hold/sell calculations made by the landlords and their lenders.

The landlord mindset is going to completely change as it becomes clearer that the immediate future means choosing between between eating voids and dropping rents, while their tax payments rise and their capital values fall. 

Sit tight for a couple of years, wait til you see the whites of their eyes.

 

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2 hours ago, 24gray24 said:

If you rent you're only liable for the rent. You won't get handed an extra bill for £100,000 on top of rent.

If you buy and house prices fall, you will get handed a bill for an extra £100, 000 on top of your mortgage. 

The only issue is: will house prices fall? 

Directly they start falling, you'd be mad to buy so the first time buyer market stops completely. 

We seem to have arrived at that point now. So unless the government does something, eg 40% help to buy, the market is going to grind to a halt.

No prizes for guessing 40% help to buy is now here. This means the taxpayer is going to pay 40% of the losses as house prices go down . Get your cheque books out. 

I agree. The other thing that is a bit of a misnomer is that sellers can just sit on properties and don't have to sell if they don't want to. Well maybe in some cases they can, but at some point new mortgages are not going to compensate for existing mortgages being paid off, which is deflationary. Mortgages still have to be paid regardless of whether sales have plummeted, and plummeting sales usually goes hand in hand with a recession and higher unemployment. This is one of the reasons TPTB are scared witless of deflation.

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1 minute ago, Captain Kirk said:

1. sellers can just sit on properties and don't have to sell if they don't want to.  2 at some point new mortgages are not going to compensate for existing mortgages being paid off, which is deflationary. 

1. Once prices start falling (now) , the losses mount every month. So they can't sit on it. Gadarene rush for the exit ensues; every month they wait leaves them with a bigger debt at the end. 

2. What about printing money like mad? Letting currency go down to create offsetting inflation?  Isn't that the Corbyn plan to stop deflation? 

What's the tory plan?  

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25 minutes ago, 24gray24 said:

What's the tory plan? 

Force to Buy (Force to Sell)? The only real solution is to abandon the madness and move to an economy based on producing goods and services and selling them. It will mean higher interest rates and unemployment whilst the economy adjusts. Or, we can just watch it blow up every couple of decades, as free market forces overwhelm TPTB, and hope one of the busts doesn't end up in a depression.

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On 18/01/2019 at 21:07, Captain Kirk said:

Renting is risk free. The 'risk' that you may get moved on is not a financial risk. You don't continue to pay rent if you get moved on. By renting, you are purchasing accommodation and know exactly how much you will pay and how much you will make out of it (the latter being nothing financially).

Borrowing has risk because you do not know how much you are paying for the house because you don't know what the interest rates will be in the future.

The risk of being moved on (which is higher when renting from a landlord than when renting from a bank) - in non financial terms can be, at different stages of life, very small or just plain huge.

As someone who took the hit of being moved on, twice, by greedy landlords when my twins were very young (once when they were 1 month and once when they were 28 months) - that hurt, and the impact of that on my family and the emotional, relational and physical cost of that outweighs the financial cost.

Edited by Aidan Ap Word
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On ‎19‎/‎01‎/‎2019 at 15:10, 24gray24 said:

Calling all Tories: someone must know what the Tory plan is to stop prices going down? 

Wasn't it simply giving money to the banks at one time ?  ( which the banks used to inflate bubbles in everything)

Mansion House speech last year - £750,000,000,000 available to the banks to draw upon at any time they need. No permission or nod from politicians required: https://www.bloomberg.com/news/articles/2018-06-21/boe-to-get-1-6-billion-as-carney-beefs-up-bank-s-crisis-powers

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On 18/01/2019 at 21:07, Captain Kirk said:

Borrowing has risk because you do not know how much you are paying for the house because you don't know what the interest rates will be in the future.

Yes, there is a financial risk to borrowing - an interest rate risk - but that - at least can be managed.

And I can manage how much I borrow to some extent.

And if a calamity occurs (eg: lose job and cannot find new one that is local-enough OR interest rates spike) I at least get > 2 months warning (unless I am asleep under a rock).

And I can choose a 5yr fixed rate mortgage and so get even more warning (balanced against the additional interest paid on the mortgage).

Ans I can overpay my mortgage - maybe if I get very lucky - and this add further (small) mitigations to the risk.

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15 minutes ago, Aidan Ap Word said:

Yes, there is a financial risk to borrowing - an interest rate risk - but that - at least can be managed.

How? Are you able to influence the MPC decisions?

27 minutes ago, Aidan Ap Word said:

As someone who took the hit of being moved on, twice, by greedy landlords when my twins were very young (once when they were 1 month and once when they were 28 months) - that hurt, and the impact of that on my family and the emotional, relational and physical cost of that outweighs the financial cost.

Normally you have a fixed term contract in which period you cannot get moved on, and you have the option of renewing for a new fixed term at the end of it.

Mistaking emotions for financial risk is probably going to end up in bad financial decisions.

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17 minutes ago, Captain Kirk said:

How? Are you able to influence the MPC decisions?

Normally you have a fixed term contract in which period you cannot get moved on, and you have the option of renewing for a new fixed term at the end of it.

Mistaking emotions for financial risk is probably going to end up in bad financial decisions.

No, I am not able to influence MPC decisions, but I can "insure" against decisions that negatively affect me.

I cannot "insure" against my landlord moving me on, any more than I can "insure" against rising rents too.

A fixed term contract is only a short term hedge against rental increases (even a 12 month contract has option to S21 after 6 months).

A 5yr fix on my interest rate is 10 times longer than that, and a 10yr fix is 20 times longer. And when you compare it with 2 months notice ... the numbers make my point even stronger.

And I can adjust my lifestyle during those 5 years ... a lot easier than I can adjust the car seats in the car during the winter when I have both of my twins in my arms whilst trying to keep them from getting cold all the while making sure the cheap removals company (because it is all about making sound financial decisions, after all, no?) doesn't drop a box on them.

And if the rates rise out of my affordability criterion in less than, say, 6 months then either:

  • the UK has altogether bigger problems OR
  • I have a badly skewed view of affordability

Mistaking the reasons for being a house in the 2010s as a purely financial decision is just plain silly.

And moving young children involves a lot of physical risk - it is not just an emotional thing (though that side of it is hardly irrelevant).

And it is very expensive.

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8 minutes ago, Aidan Ap Word said:

No, I am not able to influence MPC decisions, but I can "insure" against decisions that negatively affect me.

I cannot "insure" against my landlord moving me on, any more than I can "insure" against rising rents too.

A fixed term contract is only a short term hedge against rental increases (even a 12 month contract has option to S21 after 6 months).

A 5yr fix on my interest rate is 10 times longer than that, and a 10yr fix is 20 times longer. And when you compare it with 2 months notice ... the numbers make my point even stronger.

And I can adjust my lifestyle during those 5 years ... a lot easier than I can adjust the car seats in the car during the winter when I have both of my twins in my arms whilst trying to keep them from getting cold all the while making sure the cheap removals company (because it is all about making sound financial decisions, after all, no?) doesn't drop a box on them.

And if the rates rise out of my affordability criterion in less than, say, 6 months then either:

  • the UK has altogether bigger problems OR
  • I have a badly skewed view of affordability

Mistaking the reasons for being a house in the 2010s as a purely financial decision is just plain silly.

And moving young children involves a lot of physical risk - it is not just an emotional thing (though that side of it is hardly irrelevant).

And it is very expensive.

Very true - not saying that people should buy now - I wish I knew what prices were going to do but I don't so would not recommend anything to anyone.

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20 minutes ago, Aidan Ap Word said:

No, I am not able to influence MPC decisions, but I can "insure" against decisions that negatively affect me.

I cannot "insure" against my landlord moving me on, any more than I can "insure" against rising rents too.

A fixed term contract is only a short term hedge against rental increases (even a 12 month contract has option to S21 after 6 months).

A 5yr fix on my interest rate is 10 times longer than that, and a 10yr fix is 20 times longer. And when you compare it with 2 months notice ... the numbers make my point even stronger.

And I can adjust my lifestyle during those 5 years ... a lot easier than I can adjust the car seats in the car during the winter when I have both of my twins in my arms whilst trying to keep them from getting cold all the while making sure the cheap removals company (because it is all about making sound financial decisions, after all, no?) doesn't drop a box on them.

And if the rates rise out of my affordability criterion in less than, say, 6 months then either:

  • the UK has altogether bigger problems OR
  • I have a badly skewed view of affordability

Mistaking the reasons for being a house in the 2010s as a purely financial decision is just plain silly.

And moving young children involves a lot of physical risk - it is not just an emotional thing (though that side of it is hardly irrelevant).

And it is very expensive.

I guess when you have kids it's like choosing between a rock and a hard place. It's a shame this country has come to this (or gone back to this).

I think the UK already has big problems. If I was buying I'd wait until after Brexit seeing it is just a couple of months away.

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On 18/01/2019 at 19:16, Dorkins said:

It's not a great idea to have a big mortgage when a major recession comes. That's the position my parents were in when the 89-early 90s recession came. House prices fell, their household income dropped and they couldn't make the mortgage payments. In the end the house was repossessed and all of the equity they had built up in a couple of decades of full time work and mortgage payments was wiped out. They ended up becoming FTBs again in their mid 40s.

Sorry to hear that. Didn't stop them buying again though? 

When is the next recession coming?

What would class as a big mortgage?

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2 hours ago, Aidan Ap Word said:

Yes, there is a financial risk to borrowing - an interest rate risk - but that - at least can be managed.

And I can manage how much I borrow to some extent.

And if a calamity occurs (eg: lose job and cannot find new one that is local-enough OR interest rates spike) I at least get > 2 months warning (unless I am asleep under a rock).

And I can choose a 5yr fixed rate mortgage and so get even more warning (balanced against the additional interest paid on the mortgage).

Ans I can overpay my mortgage - maybe if I get very lucky - and this add further (small) mitigations to the risk.

If you get repossessed, you not only have to move your twins, but you also go personally bankrupt as well. 

So buying clearly has more risk than renting. 

You have to pay all of any house price drop when you sell and no fixed term mortgage can stop that. 

So in a falling market it's just silly to buy. And that explains why the establishment is terrified of deflation.  

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10 minutes ago, 24gray24 said:

If you get repossessed, you not only have to move your twins, but you also go personally bankrupt as well. 

So buying clearly has more risk than renting. 

You have to pay all of any house price drop when you sell and no fixed term mortgage can stop that. 

So in a falling market it's just silly to buy. And that explains why the establishment is terrified of deflation.  

Nonsense! What is the provability of going bankrupt as a homeowner and as a tenant? The same? more or less? 

If you're renting and you go bankrupt you're moving house anyway. If you get repossessed it's because you haven't be able to pay the mortgage for x months. This doesn't result in bankruptcy provided the house is worth what it's sold for, or you agree to pay the shortfall. 

Some reading for you:

https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/bankruptcy-2/is-bankruptcy-right-for-you/will-you-lose-your-home-bankruptcy/

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33 minutes ago, 24gray24 said:

If you get repossessed, you not only have to move your twins, but you also go personally bankrupt as well. 

So buying clearly has more risk than renting. 

You have to pay all of any house price drop when you sell and no fixed term mortgage can stop that. 

So in a falling market it's just silly to buy. And that explains why the establishment is terrified of deflation.  

 

17 minutes ago, Unmoderated said:

Nonsense! What is the provability of going bankrupt as a homeowner and as a tenant? The same? more or less? 

If you're renting and you go bankrupt you're moving house anyway. If you get repossessed it's because you haven't be able to pay the mortgage for x months. This doesn't result in bankruptcy provided the house is worth what it's sold for, or you agree to pay the shortfall. 

Some reading for you:

https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/bankruptcy-2/is-bankruptcy-right-for-you/will-you-lose-your-home-bankruptcy/

Thank you @Unmoderated!

That is why renting from the bank (or buying with a mortgage) is has less potential downside than renting from a landlord.

And the bank has significantly more reason to keep a paying "tenant" (keeping up with mortgage payments) in place. Proof of this is seen in all the forbearance for many thousands of home "owners" over the years.

A landlord - sometimes - has a specific interest in replacing a paying tenant with a new one.

Summary for 24gray24:

  • if the UK economy goes totally "bust" then I have a risk of having to move regardless of whether I signed mortgage papers or not *
  • if the UK economy goes "boom" then I am likely to get moved on by the landlord when the landlord wants to cash in on their "mad gainz", or even when the landlord wants to double-down on their "pwoperdy" bet.

* though like I say: there is a lot more stacked up to keep homeowners paying their mortgage because the TPTB have staked their futures on it.

 

Edited by Aidan Ap Word
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3 minutes ago, Aidan Ap Word said:

 

Thank you @Unmoderated!

That is why renting from the bank (or buying with a mortgage) is has less potential downside than renting from a landlord.

And the bank has significantly more reason to keep a paying "tenant" (keeping up with mortgage payments) in place. Proof of this is seen in all the forbearance for many thousands of home "owners" over the years.

A landlord - sometimes - has a specific interest in replacing a paying tenant with a new one.

Summary for 24gray24:

  • if the UK economy goes totally "bust" then I have a risk of having to move regardless of whether I signed mortgage papers or not *
  • if the UK economy goes "boom" then I am likely to get moved on by the landlord when the landlord wants to cash in on their "mad gainz", or even when the landlord wants to double-down on their "pwoperdy" bet.

* though like I say: there is a lot more stacked up to keep homeowners paying their mortgage because the TPTB have staked their futures on it.

 

Anytime :)

Who is 24 shades of sh!te anyway? I've been on TOS for a bit now and popped back. Looks like I'm missing the sport of HPC :)

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23 minutes ago, Unmoderated said:

Nonsense! What is the provability of going bankrupt as a homeowner and as a tenant? The same? more or less? 

If you're renting and you go bankrupt you're moving house anyway. If you get repossessed it's because you haven't be able to pay the mortgage for x months. This doesn't result in bankruptcy provided the house is worth what it's sold for, or you agree to pay the shortfall. 

Some reading for you:

https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/bankruptcy-2/is-bankruptcy-right-for-you/will-you-lose-your-home-bankruptcy/

I don't think it's 24gray24 that needs to do some reading! It's unlikely you are going to lose your house unless you are bankrupt, or would be bankrupt without the sale of the house.

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5 minutes ago, Captain Kirk said:

I don't think it's 24gray24 that needs to do some reading! It's unlikely you are going to lose your house unless you are bankrupt, or would be bankrupt without the sale of the house.

Aye aye Captain. Well aware of that so I said IF you get repossessed (because we're talking about moving houses here). 

Maybe read 24shades' post that I replied to regarding bankruptcy, and then the one before that talking about risk (in the context of moving house). 

Bankruptcy doesn't always = loss of owned home (see link). The point everyone else is talking about is which is less risky from a moving house perspective? 

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10 minutes ago, Unmoderated said:

Aye aye Captain. Well aware of that so I said IF you get repossessed (because we're talking about moving houses here). 

Maybe read 24shades' post that I replied to regarding bankruptcy, and then the one before that talking about risk (in the context of moving house). 

Bankruptcy doesn't always = loss of owned home (see link). The point everyone else is talking about is which is less risky from a moving house perspective? 

I've read the posts. I'm not to sure moving house is risky. Unless you balance all your possessions on your head and walk to your new house on a tightrope, rooftop to rooftop, with a child on each arm.

None of my moves have ever been risky.

And I've browsed that link. Good luck keeping your home without paying your mortgage. I think you'll have zero chance.

Edited by Captain Kirk
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1 minute ago, Captain Kirk said:

I've read the posts. I'm not to sure moving house is risky. Unless you balance all your possessions on your head and walk to your new house on a tightrope, rooftop to rooftop, with a child on each arm.

None of my moves have ever been risky.

Well done :) but there's risk attached to everything, even being stupid on the internet. 

Which is more risky (where risk is defined as the likelihood of having to move house); owning a home, or renting a home? 

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1 hour ago, Captain Kirk said:

I don't know. What's more purple (where purple is defined as the likelihood of having to move house); owning a home, or renting a home?

Obviously if you own at home and all other things are equal then you are less likely to have to move than if you rent*.  Saying that it does not mean buying is better, but it is an advantage.

 

*The landlord might have to sell because of S24 for example or divorce or whatever.

 

Saying that if you are happy renting for ever, great - I am happy for you - and your landlord.

Edited by iamnumerate
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