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FTB1

Level Of Opportuinity After The Crash

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A couple of the threads on here today have led to me thinking what a lot of people on here have to gain after a crash.

We will presumably be living in a world of high interest rates and high unemployment. The actual price of a house will be lower, but what effect does this have on affordability.

Clearly, a lot of STRs will be well served by a crash, as will some FTBs with a very large deposit.

But what about the rest of us, with 'reasonably' secure jobs, and <£50k deposits.

Sure, I will be able to buy a 3 bed house for £200k, but will I be in any better position to be able to afford it?

My interest in this site has been purely from an educational standpoint, understanding more about crashes and the underlying economics.

I think that a crash will occur, but am unsure if I actually want or will benefit from it.

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Same affordability - less debt with lower prices and higher interest rates.

Who can tell the IR's in 10 years time when one has paid probably less than 5% of the overall borrowing.

That would be my gain, less debt.

And as I'm looking at £100 -£120K purchase and saving each year I'll have money as a deposit meaning less debt (life control) for those lovely bankers over me.

And some financial freedom will be mine ha ha ha - content laugh.

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A small minority of FTB's will be worse off. These will be the ones who lose their jobs. All the rest will be better off by far, even if not immediately then medium/long term.

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A couple of the threads on here today have led to me thinking what a lot of people on here have to gain after a crash.

We will presumably be living in a world of high interest rates and high unemployment. The actual price of a house will be lower, but what effect does this have on affordability.

Clearly, a lot of STRs will be well served by a crash, as will some FTBs with a very large deposit.

But what about the rest of us, with 'reasonably' secure jobs, and <£50k deposits.

Sure, I will be able to buy a 3 bed house for £200k, but will I be in any better position to be able to afford it?

My interest in this site has been purely from an educational standpoint, understanding more about crashes and the underlying economics.

I think that a crash will occur, but am unsure if I actually want or will benefit from it.

I agree with what you're saying about the affordability aspect. However, I think it would be a lot easier to pay off the mortgage earlier if the principal (is that what it is called?) was smaller with higher interest rates rather than larger with lower interest rates.

Also, presumably if we have high interest rates, it's because we have high inflation. This would also erode the debt away over time (assuming that wage inflation keeps reasonable pace with real inflation).

If you can make overpayments in the "high IR, low debt environment" above, you'll save a ton of money compared to the "low IR, high debt environment". With the banks making 70p on every pound you borrow, they will be big losers if property prices fall substantially.

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Same affordability - less debt with lower prices and higher interest rates.

Who can tell the IR's in 10 years time when one has paid probably less than 5% of the overall borrowing.

That would be my gain, less debt.

And as I'm looking at £100 -£120K purchase and saving each year I'll have money as a deposit meaning less debt (life control) for those lovely bankers over me.

And some financial freedom will be mine ha ha ha - content laugh.

This is true, but the type of crash that we are talking about would require huge job losses. This would reduce affordability to most ftbs to zero.

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This is true, but the type of crash that we are talking about would require huge job losses. This would reduce affordability to most ftbs to zero.

In the short term, yes, but not in the long term. Not everyone will be unemployed indefinitely if there is a recession.

Also, OO's are just as likely to lose their jobs and be REPO'd as FTB's are (to lose their jobs).

I'm feeling very up beat about recessions this week. Usually the thought scares the living day light out of me, but for the past couple of days I've started thinking that even though it'll be painful, it may well be better for all of us in the long run.

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A recession and job losses is the price we have to pay.

Its going to be tough, and for sure those FTB'ers with less than a 50% deposit will be turned away by the banks and Building Societies as job security will be at an all time low.

When house prices become very cheap at the bottom of the recession, only those with hard cash and a very very good secure job will be in a position to buy.

The winners will be Landlords with good property portfolios who have enough security to entice a Bank to lend in a bad market.

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The winners will be Landlords with good property portfolios who have enough security to entice a Bank to lend in a bad market.

That excludes the ones who bought in the last four years then.

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I have been saving for years, i could of bought alot of nice stuff but i havnt, if i was to buy now and the market dropped 10% then the years i have spent skrimping and saving would of been for nothing. It is not easy saving for YEARS.

If the market falls enough then perhaps i will only need a few 10's of thousands of a mortgage. It is a no brainer for me. I dont have anything to lose by waiting.

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FTB1,

I think you have to understand that some posters have a cluster of economic views, which they regard as being correlated. For example:

1. Gold is a good investment.

2. Peak oil.

3. We're on the brink of a global recession.

4. The UK economy is on the verge of mega recession.

5. Paper currencies aren't worth holding - with particular emphasis on the pound.

6. Interest rates have to go up.

7. Unemployment has to go up.

8. Property prices are on the verge of collapsing.

9. Sooner or later the stock market will collapse as well.

I don't think these scenarios are neccessarily correlated. The stock market could go up while property prices collapse. Gold and property prices, which over the last five years have, I believe, been quite well correlated, could both collapse. The oil price could collapse as well. Unemployment could go up at the same time as the stock market goes up. The stock market could go up while the pound collapses - not surprising, really! It's also possible that interest rates remain static while property collapses. As far as I am concerned any number of scenarios could happen, but in my mind the most likely scenario is a collapse in property prices. The hows and whys don't matter - it's an asset-class that's overbought, full stop.

Edited by Scipio_Africanus

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I was just wondering what you might mean by a 'reasonably secure job' ? I take the point that not everyone will become unemployed for a long time if a recession occurs, but surely those that do continue to earn decent wages will be in the best position to benefit from HPC.

I get the feeling that a lot of the bears on here assume that their jobs will be safe and so they will do well (i.e. be able to afford the house they've dreamed of). I'm just not sure that many jobs can be insulated from a serious economic decline, given how crap our real economy is even now.

So what types of jobs are 'reasonably secure' - other than a seat in the House of Lords?

Cheers

LL

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I have been saving for years, i could of bought alot of nice stuff but i havnt, if i was to buy now and the market dropped 10% then the years i have spent skrimping and saving would of been for nothing. It is not easy saving for YEARS.

If the market falls enough then perhaps i will only need a few 10's of thousands of a mortgage. It is a no brainer for me. I dont have anything to lose by waiting.

How much of your savings would you invest in a house if you had no job or a job with no security?

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How much of your savings would you invest in a house if you had no job or a job with no security?

This job scenario is possible even with no savings and a 120000 mortgage........ Im sure EVERYBODY would prefer not to have MASSIVE debt should they lose their job......

Ask another question.... Like 'How pleased are you that you didnt put all of that HARD EARNED CASH down as a deposit on property when it was at a very overvalued price just because you felt you had to buy it at the time ?'

At least a deep recession would give an up and coming generation of potential house buyers a more level playing field against the wave of HPI feeding BTL investors that have shafted the bottom of the market....

Plenty of home owners are close to the limit when it comes to debt.... Go and talk to them and make them feel better about it.....

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Who is delusional? IRs going to go down? You can wish for this as hard as you like but you won't change the global economic facts of life.

We are now entering the final phase of this madness. Economic armageddon approaches but even as a herd of lemmings approaches the cliff - the ones in the middle with their heads down following the crowd can't see what is about to happen.

Most people are greedy and most people are stupid. If you stand back and watch what most people are doing, you can profit from their behaviour.

You are deluding yourself - there isn't going to be a crash.

See...its about-turns like this that make me think this whole debate is well...rigged in one way or other.

All of a sudden we have a herd of 'bears' turn, not quite bullish but, at least anti-bearish.

Again I strongly suspect something afoot here - may have the webmasters fingerprints on it or it may not.

It feels to me as though the agenda is being...pushed? Manipulated?

There a concerted or co-ordinated effort from previous bears to undermine the bearish approach?

I've also noticed it with a few other 'big' members too - are the web admins/mods involved.....

But....whats written...quoted evidence when your pbviously paranoid (NB would prefer "circumspect", please)

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How much of your savings would you invest in a house if you had no job or a job with no security?

Like i have said plenty of times before, i am a 27 year old physically fit, reasonably intellimegent, factory worker, i work with some pretty nasty chemicals in a corrosive environment working some god awful hours (2 week turnabout continental). If i cannot get a job of the same low standard then ME not having a job will be the least of my worries. Ill be making explosives and a gun.

See the thing is nodumsunreader what you seem to over look is...

If i buy now and lose my job i will have no savings (and no ability to save either) if i was to lose my job then things would be tough.

I do not want, i will not pay 125K for a 2 up 2 down that was bought 5 years ago for less than 50K. If i wait my deposit grows. My friends and family have 50K - 70K mortgages and even with that they have to budget and just can buy what they want when they want it. How am i supposed to cope with a mortgage of double that size.

Anyways cant talk, gotto go to work :rolleyes:

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It was very unfashionable to buy property in 1993.

This time, some of you may consider being in rent for the long term?

You hit the nail on the head here, it was unfashionable and many missed the boat.

In 1993 very few people would even discuss property, it was a taboo subject consigned to the pub bore.

This situation will happen again, there will be bargains but very few people will see them as such at the time. Hindsight is a wonderfull thing.

There will be a crash, simple economics will dictate that. But the crash can only be started by interest rate rises taking away the affordability factor.

I know its tough for many people, but I'm afraid to say with the low rates we have today people can still afford to buy. As the banks and the Government become more and more creative with their lending such as part ownership schemes, or low start mortgages they will ensure that people can buy.

Now I understand that many cannot buy, simply because they do not earn enough, and that has always been the case. Some people are just not destined to earn a good living, this could be for a number of reasons but usually because they do not have a skill that is in demand in any way.

The next recession is not far off, and rate rises will start in 2007. And that will be the only catalyst to collapse the market. Forget the idea that sentiment is going to be of value, it might apply to stocks and shares where the market reacts hourly on news reports but it will never apply to housing. The reason is simple, to buy a house takes 12wks, so its not a liquid asset that can be onloaded or offloaded without giving it serious thought.

Sentiment plays very little in terms of prices and market volumes. The resource is very scarce, everyone wants it, and many have the money to pay for it.

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I brought in 1988, had a large deposit that I had saved, and took the commitment to buy with a fixed rate mortgage that I felt I could afford, and if the worst came to the worst could always rent out the second bedroom. This was to be my home over the longer term.

Over the next few years property slumped and interest rates rocketed. I held tight as I could afford to. Many handed their keys back to the banks and building societys as they fell into negitive equity and ran,(bet some regret that now).

Over time you can ride out any storm ;)

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FTB1,

I think you have to understand that some posters have a cluster of economic views, which they regard as being correlated. For example:

1. Gold is a good investment.

2. Peak oil.

3. We're on the brink of a global recession.

4. The UK economy is on the verge of mega recession.

5. Paper currencies aren't worth holding - with particular emphasis on the pound.

6. Interest rates have to go up.

7. Unemployment has to go up.

8. Property prices are on the verge of collapsing.

9. Sooner or later the stock market will collapse as well.

I don't think these scenarios are neccessarily correlated. The stock market could go up while property prices collapse. Gold and property prices, which over the last five years have, I believe, been quite well correlated, could both collapse. The oil price could collapse as well. Unemployment could go up at the same time as the stock market goes up. The stock market could go up while the pound collapses - not surprising, really! It's also possible that interest rates remain static while property collapses. As far as I am concerned any number of scenarios could happen, but in my mind the most likely scenario is a collapse in property prices. The hows and whys don't matter - it's an asset-class that's overbought, full stop.

Occasionally a poster discovers the truth, picks himself up, dusts himself off and continues along as if nothing has happened.

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There will be a crash, simple economics will dictate that. But the crash can only be started by interest rate rises taking away the affordability factor.

I agree there will be a crash (crashing now) but I don’t think interest rates need to rise for it.

Low interest rates are a symptom of a badly run economy, keeping them low has only delayed

the inevitable, and made it much worse than it could have been.

1930’s depression stylie.

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So Burnt Before

If interest rates are not going to crash property what is?.

Remember, they are still affordable to many many people who quite happily keep up the repayments on their loans.

What is going to crash the market ?.

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  • 302 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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