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Smurf1976

Negative Equity Right Now In Australia

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http://firstrung.co.uk/articles.asp?pageid...1305&cat=47-0-0

...The banker, who did not want to be named, said borrowers without equity were "lambs to the slaughter" because they had little or no bargaining power if their circumstances changed.

Melbourne's median house price of $375,000 last December was 1.3 per cent lower than in 2003 -- but values in some outer suburbs were up to 10 per cent lower.

Denis Orrock, general manager of financial services provider Infochoice.com.au, said many borrowers could not afford to sell.

An over-stretched borrower could take years to get to a break-even point.

He said homeowners would pay so much interest by holding on during a flat period that some might be be better off taking a loss today.

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http://firstrung.co.uk/articles.asp?pageid...1305&cat=47-0-0

...The banker, who did not want to be named, said borrowers without equity were "lambs to the slaughter" because they had little or no bargaining power if their circumstances changed.

Melbourne's median house price of $375,000 last December was 1.3 per cent lower than in 2003 -- but values in some outer suburbs were up to 10 per cent lower.

Denis Orrock, general manager of financial services provider Infochoice.com.au, said many borrowers could not afford to sell.

An over-stretched borrower could take years to get to a break-even point.

He said homeowners would pay so much interest by holding on during a flat period that some might be be better off taking a loss today.

Same thing is happening on the coasts in the US--it will be repeated worldwide as the global recession begins to bite. Anyone who thought HPI could continue to drive economies without a corresponding growth in other sectors of the economy was mistaken. Man does not live by house price inflation alone.

Edited by Realistbear

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Can you expain why negative equity means you can't move? (More for newbies really).

Can't you just move to an equivalent value house?

I say this because a lot of people have not experienced NE before and don't realise the impact it has.

Someone more experienced than me might want to answer, but heres a brief explanation:

House bought for 200K with a morgage of 180 drops to 160 valuation

You still own the bank 180.

You can only realise 160 sale

Your 20K down still owing to the bank.

You want to buy a house that costs 140 (your trying to climb down the ladder to save yourself)

The bank will only lend you 126K on that house. So you have to find the deposit of 14K which you don't have because you sold at a loss, and you still owe them 20K from the previous house. So you need to find 34K to move (the deposit + the difference).

Hence you are trapped. Stuck. going Nowhere.

Interest Rates are probably going up, because that is what they do when the money supply tightens (when people go bankrupt en masse the money supply tightens) and if you chose one of those fabulous flexible variable rate trackers, or even better an offset morgage so that you could "plan a payment holiday", now you are stuck, trapped going nowhere and unable to move your morgage because no morgage company will lend you more than 95% of the value of the house which is about 144K and the rates are going up and up, and your wondering how your going to pay the gas bill (which has increased by 22%) ... its vicious.

You are trapped until the morgage = the value of the house - 5%.... or until you hand the keys in... but when you do, bear this in mind, if you don't declare yourself bankrupt at that point it is a further slippery slope...

The bank can come back 20 years later, when you've got your life back together and got your new home and are starting to feel really comfortable and SAFE, and try to make you sell that one to cover the difference between the bargain basement price they sold your old home to an RE mate for, and what was left of the old morgage + 20 years compound interest.

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Excellent. Thanks for that! Do you know, one of my friends actually thought that when the value of your house drops then the value of the mortgage drops as well!

We need to be clear how financially illiterate most people are. We need................

Alvin.

Edit - just re-read last bit of your post - is this true? Blimey O'Reilly if it is. Can they DO this?

Edited by 29929BlackTuesday

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Negative Equity only applies in Australia

In the UK negative equity has been abolished completely due to new legislation brought in by the Labour Party. In fact it was one of the first things they did in office.

Abolish Boom to Bust, and Negative Equity.

This policy is the backbone of the Labour Party, there is no way we want to return to the days of the Tories where there was negative equity and a recession.

Labour have spent many millions on publicising this policy at the elections with Slogans such as "No more boom to Bust"

So dont worry, invest in property and be assured from Gordon and Tony that the property market will never crash.

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Guest Winners and Losers

Phew, thank goodness for that.

Negative Equity only applies in Australia

In the UK negative equity has been abolished completely due to new legislation brought in by the Labour Party. In fact it was one of the first things they did in office.

Abolish Boom to Bust, and Negative Equity.

This policy is the backbone of the Labour Party, there is no way we want to return to the days of the Tories where there was negative equity and a recession.

Labour have spent many millions on publicising this policy at the elections with Slogans such as "No more boom to Bust"

So dont worry, invest in property and be assured from Gordon and Tony that the property market will never crash.

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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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