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House Price Crash Coming Soon... (not)

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QUOTE--- Besides, how is this helping your argument? People can afford cheap electronic tat in 2006. I thought I'd already covered this. People buy this junk on credit cards (because credit is cheap in 2006 and so are electronic gadgets)

I wholesale the above and belive you me there are far fewer people buying the said ``electronic tat``than there were a couple of years ago!!!!!!!!

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I wouldn't.

You don't buy these goods very often. You didn't back then and you don't now so they're largely irrelevant.

Your so right. You only buy them once. But having maxed out on the morgage you don't buy them, you borrow them from the credit card, once again stretching the availablility of ongoing cash sheet book balancing exercise due to ursurous interest rates. So they are not largely irrelevant. They are a critical ongoing revenue funding issues for the average punter's personal housing project.

QUOTE--- Besides, how is this helping your argument? People can afford cheap electronic tat in 2006. I thought I'd already covered this. People buy this junk on credit cards (because credit is cheap in 2006 and so are electronic gadgets)

I wholesale the above and belive you me there are far fewer people buying the said ``electronic tat``than there were a couple of years ago!!!!!!!!

"Credit is cheap". Interesting concept. Credit is cheap if it is secured credit. Credit which is in reality secured but in contractual terms not tied to a particular item (eg. a house) is about 14%. HMPH.

Edited by Elizabeth

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.......people still contributed to pensions in 1988 AFAIK.

True, but generally at a lower percentage of earnings. There were also a great deal more non contributory final salary schemes a around in those days. These are almost non existant these days.

NDL

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Your so right. You only buy them once. But having maxed out on the morgage you don't buy them, you borrow them from the credit card, once again stretching the availablility of ongoing cash sheet book balancing exercise due to ursurous interest rates. So they are not largely irrelevant. They are a critical ongoing revenue funding issues for the average punter's personal housing project.

"Credit is cheap". Interesting concept. Credit is cheap if it is secured credit. Credit which is in reality secured but in contractual terms not tied to a particular item (eg. a house) is about 14%. HMPH.

I've not had a loan for a long time but I soon found this...

http://uk.virginmoney.com/personal-loans/

Unsecured Loan 6.9%APR up to £25k

Also, many stores offer 'buy now nothing to pay for one/two years'

HMPH.

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Year 2006

Salary 1 £25k

Salary 2 £17k

(big) Mortgage £160k (Nationwide average house Price)

Long term fixed (5yrs? 10yrs?) at 4.7%

Monthly repayment £900

Combined take home pay £2500pm

Car loan £5000 4yrs 6% = £115pm

Net disposable income before bills £1485pm

Who would lend you 160k based on those salaries? Around 120k seems to be more realistic.

These wont:

http://www.northernrock.co.uk/mortgages/calculator/index.asp

http://www.halifax.co.uk/mortgages/afforda...alculator.shtml

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Who would lend you 160k based on those salaries? Around 120k seems to be more realistic.

These wont:

http://www.northernrock.co.uk/mortgages/calculator/index.asp

http://www.halifax.co.uk/mortgages/afforda...alculator.shtml

You are right that £160k is 'big' (note I also said 'big' next to it in the figures)

However,the figures I quote assume no deposit and a couple on below average wages buying an average house. More realistically the couple would have a deposit and would buy a slightly smaller house as an FTB (but this applies to all three dated examples)

You need to look at the ratios of disposable income across all three examples.

The point is that the 2006 figures for this couple are not anywhere near crisis point. Even with a (big) £160k loan. Hence my question about how high rates would have to go before a crisis occurred.

Nobody has answered this yet...

(You can get up to 4 times joint income BTW).

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Guest wrongmove

Who would lend you 160k based on those salaries? Around 120k seems to be more realistic.

I put the numbers into Nationwide and they say

Your Affordability Results

You requested a loan of £160,000 over a period of 25 years 0 months.

Nationwide could lend you, subject to satisfactory income evidence, credit scoring and suitable security up to a maximum of £178,500. The minimum period you could afford to repay that amount over would be 15 years 4 months.

I just put zero in all the 'other income' and 'other debt' boxes.

Heres the link: http://www.nationwide.co.uk/mortgage/homebuyers/calcs.htm

Just click on "affordabilty calculator".

Edited to add: IMHO, this is a huge debt for a couple on those incomes. You would have to really want that house. But it shows what we are up against. Nationwide are a huge, mainstream lender, and this is what they would give you if you are honest.

Edited by wrongmove

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"Long term fixed (5yrs? 10yrs?) at 4.7%"

Inflation is rising, and so are rates.

What makes you think it will stay at 4.7%

Who cares? (within reason)

In 10 years' time the repayment loan will shrink by about 30%.

This offsets the pain of higher rates as you only pay interest on what is left of the debt.

Also the buyer has TEN YEARS of wage inflation and promotions on their side too.

After 10yrs the fixed rate buyer can remortgage the debt (only 70% of what it was ) if rates go high.

What you should be asking is " Will house prices be LOWER in £££ in 10 years' time by 30%?"

If they stay level (I think they will be HIGHER) you will be buying the same house as todays fixed rate buyer but you will be borrowing 30% MORE AND PAYING THE SAME INTEREST RATE.

and you've missed out on 10 years of home ownership...

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Guest wrongmove

Just out of interest, I put my own details into Nationwide's calculator.

It offered me 4.25x. It even offered to lend me this amount over 15 year repayment.

I clicked on quote, chose a fixed rate, 15 year repayment mortgage and the cost was just over 50% of my take home pay (after tax and NI, but before pension)

So that's what NW think is affordable: 50% of take home for a single person. I guess on a fix, this could be possible, but they offer this on variable rate as well. Ouch !

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I put the numbers into Nationwide and they say

I just put zero in all the 'other income' and 'other debt' boxes.

Heres the link: http://www.nationwide.co.uk/mortgage/homebuyers/calcs.htm

Just click on "affordabilty calculator".

Edited to add: IMHO, this is a huge debt for a couple on those incomes. You would have to really want that house. But it shows what we are up against. Nationwide are a huge, mainstream lender, and this is what they would give you if you are honest.

I put my (genuine) details into the calculator and it came up with the following:-

"You requested a loan of £300,000 over a period of 25 years 0 months.

Nationwide could lend you, subject to satisfactory income evidence, credit scoring and suitable security up to a maximum of £1,062,500. The minimum period you could afford to repay that amount over would be 15 years 10 months. "

:lol:

This is based on a household income of well under £100,000

Somehow, I don't think this should be taken seriously.

Oooops scrub that. I can't tell the difference between monthly and annual income !!!

Edited by spiv

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Here's some FTB calculations to compare 2006, 1989 and 1988 (before the crash)

Some bears may not agree with my conclusions BUT BEARS DON'T HAVE TO AGREE.

It's FTBers and BTLs who buy houses.

to sustain the market) :lol::lol:

It may be 'affordable' but at what cost? The average age of a FTB is 35/36 and on this basis most would probably be hoping to start a family. Take away one salary for a period of maternity leave, (or may be they are forced to go back when the baby is 3 months!). Then factor in that one parent may wish to stay at home, which means they would be severely stretched in paying the mortgage. Alternatively consider the mother returns to work part time or even part time, requiring nursery fees need to be paid. In London, fees generally are at least £800/900 upwards. How will they pay the mortgage and god forbid they may actually want another child!

Edited by Buffer Bear

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It may be 'affordable' but at what cost? The average age of a FTB is 35/36 and on this basis most would probably be hoping to start a family. Take away one salary for a period of maternity leave, (or may be they are forced to go back when the baby is 3 months!). Then factor in that one parent may wish to stay at home, which means they would be severely stretched in paying the mortgage. Alternatively consider the mother returns to work part time or even part time, requiring nursery fees need to be paid. In London, fees generally are at least £800/900 upwards. How will they pay the mortgage and god forbid they may actually want another child!

Good points.

However, at age 35 the FTB couple should have a decent deposit saved between them. This would reduce the mortgage to a more manageable level.

FTBing at age 28 assuming minimal deposit the couple could buy and save £200pm in an ISA for a few years. They could afford to start a family in a few years' time.

Don't forget about maternity pay and child tax credits. Also people (mums?) can change career and work from home these days via the internet.

Also don't underestimate people's ability to muddle through. i.e. help from extended family or other mums wrt looking after kids, father working overtime etc.

You might find these arguments a little thin, but the same problems face those who are renting.

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How will they pay the mortgage and god forbid they may actually want another child!

Maybe the next growth industry will be importing children from China: got to be cheaper than having your own.

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Guest Bart of Darkness

I put the numbers into Nationwide and they say

I just put zero in all the 'other income' and 'other debt' boxes.

Heres the link: http://www.nationwide.co.uk/mortgage/homebuyers/calcs.htm

Just click on "affordabilty calculator".

Edited to add: IMHO, this is a huge debt for a couple on those incomes. You would have to really want that house. But it shows what we are up against. Nationwide are a huge, mainstream lender, and this is what they would give you if you are honest.

Thanks for the link wrongmove, I've not used the Nationwide calculator before.

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Guest muttley

However, at age 35 the FTB couple should have a decent deposit saved between them. This would reduce the mortgage to a more manageable level.

Here lies the problem.(Maybe just my problem) Why tip up your hard earned deposit to someone else?

A 10% deposit on an "average" UK house is 16k (20k if you believe Rightmove) 16k is alot of money to most people.

Better to rent for now.

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Good points.

However, at age 35 the FTB couple should have a decent deposit saved between them. This would reduce the mortgage to a more manageable level.

FTBing at age 28 assuming minimal deposit the couple could buy and save £200pm in an ISA for a few years. They could afford to start a family in a few years' time.

Don't forget about maternity pay and child tax credits. Also people (mums?) can change career and work from home these days via the internet.

Also don't underestimate people's ability to muddle through. i.e. help from extended family or other mums wrt looking after kids, father working overtime etc.

You might find these arguments a little thin, but the same problems face those who are renting.

I agree. I reckon the housing market is fine...

... if people save from the age of 28 as well as paying off student loans etc

... if people decide to not have children or have their parents living nearby ready to lots of babysitting

... if IRs don't go much above 4.75%

... if the economy keeps growing at 2% pa

... if people keep MEWing

... if people keep building up their debt at a rate of 10% a year

... if the pound stays strong despite a record trade deficit

... if the US, one of our most important trading partners, doesn't see its currency tank

... if we import a few million young people with good qualification to make up for demographic changes

... if our economy discovers a way of continuing to employ an extra 600K public sector workers

... if Gordon Brown doesn't hike taxes to pay for his ludicrous social engineering schemes

... if the housing market can survive without people being able to move up the ladder

... if people put owning a property above all other interests

Sorted! Glad that's settled. ;)

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Here's some FTB calculations to compare 2006, 1989 and 1988 (before the crash)

Some bears may not agree with my conclusions BUT BEARS DON'T HAVE TO AGREE.

It's FTBers and BTLs who buy houses.

Read the figures and decide for yourself. Note the similarity between the mortgage/income/disposable income ratios in early 1988 and today. It took a hike in rates from 8% to 15% in 1989 and a big reduction in MIRAS relief for joint incomes to kick off the crash last time.

In 2006 this is affordable. This is why people are out there buying houses today NOW.

i.e. 115,000 mortgage approvals last month.

If rates hit 8% in 5 years then their mortgage will go up by £300pm.

But you could argue that their wages would rise by more than 3.5% if there were higher rates/inflation/promotions.

(Don't forget, not ALL couples have to be able to buy, in order to sustain the market)

How far do interest rates have to go before you can stop couples like this from buying?

Compare this to the same couple trying to FTB in 1989 (when there really was a crash...)

Here's why. Go back a year.

In 1988 this was affordable and explains why people were buying houses in the late 1980s.

Their disposable income is nearly DOUBLE what it would become a year later. Quite a shock to the system inside a year!

Where is a similar interest rate shock (don't forget the MIRAS shock too) for a HPC (one which causes large nominal falls in £££) coming from in 2006? I don't see it happening (at least not this side of the next election)

Yeah house prices only ever go up and up. Tw@t. When will you realise many of us are happy where we are and can wait this out till the end. :rolleyes::lol::lol::lol:

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Here's some FTB calculations to compare 2006, 1989 and 1988 (before the crash)

Some bears may not agree with my conclusions BUT BEARS DON'T HAVE TO AGREE.

It's FTBers and BTLs who buy houses.

Read the figures and decide for yourself. Note the similarity between the mortgage/income/disposable income ratios in early 1988 and today. It took a hike in rates from 8% to 15% in 1989 and a big reduction in MIRAS relief for joint incomes to kick off the crash last time.

In 2006 this is affordable. This is why people are out there buying houses today NOW.

i.e. 115,000 mortgage approvals last month.

If rates hit 8% in 5 years then their mortgage will go up by £300pm.

But you could argue that their wages would rise by more than 3.5% if there were higher rates/inflation/promotions.

(Don't forget, not ALL couples have to be able to buy, in order to sustain the market)

How far do interest rates have to go before you can stop couples like this from buying?

Compare this to the same couple trying to FTB in 1989 (when there really was a crash...)

Here's why. Go back a year.

In 1988 this was affordable and explains why people were buying houses in the late 1980s.

Their disposable income is nearly DOUBLE what it would become a year later. Quite a shock to the system inside a year!

Where is a similar interest rate shock (don't forget the MIRAS shock too) for a HPC (one which causes large nominal falls in £££) coming from in 2006? I don't see it happening (at least not this side of the next election)

Hi,

Outside of any affordability considerations, I just will NOT pay 250K what someone paid 150K just five years ago. This is plain simple, I just can't…. why would I have to strain myself while my mate has a good life for similar job and pay? No way.

And now again, a soft landing or price not "lowered" by inflation would be the first time. But, to be honest with the debt here, in the US, in France (relatively low though)…. for me the question is not will there be a major adjustment but when and true for me the sooner the better and this is why I am upset.

Bye for now,

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Guest

... if people keep MEWing

I would make this compulsory for all home owners. They must do their civic duty and MEW up to the full price of their properties and spend it NOW. Your country NEEDS YOU.

... if we import a few million young people with good qualification to make up for demographic changes

The immigration must necessarily be ageist in its nature.

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Guest muttley

I agree. I reckon the housing market is fine...

... if people save from the age of 28 as well as paying off student loans etc

... if people decide to not have children or have their parents living nearby ready to lots of babysitting

... if IRs don't go much above 4.75%

... if the economy keeps growing at 2% pa

... if people keep MEWing

... if people keep building up their debt at a rate of 10% a year

... if the pound stays strong despite a record trade deficit

... if the US, one of our most important trading partners, doesn't see its currency tank

... if we import a few million young people with good qualification to make up for demographic changes

... if our economy discovers a way of continuing to employ an extra 600K public sector workers

... if Gordon Brown doesn't hike taxes to pay for his ludicrous social engineering schemes

... if the housing market can survive without people being able to move up the ladder

... if people put owning a property above all other interests

Sorted! Glad that's settled. ;)

Good points...you forgot deflation.

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Guest muttley

deflation of house prices? never. it just never happens. never has and never will ;)

Actually, I think that deflation is a real threat to the economy, and a HPC trigger.

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Guest

Actually, I think that deflation is a real threat to the economy, and a HPC trigger.

Not before an inflationary push for a bit I reckon.

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Guest wrongmove

Actually, I think that deflation is a real threat to the economy, and a HPC trigger.

I'm sure deflation would be great for house prices (from an FTB's or bear's point of view :) ) Deflation should be good if you are debt free, holding cash, and in a job. But do you think it is likely in the West, if the banks nail rates to the floor again ?

I just think we are different to the Japanese. They have always saved loads, and when economic trouble came, the saving went into overdrive, even with rates at zero. (Real rates were still positve. Everthing but cash was going down). It's like they are insecure. Getting nuked and losing a world war may be a factor in their mentality. But I think deflation in the west, with banks determined to stop it, seems unlikely. Or at least less likely than Japan.

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  • 337 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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