Cornona Effects on House Prices

[2buyornot2buy]

30 minutes ago, sp84 said:

Thanks very much! 

In terms of my own situation and employment - I am a teacher and my wife currently works as a support worker in an assisted living complex. So she is somewhat involved in the health sector.

I am not permanent (which I know is a risk) - but this August I am about to enter into my 4th consecutive year in a school. After 4 years of continuous service, the position is made permanent - so the added security of that is hopefully not too far off.

You'll be grand. Worst case the house would have been 20 or 30k cheaper in a year or two. In the meantime you can be in a house you'll stay in for years.

 

Just as a point, the 4 years conversion from fixed term to permanent isn't automatic if it can be objectively justified. So definitely have a conversation with your principal. Which I'm sure you have. 

[sp84]

23 minutes ago, 2buyornot2buy said:

You'll be grand. Worst case the house would have been 20 or 30k cheaper in a year or two. In the meantime you can be in a house you'll stay in for years.

 

Just as a point, the 4 years conversion from fixed term to permanent isn't automatic if it can be objectively justified. So definitely have a conversation with your principal. Which I'm sure you have. 

Thank you!! You've no idea how good seeing the words "you'll be grand" typed on a forum, can make a guy feel haha!

Yea I have spoken to the principal and they are aware of when I will hit the 4 years. The pessimistic part of me though won't believe it until it actually happens.

I'm going to phone my union tomorrow just to check a few things - I've been told by another teacher that if the position isn't justified in the current school (which mine will be based on curriculum needs) - then you are still made permanent but it goes to a transfer redundancy. So you basically go to another school. I am far from sure on that fact though. 

I think my decision to sign for the house or not, rests solely on the question "in a worst case scenario, by how much will a £159k house fall in value in the next 2 years" ... I could ride out around a drop of 30k (18%-20% drop in prices) ... Anything beyond that would more than likely have me in some form of negative equity.

[Canyon78]

Hi Sp84, just giving my experience on negative equity and SVR rates. Back in 08/09 I got caught by the short and curlys and put on the SVR rate when my house dropped significantly in price.  It was crazy prices/ times back then when I bought. Took me 8 years to grind my way out of that one. The banks may have changed how they treat negative equity now Im not sure.  But it looks like you have done your research and thought through the risks. Personally  I have no idea what house prices are going to do, I can not currently get my head around Belfast property market at the minute. Good luck on what ever you decide.

[sp84]

18 hours ago, Canyon78 said:

Hi Sp84, just giving my experience on negative equity and SVR rates. Back in 08/09 I got caught by the short and curlys and put on the SVR rate when my house dropped significantly in price.  It was crazy prices/ times back then when I bought. Took me 8 years to grind my way out of that one. The banks may have changed how they treat negative equity now Im not sure.  But it looks like you have done your research and thought through the risks. Personally  I have no idea what house prices are going to do, I can not currently get my head around Belfast property market at the minute. Good luck on what ever you decide.

Thanks very much Canyon!

If you don't mind me asking - what was your purchase price and what did it drop to? I'm just asking because the vast majority of prices here haven't gotten back to those inflated 07/08 prices (in a lot of cases) - and the opportunistic part of me is thinking that if they do drop "significantly" ... Then they don't have as far to fall as they did back then. Meaning if in a negative equity situation, it should in theory, not take as long to get out of it. 

I have just heard a few people say that if in negative equity, you will end up somewhere in between the best deals interest rate and the SVR. Though I'm not sure how true it is. 

I was also hoping someone could answer me this other question too ... I know that the SVR is linked to the Bank of England base rate. Normally x% more than what it is.

Am I right in assuming that with interest rates as low as they are now (and I'm sure for the foreseeable future) - then if I do switch to the SVR, then the mortgage repayments shouldn't astronomically shoot up? 

For e.g. I know that in my mortgage repayment illustration (which I know can change as the SVR does) - it tells me that in 2 years time my interest rate will move from the agreed 1.85% fixed to 3.49% variable. This increases the monthly mortgage payments by about £180. So still more than affordable.

Am I right in my thinking ? Or have I got it wrong there in relation to the SVR and the Bank of England base rate ? 

Thanks !

[Canyon78]

Hi Sp84,

I could write a thread all on its own on how not to buy a house from my previous mistakes but it looks like you are way more prepared than I ever was. I wish I had found this site back in 06/07. 
 

I purchased at £130 and sold approx 9 years later at £40 in 2016. The house wasn’t in a great area outside Belfast and it needed a lot of work buy the time I sold it, which also reflected in some of the price drop. 
 

I think the SVR is loosely linked to the Base rate. You could check with your mortgage provider. It could also be different from lender to lender how the set the SVR rate. When the base rate dropped in the last recession. My SVR rate dropped from I think around 7.5% to 3.9%. I could dig out the paper work and find the exact numbers. 
 

I wouldn’t/couldn’t advise you on what to do as my guessing on the economy and house prices have been shockingly wrong. 
 

 

[sp84]

14 minutes ago, Canyon78 said:

Hi Sp84,

I could write a thread all on its own on how not to buy a house from my previous mistakes but it looks like you are way more prepared than I ever was. I wish I had found this site back in 06/07. 
 

I purchased at £130 and sold approx 9 years later at £40 in 2016. The house wasn’t in a great area outside Belfast and it needed a lot of work buy the time I sold it, which also reflected in some of the price drop. 
 

I think the SVR is loosely linked to the Base rate. You could check with your mortgage provider. It could also be different from lender to lender how the set the SVR rate. When the base rate dropped in the last recession. My SVR rate dropped from I think around 7.5% to 3.9%. I could dig out the paper work and find the exact numbers. 
 

I wouldn’t/couldn’t advise you on what to do as my guessing on the economy and house prices have been shockingly wrong. 
 

 

Thanks very much !!!

Flip that was a huge drop! Was it over inflated to begin with? What would you think it would have sold for say 1 year ago?

I've been trying to make myself feel better that the house I'm buying (£159k) won't drop below, let's say £120k. Mainly due to its location (Lambeg, Belsize Road) and other added value things such as detached garage, and good sized front and back garden. Bottom line is, people still need somewhere to live. 

I had a look on my lenders site and their SVR is BoE base rate + 3.49% ... Which, as long as interest rates remain low for the next while, will still mean the mortgage is affordable (and more than likely, still cheaper than rent).

I'm trying my best to be prepared - last piece of paperwork came through yesterday, so I will have to sign (or not sign), relatively soon ... Though no matter how prepared I try to be, deep down I know that it may not matter. That's what has me stressed out the most, the factors out of my control. 

[Canyon78]

28 minutes ago, sp84 said:

Thanks very much !!!

Flip that was a huge drop! Was it over inflated to begin with? What would you think it would have sold for say 1 year ago?

I've been trying to make myself feel better that the house I'm buying (£159k) won't drop below, let's say £120k. Mainly due to its location (Lambeg, Belsize Road) and other added value things such as detached garage, and good sized front and back garden. Bottom line is, people still need somewhere to live. 

I had a look on my lenders site and their SVR is BoE base rate + 3.49% ... Which, as long as interest rates remain low for the next while, will still mean the mortgage is affordable (and more than likely, still cheaper than rent).

I'm trying my best to be prepared - last piece of paperwork came through yesterday, so I will have to sign (or not sign), relatively soon ... Though no matter how prepared I try to be, deep down I know that it may not matter. That's what has me stressed out the most, the factors out of my control. 

Everything was over inflated in 06/07, looking back it was nuts. I just checked propertypal, similar houses in that area range from 45k upwards. 

This financial crisis is very different than the last one in many ways. 

You could stretch the purchase processes out a bit to give you more time on your decision. Wait until the seller puts pressure on you?  (Not sure how ethical that what be?)

There is so many variables in the housing market. It can be hard to stay rational and objective with such a big decision. You have to do whats right for you and take all the risks into consideration. Which it does look like you have done.Sorry not much of an answer.

[nigooner]

46 minutes ago, sp84 said:

Thanks very much !!!

Flip that was a huge drop! Was it over inflated to begin with? What would you think it would have sold for say 1 year ago?

I've been trying to make myself feel better that the house I'm buying (£159k) won't drop below, let's say £120k. Mainly due to its location (Lambeg, Belsize Road) and other added value things such as detached garage, and good sized front and back garden. Bottom line is, people still need somewhere to live. 

I had a look on my lenders site and their SVR is BoE base rate + 3.49% ... Which, as long as interest rates remain low for the next while, will still mean the mortgage is affordable (and more than likely, still cheaper than rent).

I'm trying my best to be prepared - last piece of paperwork came through yesterday, so I will have to sign (or not sign), relatively soon ... Though no matter how prepared I try to be, deep down I know that it may not matter. That's what has me stressed out the most, the factors out of my control. 

If you assess every single risk individually you’ll never End up buying a house- and that can be either a good or bad thing. Sometimes i think that the slightest hint of losing a bit of money on a house at any point in the future puts people off buying, but at the potential detriment to family/personal life or your own well being. You’ve clearly done your research and are well versed on all possible scenarios. But if it’s a long term family purchase for family lifestyle, maybe put more weight on these factors. If you were expecting markets to drop 50% then obviously don’t buy a house, but if you’re expecting 10% worst case scenario and can stomach that without financial distress- the monetary value of that 10% could be far outweighed by the intangible benefits of peace of mind/ happy kids/ setting down roots etc. 

It’s hard to put a monetary value on unquantifiable things like well being to compare against house price increases/decreases- But don’t put your life on hold for the gamble of timing a property purchase at the rock bottom of the market. Economists that are paid lots of money to work market cycles out are rarely correct! 

[sp84]

9 minutes ago, nigooner said:

If you assess every single risk individually you’ll never End up buying a house- and that can be either a good or bad thing. Sometimes i think that the slightest hint of losing a bit of money on a house at any point in the future puts people off buying, but at the potential detriment to family/personal life or your own well being. You’ve clearly done your research and are well versed on all possible scenarios. But if it’s a long term family purchase for family lifestyle, maybe put more weight on these factors. If you were expecting markets to drop 50% then obviously don’t buy a house, but if you’re expecting 10% worst case scenario and can stomach that without financial distress- the monetary value of that 10% could be far outweighed by the intangible benefits of peace of mind/ happy kids/ setting down roots etc. 

It’s hard to put a monetary value on unquantifiable things like well being to compare against house price increases/decreases- But don’t put your life on hold for the gamble of timing a property purchase at the rock bottom of the market. Economists that are paid lots of money to work market cycles out are rarely correct! 

That's a great way to look at - and one that I am trying to think more along the lines of. You are also absolutely right about overthinking and that resulting in never actually making buying a home. And that's exactly what I plan on this being for my family - a home. I have never been this worked up about anything in my life. To the point where worrying is definitely affecting my well being at the minute ... It isn't even a loss of money I care about. The "on paper value" does matter to me because I doubt I'll want to move. It is solely about making sure the mortgage repayments are manageable, in the event of negative equity. I know I am probably overthinking that aspect of it though.

At this stage they are all just predictions and we really won't know the impact until furlough ends. And also I know that price drops aren't created equally (it isn't a blanket approach). Every house/area is affected differently. Since the market reopened I know people have been bidding and buying ... Plus with nationwide going back to the 10% deposit mortgage market tomorrow, it ma also help stabilise things somewhat.

The biggest drop prediction that I have read for NI, is 16% ... Which I could sit tight and ride that amount out. Mainly in terms of the % equity I would be able to build up between now and the time it comes to remortgage in 2022.

I think a drop of 50% (which I haven't seen predicted anywhere) and the vast majority of homeowners that have bought within the last 10 years would be affected.

I can't really hold off signing for the house much longer. The process has been going on incredibly long, there has been pressure from the seller to get things moving again now that the market has opened ... and my mortgage offer expires at the beginning of August. 

 

[nigooner]

If you can ride it out without any distress, I’d just sign and get the house and move on with your life. All the stress will be gone the second you move in! No more HPC forums, no more propertynews/pal searches, no news reports and house price index. 

[2buyornot2buy]

15 hours ago, nigooner said:

If you can ride it out without any distress, I’d just sign and get the house and move on with your life. All the stress will be gone the second you move in! No more HPC forums, no more propertynews/pal searches, no news reports and house price index. 

In fairness we both own and we're still here. 

[sp84]

4 hours ago, 2buyornot2buy said:

In fairness we both own and we're still here. 

? Haha fair point! I'd say that even with signing for the house, I would still be keeping an eye on how things change. Especially between now and when I have to remortgage in 2022. Obviously not that I could control or do anything about it - but just to be informed. 

Thanks a lot for all the advice everyone, really appreciate it. 

@Canyon78 sorry I just seen your previous post regarding what it sells for now! So it is still around the level you sold it for, and hasn't gotten near the price you bought it for? Is that right?

@2buyornot2buy I also spoke to the teaching union on Friday in relation to 4 years. We went over the role I have been covering and whether I have had an absences or not (which I haven't). The union rep says I certainly have a good case and for me to submit the paperwork in January. If there is any pushback then they would obviously step in. I know that isn't a guarantee, but it's at least promising. 

I also took a wee drive past the house today and we still really love it and it's location. It's an older house (semi, red brick) and needs a few tiny cosmetic touch ups (outside wall painted etc) - but I know the area is popular and we were lucky to get it in the first place vs other higher bidders. 

[Canyon78]

@sp84  That area (Craigavon/lurgan) never really recovered from the 06/07 bubble and crash. Other areas  have done considerably better since. Those areas have been discussed on here before.

I would say that if it was my forever home. The drop probably wouldn't have bother me that much. I know the area you are buying in, if I had originally bought there it would have worked for me. Nigooner has made some valid points.

[Mat1111]

4 hours ago, sp84 said:

I also took a wee drive past the house today and we still really love it and it's location. It's an older house (semi, red brick) and needs a few tiny cosmetic touch ups (outside wall painted etc) - but I know the area is popular and we were lucky to get it in the first place vs other higher bidders. 

Sounds like you should go ahead with it!

 

Also you may find your house will only get revalued if you switch mortgage providers or try to get a lower LTV product. That's always been my experience with product transfers anyway. 

[sp84]

On 7/19/2020 at 8:41 PM, Mat1111 said:

Sounds like you should go ahead with it!

 

Also you may find your house will only get revalued if you switch mortgage providers or try to get a lower LTV product. That's always been my experience with product transfers anyway. 

Thanks a lot @Mat1111 - can I just clarify what you are saying there with regards to revalued? I had a friend of mine say something similar today and I suppose it is the crux of all of my anxiety around this. Especially as a FTB because the process is obviously very alien to me. 

So hypothetically, let's say in 2 years time the market in NI is down x% and I am in some sort of negatove equity.

I then go back to the bank (same lender), looking to see if I can get a new fixed rate mortgage deal. 

Do they automatically revalue my house? Or perhaps, take the newspapers/economists word of an x% drop and apply a blanket style approach to all houses in NI? 

Or, because they want to continue making money from me - do they say, we know house prices in NI have dropped by x% ... You only put down a 10% deposit and have built up 13% equity in your house ... So here is a list of current rates you are eligible for based on your high LTV/negative equity situation? 

Or is it just an absolute given of going straight onto the SVR - handcuffs and shackles on with no options? 

@Canyon78 you may actually be able to help me with that one too ... When you were in negative equity, what was your experience like with the bank? Did they try to work with you? Give you any options? Or was it simply a matter of ... This is the SVR ... Tough luck? 

Thanks!!!

[Mat1111]

8 hours ago, sp84 said:

Thanks a lot @Mat1111 - can I just clarify what you are saying there with regards to revalued? I had a friend of mine say something similar today and I suppose it is the crux of all of my anxiety around this. Especially as a FTB because the process is obviously very alien to me. 

I would definitely speak to a broker at the bank and ask about product transfers and how they do valuations for them.

Natwest seem to be saying they'll use the original valuation if the HPI has dropped. It's worth confirming this is definitely the case and whether other providers have similar clauses. I've always been a fan of product transfers, way less hassle. In my account it shows the original valuation, HPI valuation today and an option to request a proper revaluation if you've had work done for example. There is also a link that lets you roll over onto eligible products about 5 months before the fixed rate ends. 

The way I'm reading this is you should never end up trapped on the SVR with Natwest. I imagine other lenders are similar. BTL lenders are the same, no revaluations unless you're asking for more money.

"

Carrying out a more up to date valuation on your property may help you to receive a better mortgage deal, however this is not always the case.

Any deals offered to you will be subject to your Loan to Value (LTV) % - this is calculated using your total mortgage outstanding as a percentage of the valuation of your property. Once you have logged in to Manage my Mortgage you will see both the last valuation carried out on your property and a free House Pricing Index (HPI) value. In determining your current LTV% we use the higher of these two figures, to give you the best outcome and access to the lowest applicable deals. 

Alternatively, if you believe your property is worth more than we hold on file, you can choose to pay for a property valuation and we will contact one of our approved surveyors on your behalf to arrange this. Please note that if you choose this, the new valuation is used to calculate your revised LTV, whether it is higher or lower than the current value, as it has been carried out by a independent valuer. This may impact any additional borrowing you are looking to apply for and/or any new deals that you are looking to switch to from your current deal. 

When should I carry out a new valuation?

If something has happened which you think will lead to a change in your property's value then it may be worth carrying out a re-valuation, for example, an extention, loft conversation or a conservatory.

"

 

 

 

[Canyon78]

@sp84 The Halifax at the time valued it around 65k on there system when I came to  remortgage not sure how they calculated that figure they didn't come out and do a proper survey. 

Yes it was straight on to the SVR rate. I know a few years later the lenders had a process to deal with people in negative equity. I think the bank wasnt interested in helping unless I started missing payments. Im not sure what the process is now. 

 

 

[sp84]

43 minutes ago, Canyon78 said:

@sp84 The Halifax at the time valued it around 65k on there system when I came to  remortgage not sure how they calculated that figure they didn't come out and do a proper survey. 

Yes it was straight on to the SVR rate. I know a few years later the lenders had a process to deal with people in negative equity. I think the bank wasnt interested in helping unless I started missing payments. Im not sure what the process is now. 

 

 

Wow so slightly different experiences there! 

@Canyon78 I can't remember where, but I do remember reading that banks did start to change how they deal with people in negative equity - in order to try and work with them more.

@Mat1111 thanks so much for pasting in those terms. My take on that is the same as yours(at least with NatWest) ... person won't move on to the SVR even if they are on negative equity. The key line there for me was "Once you have logged in to Manage my Mortgage you will see both the last valuation carried out on your property and a free House Pricing Index (HPI) value. In determining your current LTV% we use the higher of these two figures, to give you the best outcome and access to the lowest applicable deals."

To me anyway - that indicates that regardless of negative equity (due to a % fall in prices), the bank will offer deals as long as you contact them. You will move to the SVR if you just sit on your hands, say nothing and let it automatically roll over.

Sounds a lot like when car insurance is up for renewal. They send you the new terms in the post. If you say nothing you automatically get rolled over to them. If you phone them to query, they immediately knock a few quid off just for getting in contact.

If this is the case with my lender, that would throw all my anxiety out the window and make me feel much more comfortable moving forward. That way negative equity only becomes an issue if I am looking to sell. Which fingers crossed won't be an issue. 

My mortgage offer is with Barclays and I have tried to find similar information (to what you have posted about NatWest) on their website, but without any luck!

Any idea how/where I could find out their policy regarding product transfers? 

Thanks!

[Mat1111]

44 minutes ago, sp84 said:

My mortgage offer is with Barclays and I have tried to find similar information (to what you have posted about NatWest) on their website, but without any luck!

Any idea how/where I could find out their policy regarding product transfers? 

Thanks!

Try the online chat and ask if they do a revaluation at renewal time and if so which number they use. It might be that there are betters choices if you're worried about it. Also it's worth speaking to a no-fee broker just incase they can get you a better deal than you can yourself. I'm a fan of Natwest even if the rates aren't always the absolute lowest. 

https://www.barclays.co.uk/mortgages/existing-customer-centre/guides/

[sp84]

2 hours ago, Mat1111 said:

Try the online chat and ask if they do a revaluation at renewal time and if so which number they use. It might be that there are betters choices if you're worried about it. Also it's worth speaking to a no-fee broker just incase they can get you a better deal than you can yourself. I'm a fan of Natwest even if the rates aren't always the absolute lowest. 

https://www.barclays.co.uk/mortgages/existing-customer-centre/guides/

Thank you @Mat1111 ! I just spoke to an advisor on their live chat. 

 

Firstly the way Barclays carry out their valuation for a product transfer is how I thought most banks would ... That is, they have a valuation tool that looks at prices and sales in the area. So if prices are up or down x% then that applies to the house. 

So I asked outright in relation to COVID, property prices and potential negative equity. 

I said in that situation would I automatically roll on to the SVR or is it still possible to get deals ... The advisor said that I will still be able to negotiate a renewal deal, I would just be classed in the highest LVT category, which is 90%.

He sent me their current deals and if I'm reading it right, that category has an interest rate of around 2.8% ... Which is obviously below the SVR. 

So that at least clarifies the issue with me and fear of being locked into SVR for years. 

[Mat1111]

33 minutes ago, sp84 said:

Thank you @Mat1111 ! I just spoke to an advisor on their live chat. 

I said in that situation would I automatically roll on to the SVR or is it still possible to get deals ... The advisor said that I will still be able to negotiate a renewal deal, I would just be classed in the highest LVT category, which is 90%.

He sent me their current deals and if I'm reading it right, that category has an interest rate of around 2.8% ... Which is obviously below the SVR. 

So that at least clarifies the issue with me and fear of being locked into SVR for years. 

That's not too bad considering there will be no application fees!

You can always look at things again in a couple of years. Main thing is you won't get stuck on the SVR

[sp84]

7 minutes ago, Mat1111 said:

That's not too bad considering there will be no application fees!

You can always look at things again in a couple of years. Main thing is you won't get stuck on the SVR

Yea that has always been my fear ... A "tough shit" approach from the banks and being locked into the SVR for years trying to claw out. 

At least with being able to get deals ... and as long as interest rates remain low/competitive ... potential negative equity shouldn't have too much of an impact in terms month to month affordability.

I've definitely over thought all of this haven't I haha!

[Mat1111]

1 hour ago, sp84 said:

Yea that has always been my fear ... A "tough shit" approach from the banks and being locked into the SVR for years trying to claw out. 

At least with being able to get deals ... and as long as interest rates remain low/competitive ... potential negative equity shouldn't have too much of an impact in terms month to month affordability.

I've definitely over thought all of this haven't I haha!

It's a big decision I don't blame you!

With a bit of luck you'll be in the next LTV bracket come remortgage time

 

[2buyornot2buy]

Worth pointing out(having not seen your mortgage contract ) that all this sounds very much like it's dependant on goodwill. In the event of a "significant" crash, banks are going to be looking at maintain a margin. NPL will wreck their balance sheet, we've already seen Danske make provisions this week. What remains to be seen is, in the event of a crash, will they let customers in negative equity access retention deals, or let they languish on significantly more profitable SVR. 

 

[sp84]

2 hours ago, 2buyornot2buy said:

Worth pointing out(having not seen your mortgage contract ) that all this sounds very much like it's dependant on goodwill. In the event of a "significant" crash, banks are going to be looking at maintain a margin. NPL will wreck their balance sheet, we've already seen Danske make provisions this week. What remains to be seen is, in the event of a crash, will they let customers in negative equity access retention deals, or let they languish on significantly more profitable SVR. 

 

That's very true ... The circumstances today are absolutely subject to change and another absolute unknown to throw into the equation sadly. 

May I also ask what you would class as a "significant" crash?

Obviously there are lots of % flying around and it's anyone's guess.

Prices here are currently 38% below the level they were at in 2008. So perhaps that means they have less of a distance to fall I assume? Whereas in England they are 23% above peak levels. 

As I had said in an earlier post, the biggest fall which I had seen predicted for NI was 16% - that was from which.com 

Propertypal also released a few articles back in April time. They predicted a 70% fall in sales numbers in quarter 2 (the actual figure was 66%) so they weren't far off the mark. 

They also predicted for NI a fall in prices in the range of 3%-5% but said it could be more depending on the lockdown period.