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Repossession Likely If You Bought Late In The Boom

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http://news.ft.com/cms/s/c80003a0-af12-11d...20abe49a01.html

Financial trouble more likely for boom borrowers

By Jane Croft

Published: March 9 2006 02:00 | Last updated: March 9 2006 02:00

More than 7 per cent of borrowers who took out mortgages in 1989 have had their properties repossessed, according to Moody's Investors Service, the rating agency.
A study by the agency of the mortgages taken out between 1985 and 2003 showed how home-buyers at the peak of the housing boom were much more likely to get into financial trouble.
The Moody's report showed that the level of mortgage defaults and losses to lenders depended largely on the loan-to-value ratios used, determining how much of a deposit borrowers put down.

Anyone who bought after 2003 may face some real problems soon. Anyone who buys at this late stage of the cycle is committing financial suicide.

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http://news.ft.com/cms/s/c80003a0-af12-11d...20abe49a01.html

Financial trouble more likely for boom borrowers

By Jane Croft

Published: March 9 2006 02:00 | Last updated: March 9 2006 02:00

More than 7 per cent of borrowers who took out mortgages in 1989 have had their properties repossessed, according to Moody's Investors Service, the rating agency.
A study by the agency of the mortgages taken out between 1985 and 2003 showed how home-buyers at the peak of the housing boom were much more likely to get into financial trouble.
The Moody's report showed that the level of mortgage defaults and losses to lenders depended largely on the loan-to-value ratios used, determining how much of a deposit borrowers put down.

Anyone who bought after 2003 may face some real problems soon. Anyone who buys at this late stage of the cycle is committing financial suicide.

most of my friends have bought post 2003....

didn't consider the market, I think they just thought it was the right thing to do at their age...

plus pressure from the mrs! :lol:

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The Moody's report showed that the level of mortgage defaults and losses to lenders depended largely on the loan-to-value ratios used, determining how much of a deposit borrowers put down.[/indent]

Anyone who bought after 2003 may face some real problems soon. Anyone who buys at this late stage of the cycle is committing financial suicide.

Well, some people live in the cheaper parts of cheaper cities and buying a house is not an incredible financial strain. But with people taking out 25 year mortgages which they can only just afford, all that is required is that their situation (including interest rates, salary, living costs) becomes worse than it is now at any time during that 25 years and they're finished.

Billy Shears

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Well, some people live in the cheaper parts of cheaper cities and buying a house is not an incredible financial strain. But with people taking out 25 year mortgages which they can only just afford, all that is required is that their situation (including interest rates, salary, living costs) becomes worse than it is now at any time during that 25 years and they're finished.

Billy Shears

I refuse to live in cheaper parts of a cheaper city.... so I wait, and wait, and wait......

But I agree. Stretched affordability when taking out a mortgage is madness.

If I take out a mortgage I want loads of headroom... even taking into account the possibility of a doubling of mortgage costs. Most people don't.

I know a young couple, both on cr*p wages who recently bought a flat (mid 2005).

They paid what I would consider a 'peaky' price for it, on ridiculous income multiples (as much as the lender would lend apparently) and now they are very skint.

It is also on an IO mortgage so they derive little benefit over renting.

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Well, some people live in the cheaper parts of cheaper cities and buying a house is not an incredible financial strain. But with people taking out 25 year mortgages which they can only just afford, all that is required is that their situation (including interest rates, salary, living costs) becomes worse than it is now at any time during that 25 years and they're finished.

Billy Shears

nd don't forget, low managed inflation.. those mortgages are going to hurt for a long time... at least until they have apid of enough capital to reduce payments..

Phew... could you imagine if people were borrowing 7-9 times their salary on an interst only mortgage that they can only just afford when they took out their fixed rate mortage at 4%..

at a time when the head of the Bank of England is warning that inflation will not pay of their mortgage.

that would be plain suicide..

Luckily no one is that dumb

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Well, some people live in the cheaper parts of cheaper cities and buying a house is not an incredible financial strain. But with people taking out 25 year mortgages which they can only just afford, all that is required is that their situation (including interest rates, salary, living costs) becomes worse than it is now at any time during that 25 years and they're finished.

Billy Shears

I must say that I dissagree with this assessment, for the majority of people salaries go up year on year. If their salary goes up 3% for the first 3 years, they can take a 10% cut in the 4th year and still be at the same starting point.

Furthermore, most people have other financial burdens in the begining of their mortgage term (e.g. kids). So it is really only the first few years that are a risk.

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its not surpising to see the very institutions that told these multiple mortgage warriors that there wasnt a problem lending dangerous amounts for inflated prices. until they look like they will struggle to pay.

then they come out with statements like these, when they knew they were lending to fuel a bubble in the first place.

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I must say that I dissagree with this assessment, for the majority of people salaries go up year on year. If their salary goes up 3% for the first 3 years, they can take a 10% cut in the 4th year and still be at the same starting point.

Furthermore, most people have other financial burdens in the begining of their mortgage term (e.g. kids). So it is really only the first few years that are a risk.

But what if inflation is also at 3% during each of those years of a 3% salary increase?

And what if they have kids later rather than sooner (after waiting to be able to afford them)?

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I've recently noticed that certain members on Singing Pig are taking a extra keen interest in people wanting to sell BMV and expect this market to increase...

Edited by dnd

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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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