Is Now A Good Time To Step Up The Ladder?

[moocow]

Hi all.

We bought our first house 5 years ago which was very lucky as we have recently sold it and are just about to move "Up The Ladder" into a bigger home which we will most likely reside in for many many many years.

Is now a bad time to buy or is now a good a time as any?

It doesnt matter to us if there is a crash and our home becomes worth 50p as were not looking to move away from it anyway as we feel we paid what we think the house is worth to ourselves... or is that the wrong way to look at it?

Many Thanks.

[Chriso]

Hi all.

We bought our first house 5 years ago which was very lucky as we have recently sold it and are just about to move "Up The Ladder" into a bigger home which we will most likely reside in for many many many years.

Is now a bad time to buy or is now a good a time as any?

It doesnt matter to us if there is a crash and our home becomes worth 50p as were not looking to move away from it anyway as we feel we paid what we think the house is worth to ourselves... or is that the wrong way to look at it?

Many Thanks.

Hi moocow, and welcome!!

I get a feeling you are about to be bombarded by a stream of sell and rent comments, or not to move. Most of us on here, think the economy is screwed, mainly through debt, and as a result house prices are rediculously inflated.

When the crunch hits, I wouldn't want to be the one sititng with a big mortgage.

Whatever you do, make sure your eyes are wide open and believe nothgn any EA / Mortgage advisor tells you.

[moocow]

Hi moocow, and welcome!!

I get a feeling you are about to be bombarded by a stream of sell and rent comments, or not to move. Most of us on here, think the economy is screwed, mainly through debt, and as a result house prices are rediculously inflated.

When the crunch hits, I wouldn't want to be the one sititng with a big mortgage.

Whatever you do, make sure your eyes are wide open and believe nothgn any EA / Mortgage advisor tells you.

I agree that prices are inflated..... But the property is not too inflated in my opinion and feel as though it is worth its current value.

[laurejon]

Hi all.

We bought our first house 5 years ago which was very lucky as we have recently sold it and are just about to move "Up The Ladder" into a bigger home which we will most likely reside in for many many many years.

Is now a bad time to buy or is now a good a time as any?

It doesnt matter to us if there is a crash and our home becomes worth 50p as were not looking to move away from it anyway as we feel we paid what we think the house is worth to ourselves... or is that the wrong way to look at it?

Many Thanks.

Are you paying cash for it?.

[moocow]

Are you paying cash for it?.

Unfotunately not.

Although we are lucky to have roughly a 1/3 deposit.

[purplemonkey]

Didn't you answer your own question?

"It doesn’t matter to us if there is a crash and our home becomes worth 50p as were not looking to move away from it anyway as we feel we paid what we think the house is worth to ourselves"

The only way you can be sure that your statement is right is if as 'laurejon' asked you’re paying cash, because it doesn't matter what the value turns out to if you’re not going anywhere. Or if you think your jobs are secure in the coming recession to keep up your mortgage payments, and you’re not going to get ill/divorced/addicted to heroin or anything else that may upset a stable income outgoing balance sheet.

Pessimistic yes, but you wouldn't be asking if you didn't have a bit of pessimism in your thoughts, like everyone else on this forum.....

[laurejon]

It doesnt matter to us if there is a crash and our home becomes worth 50p as were not looking to move away from it anyway as we feel we paid what we think the house is worth to ourselves... or is that the wrong way to look at it?

The problem you are overlooking is that it does matter, it matters alot.

Your hard work could easily be wiped out overnight if there is a crash.

Your house could easily fall into negative equity territory, and the banks will know that so you will soon find your credit cards personal loans all being refused without even defaulting on anything.

You like millions of others will most likely lose your Job at some stage and you may well have to work for less money post redundancy or even face years out of work.

Tax bills will rise, inflation will rise, and we will begin the task of repaying the Governments debts built up over the past ten years.

Sorry to be so negative, but its looking pretty much done deal these days, five consequative rate rises in the US, remember our rates dropped in sympathy with the US, they sure as hell will rise in Sympathy.

[Tempest]

Hi moocow, and welcome!!

I get a feeling you are about to be bombarded by a stream of sell and rent comments, or not to move. Most of us on here, think the economy is screwed, mainly through debt, and as a result house prices are rediculously inflated.

When the crunch hits, I wouldn't want to be the one sititng with a big mortgage.

Whatever you do, make sure your eyes are wide open and believe nothgn any EA / Mortgage advisor tells you.

We were in the same situation. We have just sold in London and moved up the ladder just outside in one of the home counties. Our house took 5 years (00-05) to rise in price by 25% and then took just another 1 year to rise by a further 25%. Figure that. London prices I think are now on a separate path and cycle from the regions. Anyway, we looked to move up "one rung" from 3 bed to 5 bed at a certain price range - somewhere we could live for 5-7 years until our three kids hit teens. I am a real bear btw on property prices generally but see my comments later on this. We found that given the recent London price rises, the desirable places in the SE had risen greatly too in price over the last 18 months. Everything seemed overvalued. So we went "big" - we are skipping a rung and going for a spanking six bedder with everything and is a house we will never have to move from. Despite my fear for property prices in the near/medium term I am not worried now as I if we do not have to contemplate another move up the ladder in several years we (i) do not care about property prices and (ii) will not be giving GB another 4% for the pleasure of that move up. We will live there for 15 years I reckon.

The comment about not having a big mortgage when the crunch comes is wrong - if you can afford the mortgage and fix rates properly that should not matter. Many people had big mortgages in the two previous "crashes" and provided they did not need to sell they had no problems. You really do gain a different perspective once you are making a "final" move - one from which you need not move again if necessary.

Is my purchase overvalued? Probably in historic terms. However, I found in the area I am buying that prices are far less overvalued at a level where the "regular" housing ladder stops (>£1m approx) and values are determined by means, individuality and desire alone. For example, we viewed a 6 bed house which was sold in Jan 2002 and the owners have been unable to sell it for the last 6 months at a price only 10% up on that 2002 price - they offered to sell to me at a price only 4% more than they paid almost 5 years ago. I refused. There are quite a few like that. Our is priced at less than new builds of the same size going up in the neighbourhood and ours has a better spec and is bigger.

Bottom line, I am a bear. We will have a painful few years very soon but I think London will not suffer as much as it did in previous crashes (although usffer it will). However, my growing family means I cannot sit and STR (if I had a few years ago I'd have been f*ked/priced out). I have decided to mitigate the downside of a HPC by going to the top of the ladder. If you can do it, I think that is a way forward. The problem with being a bear is timing - yes values are over the top around the country but when to call the top? People and we here on HPC have been calling it for 4 years at least. As with the dotcom guys and Pete Dye etc, it is no use being right if you are right at the wrong time. But life goes on - we cannot all have the luxury to forestall house moves purely due to speculation on a HPC.

Two, observations: As far as I can see, over the last 40 years there have only been (broadly) two really bad periods to buy proprty from a price point of view 1973/4 and 1988/9. And that only if you were overextended or at risk from interest rates (which modern rate fixing has mitigated quite a bit). As you can see at any other time it made sense or wasn't too bad. 4 years out of 40 (a generalisation I know). We are trying to call another of those periods. Despite being a bear, I cannot avoid the conclusion that on average, 90% of the time buying is not a historically bad thing. Also, even if one had bought in 1973/4 or 1988/9 at the peak and managed to service the mortgage ok etc and not be exposed to negative equity by having to sell, noone today would be complaining if they owned a house which they bought in those years, whatever the price as they now look cheap as chips at those prices.

Just as using financial speculation (on the upside) as your main reason to buy a house is a bad thing, I think solely using price speculation (on the downside) for a reason not to buy is also dangerous. By all means do it. If I were a FTB I'd be very worried. But what can you do if your life priorities dictate a move?

I say go for it. Just be sure you are happy enough with the new property to stay put and that you can afford it (fixe long term).

Good luck.

PS Just to make it clear, most of the people on HPC are right in being bearish, I agree with the sentiments but in 2004 I thought we'd have had the crash by now! Anyway, I think one can remain a bear but look after yourself if you are canny. It also helps I admit to already have had the benefit of HPI from being on the ladder for 10 years.

Edited September 3, 2006 by Tempest

[moocow]

Thank you very much for your detailed and informative post.

I think I am in a similar situation to yourself.

As long as the mortgage is fixed and we can afford it and were planning on staying in the house for a LONG LONG time, it doesnt matter what happens with the Housing market.

The money gained from our FTB house as subsidised the cost of the new house to a price which is probably nearer to the "ACTUAL" price anyway if that makes sense.

[laurejon]

And if you lose your Job? or Jobs?.

[moocow]

And if you lose your Job? or Jobs?.

That causes problems.. of course it does?

But is that not the case even if the property costs 50p.. if you have no money, you cant pay the bills.. doesnt matter the cost of the house.

[?...!]

That causes problems.. of course it does?

But is that not the case even if the property costs 50p.. if you have no money, you cant pay the bills.. doesnt matter the cost of the house.

I hope you don't think that.

If you were paying £1200pcm on your mortgage over 20-25 years, and it turned out you could have paid £1200 pcm over 10-15 years (by paying less at a later date).

Then you would have an extra ten years of mortgage payments to think about how it doesn't matter.

[laurejon]

That causes problems.. of course it does?

But is that not the case even if the property costs 50p.. if you have no money, you cant pay the bills.. doesnt matter the cost of the house.

But if you had less outgoings then its possible to get by as did many in the last recession.

Those who had bit the bullet in the last few months, bought larger houses, took on more debt...it was those people who were taken to the cleaners.

In times of potential crash, and we are at a peak now for sure, then moderation is the order of the day.

In hard times it is possible to be resourcefull, however you must be realistic.

IMHO you need today funding to get you along for 12months in liquid assets. And you must clear down any personal borrowing, Cards, Personal Loans.

Ask yourself this simple question, is now the time to be buying a bigger house, could you get by without it?.

[Tempest]

And if you lose your Job? or Jobs?.

Well, that is a risk we all face. I believe my career relatively safe but noone can ever say their job is recession proof. If we always factored in job security to all our spending then there'd be no economy as we could alway say that we all might be unemployed at some stage in the future so why not save money now? No holidays, TVs, kitchens, meals out etc. One has to be practical. "If" I lose my job, yes I'm in trouble but I'd work it out. "If" I hadn't bought my first flat in 2006 at what I thought, having watched the 1990-95 "down" years, was a "toppy" price of £100k for a big 2 bed flat in London I'd never have got on the ladder and been worse off now. Then, all my friends said "rent", its safer (but it wasn't cheaper). If, If, If. If an asteroid arrives we're all doomed. We have to assess likelihoods in all our decisions in life. I know this is probably not the best time to buy a property but "best" means different things to different people and depends on their own situation. Whether it is the worst time will tell. I have explained my rationale and I am comfortable in doing what I am doing. Would I prefer to be paying less? of course. And I still think prices will drop 20-30% at some stage in the next few years. I just don't know when.

Of course, I could not move now and save myself money when the falls arrive but it is unacceptable to me to drive my life decisions on price speculation (whether up or down) - houses are for living in. I had always said to myself in 2004 that I would only hold from buying in 2006/07 if there had been two consecutive quarters of -ve HPI from the Halifax or Nationwide. I was sure that would have happened, but no.

Bottom line, I am buying my house for the proper reason - because it will house my family for many years and I can afford it. I don't care now about what it is worth in future, well at least the next 5-10 years. I have to live life.

Laurejon, much of your points are right in terms of direction but you don't need to be so gloomy. Even in historic troubled times, good times eventually come again. I also doubt we'll be facing new "millions of others" unemployed any time soon. If the picture is slanted too much in one direction people tend not to give it as much credence - particularly if they don't see it with their own eyes.

[moocow]

I hope you don't think that.

If you were paying £1200pcm on your mortgage over 20-25 years, and it turned out you could have paid £1200 pcm over 10-15 years (by paying less at a later date).

Then you would have an extra ten years of mortgage payments to think about how it doesn't matter.

Good point.

However, has Tempest explained very well, sometimes you just need to move.

[laurejon]

Laurejon, much of your points are right in terms of direction but you don't need to be so gloomy. Even in historic troubled times, good times eventually come again. I also doubt we'll be facing new "millions of others" unemployed any time soon. If the picture is slanted too much in one direction people tend not to give it as much credence - particularly if they don't see it with their own eyes.

Thank you

If we purchased houses with saved cash, then for sure we could say that we can be positive, we can ride out a storm.

But we must not belittle what a recession means. With the age of FTB'ers now reaching 35 on average its a once in a lifetime chance. Last recession most people in my peer group were 22 yrs old on the ladder. Some lost their properties, and simply purchased again when the smoke cleared in 95.

Today, is something different. Get it wrong at 35 or older, and thats the end of. You will be looking at old age before you can be in a position to get back on the ladder.

Why buy today, when the writing is on the wall. Average Property is 12 times Average Earnings. Property inflation has recently double peaked, now looking at triple peak.

Rates have risen in the worlds leading economies, in small but decisive steps.

Inflation is being talked about again,the word trade deficit has returned to the English vocabulary, having been outlawed for five years.

Take in the landscape, smell the air, its now coming home and anyone caught with their pants down will get no sympathy from this Government or any other.

[Tempest]

I hope you don't think that.

If you were paying £1200pcm on your mortgage over 20-25 years, and it turned out you could have paid £1200 pcm over 10-15 years (by paying less at a later date).

Then you would have an extra ten years of mortgage payments to think about how it doesn't matter.

For anyone with ANY debt, in particular a mortgage, EVERY penny you spend on a non-essential item (ie other than food/water, heating etc) can be said to be prolonging your mortgage for longer than would be the case if one saved that money and prepaid the mortgage. We could all prepay the mortgage in 10-15 yrs if we did that.

Anyway, it is not that simple as you know. If you had bought in 1988 at the top of the market when rates were 7/8% then yes your price was toppy and your mortgage burden high. If you had bought in 1992/3 when prices had dropped by say 20% but rates were 14% then you still had a high mortgage burden and given the same income the outgoings were not that different - you did not have the luxury of reducing your mortgage term in the way you describe. Nice theory but it doesn't quite work out so easily. Also, HPs are priced against 25 yr terms anyway whatever the economic background so even if prices dropped to a bottom someone else will price it on 25 yr debt service and you will not get there on price with only 15yrs. Unless one can be certain about rates etc one doesn't know how much better off one would be.

Actually, thinking back, what happens is this! (we did it as did thousands of others). Prices fall for 4/5 yrs. People start to see that pricess are looking sensible again. What do they do? They DON'T spend the same "1200"pcm on the same [x] bedroom property they were going to buy but shorten their mortgage term by 10 yrs. They DON'T reduce the 1200 to 900pcm on the same [x] bedroom property they were going to buy. No, they use the 1200 pcm they were going to pay to buy instead an [x+1} bedroom property instead. Bingo, no reduced mortgage term, no savings in outgoings but a rung up the ladder. This is what happened in the 90s. I know. I did it. The demise of the 1 bedroom flat was all over the papers and it took a long time for 1 bedders to gain in price by the same proportion.

This would happen again. Watch - it is human nature/psychology ("look what I can afford now!"). So, the HPC just becomes (in practice) a method for the lcuky few to get a boost up the ladder to their benefit later on.

Edited September 4, 2006 by Tempest

[Tempest]

Thank you

If we purchased houses with saved cash, then for sure we could say that we can be positive, we can ride out a storm.

But we must not belittle what a recession means. With the age of FTB'ers now reaching 35 on average its a once in a lifetime chance. Last recession most people in my peer group were 22 yrs old on the ladder. Some lost their properties, and simply purchased again when the smoke cleared in 95.

Today, is something different. Get it wrong at 35 or older, and thats the end of. You will be looking at old age before you can be in a position to get back on the ladder.

Why buy today, when the writing is on the wall. Average Property is 12 times Average Earnings. Property inflation has recently double peaked, now looking at triple peak.

Rates have risen in the worlds leading economies, in small but decisive steps.

Inflation is being talked about again,the word trade deficit has returned to the English vocabulary, having been outlawed for five years.

Take in the landscape, smell the air, its now coming home and anyone caught with their pants down will get no sympathy from this Government or any other.

I agree there are some big issues, huge, Your point about the age thing is one of mine too. Even ignoring the age of FTBs there are millions remortgaging and MEWing against fresh 25 yr mortgages late in their 30s and early 40s. Madness - they will not be paying off the mortgage until they are 65. I would worry more about that than HPs. Social security/pensions etc all bad news in 20-30 yrs I agree.

If I were a FTB I would hold - for all your reasons, no question. In fact, for an FTB this could be the opportunity of a lifetime to improve one's finances to one's lifetime benefit by delaying the issue. All I am saying is that things get in the way sometimes. All your gloomy thoughts are in my head too! Its just that I am now in a position to sideline them for me. I have saved hard all my life. Not much extravagance by modern standards, sensible saving etc and have planned this thing very carefully.

On one view the yrs 2010-2020 could be very problematic. Alternatively we may come out of a recession positively and things would improve again.

Keep up the good work. It all needs to be known by Joe P. But hopefully we can find out way through it.

Edited September 3, 2006 by Tempest

[?...!]

For anyone with ANY debt, in particular a mortgage, EVERY penny you spend on a non-essential item (ie other than food/water, heating etc) can be said to be prolonging your mortgage for longer than would be the case if one saved that money and prepaid the mortgage. We could all prepay the mortgage in 10-15 yrs if we did that.

Anyway, it is not that simple as you know. If you had bought in 1998 at the top of the market when rates were 7/8% then yes your price was toppy and your mortgage burden high. If you had bought in 1992/3 when prices had dropped by say 20% but rates were 14% then you still had a high mortgage burden and given the same income the outgoings were not that different - you did not have the luxury of reducing your mortgage term in the way you describe. Nice theory but it doesn't quite work out so easily. Also, HPs are priced against 25 yr terms anyway whatever the economic background so even if prices dropped to a bottom someone else will price it on 25 yr debt service and you will not get there on price with only 15yrs. Unless one can be certain about rates etc one doesn't know how much better off one would be.

Actually, thinking back, what happens is this! (we did it as did thousands of others). Prices fall for 4/5 yrs. People start to see that pricess are looking sensible again. What do they do? They DON'T spend the same "1200"pcm on the same [x] bedroom property they were going to buy but shorten their mortgage term by 10 yrs. They DON'T reduce the 1200 to 900pcm on the same [x] bedroom property they were going to buy. No, they use the 1200 pcm they were going to pay to buy instead an [x+1} bedroom property instead. Bingo, no reduced mortgage term, no savings in outgoings but a rung up the ladder. This is what happened in the 90s. I know. I did it. The demise of the 1 bedroom flat was all over the papers and it took a long time for 1 bedders to gain in price by the same proportion.

This would happen again. Watch - it is human nature/psychology ("look what I can afford now!"). So, the HPC just becomes (in practice) a method for the lcuky few to get a boost up the ladder to their benefit later on.

Nice, but you seem to have read too much into what I said, which was basically...

If this person took on a 1200pcm mortgage over 25 years, and prices fell (in the way the poster stated "didn't matter"), it's perfectly feasible they will be in a situation where they are paying for the house ten years longer than they would have needed too.

What I did, was I typed a hypothetical example to illustate what price falls could mean in terms of "mattering" in a way I thought the poster could easily relate to.

You have responded with block capitals and exclaimation marks. And your point seems to be "people will pay as much as they can afford". Which is the kind of sentiment indicative of a speculative market.

[Tempest]

Nice, but you seem to have read too much into what I said, which was basically...

If this person took on a 1200pcm mortgage over 25 years, and prices fell (in the way the poster stated "didn't matter"), it's perfectly feasible they will be in a situation where they are paying for the house ten years longer than they would have needed too.

What I did, was I typed a hypothetical example to illustate what price falls could mean in terms of "mattering" in a way I thought the poster could easily relate to.

You have responded with block capitals and exclaimation marks. And your point seems to be "people will pay as much as they can afford". Which is the kind of sentiment indicative of a speculative market.

No, I understood exactly what you were doing. I was in part responding to you but also to the others writing and reading this thread as part of the general discussion. Nothing personal. The capitals were for emphasis only, I'll use italics next time. The (single not plural) exclamation mark was used in the third person to show the exaggurated human element which does manifest itself in these situations. I think most people knew how it was intended to be interpreted.

You say you gave a hypothetical example to illustate what price falls could mean in terms of "mattering" in a way you thought the poster could easily relate to.

I responded with practical experience and to highlight that that simplistic theoretical approach does not translate into the real world for all sorts of reasons and is thus on its own misleading. My point was not that "people will pay as much as they can afford" - but that is not far off the truth - I said they tended not to reduce their pre-set pcm amount. That amount may not be all they can afford but be something within their means - big difference and was the order of the day in the mid 90s when no-one in their right mind would pay all they could afford for a property. We were below 3x earnings there. Anyway, in my view the sentiment indicative of a real speculative market is people paying "more" than they can really afford.

All I am saying is that it is not perfectly feasible to shorten the mortgage term by 10 years. If you have examples from the early 90s let me know . No-one I know managed that. Aside from the necessary mindset on the part of the buyer, that requires a magnitude of crash combined with simultaneous low level of rates for which there is no historic example (see my comment re rates and mortgage burden). Further, as I said, when people started buying again in 95/96 they didn't do what you are saying would make sense ( I agree it would be possible to buy "the same" house for less than it was 5 years ago and pay off the mortgage (by using the original debt service "pcm" amout) to shorten the term by a few years maybe). In fact they tended to spend the same in buying a bigger property than they could have previously afforded. That is reality and nothing to do with speculation - the opposite believe it or not. The received wisdom in 1995/6 was buy a 2 bed flat not a 1 bed as if things go wrong you can rent out the other room to help cover the mortgage. With 1 bed you don't have that option so it was perceived as (and probably was) safer.

Edited September 4, 2006 by Tempest

[laurejon]

Read the below, then tell me that a drop in prices will not affect you, that the economy is happily bouncing along with a bright future. Personal Debt increases 10% in a year, that should tell you everything you need to know.

If you feel safe today, then keep it that way and sit on it.

This month's collection of the latest UK debt statistics by Credit Action makes for worrying reading.

At the end of July 2006 the total UK personal debt was £1,237bn. The growth rate increased to 10.5% for the previous 12 months which equates to an increase of £105bn.

Total secured lending on homes has exceeded £1 trillion (£1,000 billion) and in July 2006 it stood at £1025.4bn. This has increased 11.2% in the last 12 months.

Total consumer credit lending to individuals in July 2006 was £211.9bn. This has increased 7.2% in the last 12 months.

Total lending in July 2006 grew by £10.9bn. Secured lending grew by £9.8bn in the month. Consumer credit lending grew by £1.1bn.

Average household debt in the UK is approximately £8,577 (excluding mortgages) and £50,091 including mortgages.

Average owed by every UK adult is approximately £26,313 (including mortgages). This grew by ~ £200 last month.

Average interest paid by each household on their total debt is approximately £3,086 each year.

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,506 per average UK adult at the end of July 2006.

Britain's personal debt is increasing by ~ £1 million every four minutes.

Plastic card / Personal Loans: Research by uSwitch has found that 3.4 million credit cardholders in the UK regularly make only the minimum repayment on their credit card. 11% of those with a credit card only ever make the minimum repayment – increasing to 18% for the 25-34 age group.

Credit card arrears rose consistently throughout 2005. The proportion of balances more than three months in arrears increased to 8.5%.

The number of people refused credit by mainstream lenders is estimated to increase from 9.1m in 2005 to 9.4m in 2010.

Total credit card debt in July 2006 was £54.7bn.

According to the BBA the proportion of credit card balances bearing interest was 74.3% in June 2006.

The average interest rate on credit card lending is currently 15.72 %, around 11 percentage points above base rate.

282 plastic transactions took place every second in the UK in 2005.

Debit cards accounted for 37% of all retail spend in 2005, ahead of cash at 34%. Plastic cards were used for 63% of all UK retail spending last year

Plastic cards in issue were 190m in 2005. This works out at an average of 4.1 plastic cards for every adult in the UK.

There are more credit cards in the UK than people according to APACS. At the end of 2005 there were 74.6m credit and charge cards in the UK compared with around 60 million people in the country.

Servicing Debt: Approximately 9.8% of individuals consider unsecured debt to be a “heavy burden”. A further 31% saying they are keeping up, but struggle from time to time

One person is falling victim to insolvency every minute of the working day - 26,021 people became insolvent between April to June 2006 which is a 66% increase on the same quarter last year. The number of people becoming insolvent in 2006 is likely to exceed 100,000.

In the last four years the average age of a bankrupt has fallen from 43 to 41 and the proportion of younger bankrupts, aged between 18 and 29, has more than doubled.

According to recent research by a leading debt solutions consultancy, the number of consumers facing personal insolvency is growing fast. Of adults with a high level of unsecured debt (£10,000 or over), 20% of those interviewed said they were ‘quite likely’, ‘very likely’ or ‘certain’ to declare themselves bankrupt or take out an IVA (Individual Voluntary Arrangement). This equates to 1.1 million adults across Great Britain.

The Bank of England raised the base lending rate to 4.75% in August 2006. This was the first increase for 2 years.

Citizens Advice Bureau (CAB) dealt with 1,128,000 debt enquiries last year. In the last decade the number of consumer debt problems dealt with by CAB has increased 118%. CAB clients have an average of £13,000 of debt which is nearly 17.5 times their monthly income. On average it would take CAB clients 77 years to pay back their debts in full.

The average debt of a client coming to Consumer Credit Counselling Service (CCCS) for advice is now £32,000. The number of people earning more than £30,000 a year who are asking them for help has risen by 257% in the past three years.

According to a report commissioned by One Advice, nearly 2 million people in the UK have unsecured debts in excess of £10,000. About half a million have unsecured debt higher than £20,000. People in the lower middle-aged bracket (35 to 44-year-olds) were the most likely to have substantial debts that weren’t secured, with some 50,000 individuals in that demographic owing more than £10,000.

Three quarters (74%) of British couples find money the hardest subject to talk about with their partners according to a recent survey by the Financial Services Authority (FSA). They also found that over a quarter (27%) of couples regularly argue when they try to discuss their finances; about a third (32%) of couples lie to their partners about how much they spend on their credit cards; over a third (35%) of British couples are kept awake at night worrying about their money situation

Research from AXA shows money worries are a significant cause of worry, anxiety and stress according to GP and leading mental health expert, Dr Roger Henderson, who recently published a paper identifying the condition Money Sickness Syndrome (MSS). Almost half (43%) of the UK adult population is affected by money worries and have experienced MSS symptoms. 3.8m people admit money worries have caused them to take time off work and more than 10.76m people suffer relationship problems because of money worries, with almost one in five complaining of a sex life slump.

A quarter of those in debt are receiving treatment for stress, depression and anxiety from their GP.

Young people (under 30): Graduates leaving university this year had average debts of £13,252, a 5% increase on 2005, according to a survey by NatWest bank. 62% of graduates leave university with debts of over £10,000.

Sixth-formers heading for college this year expect to leave their courses with debts of nearly £15,000. For those starting university this summer, the biggest concern was money being tight. Students are now increasingly relying on part time jobs to finance their life at university. A massive 87% of this year’s intake believes that they will have to get a part time job and 46% of current students have to rely on their income from term time work to get by, working an average of 14 hours a week.

Recent research shows that budgeting is the last thing on many students’ minds as the vast majority (80%) of 16-24 year olds admit they don’t keep track of their finances. Also, despite the likelihood of being on a tight budget, 1 in 5 doesn’t know within £100 what their financial state might be.

The average UK weekly pocket money for 7 – 16 year olds is £8.20 (£9.76 for 12 to 16 year olds, compared to £6.30 for seven to 11 year olds).

Four out of every five women aged between 21 and 25 spend more than their wages every month.

A recent FSA report highlighted:

* 29% of 16-24 year olds said they would not know how to prepare and manage a weekly budget;

* 19% of 22-24 year olds have short-term debts over £5,000;

* 62% of young people said if they got into money trouble or debt they would not be able to name any advice or support services they could turn to for advice

* One in five students dropped out of courses; Of undergraduates who considered dropping out financial difficulty was a strong factor for 34.4%;

* 94% of 16 year olds believe it is important to know how to manage money; only 53% have been taught how to

Pensioners / Pensions: 1.4 million pensioners (14% of the UK’s pensioner population) live on an income of £5,000 or less each year. After council tax, water and electricity bills, this leaves only £3,092 per annum – which is equivalent to £59.46 each week or £8.49 a day. More than 38 per cent (3.6 million people) get by on £10,000 or less, and over half of the British pensioner population live on £15,000 or less each year.

A major report published by Scottish Widows, reveals a dramatic deterioration over the last 12 months in the number of people saving adequately for retirement. The percentage of the population saving adequately for retirement falls from 55% in 2005 to 46% in 2006. The percentage of people who do not know where their main income in retirement will come from has almost doubled, and is now nearly a quarter of the population (23%)

Research from Scottish Widows Bank reveals one in six (over 1 million), pensioner homeowners in the UK have an outstanding mortgage on their home – each with an average debt of £45,313 – making a nationwide debt of almost £47 billion. What is more, one in three owe more than £50,000 and one in ten more than £100,000 putting increased pressure on retirement income.

Over 8 million British workers (21%) don’t have any pension provision according to a recent report issued by Virgin Money. This is despite continued warnings from the Government and the pension industry of the need to save now to avoid inadequate income at retirement.

Housing: According to the Department for Communities and Local Government (DCLG) the average house price in the UK in June 2006 stood at £190,883 (£198,952 in England). UK annual house price inflation rose by 5.2%. Annual house price inflation in London was 5.8%.

Note: the weightings used by DCLG were changed for the February 2006 figures.

The average Mortgage Interest rate at the end of June 2006 was 5.29%.

28% of mortgages taken out in June 2006 were “interest only” mortgages compared with only 12% taken out in June 2003. 22% of these “interest only” mortgages were taken out without a repayment plan specified to repay the capital.

Approximately 280,000 mortgages are one month or more in arrears. This represents an increase of 4% from the same period one year ago.

During the second quarter of 2006, 33,180 mortgage possession actions were entered, and a total of 22,254 orders were made – 11,020 of which were suspended orders. This is a 17% increase from the second quarter of 2005.

Gross mortgage lending was £30.4 billion in July - the second highest figure on record and the strongest July figure ever - according to new data from the Council of Mortgage Lenders (CML). Home buyers borrowed 19% more in July 2006 than in July 2005.

According to the Nationwide the annual rate of house price inflation picked up for the third consecutive month in August. House prices are now 6.6% higher than at this time last year. This is the fastest annual rate of growth since April 2005 and almost three times faster than at this time last year.

According to The National Association of Estate Agents (NAEA) the average time between instruction and completion is 17.0 weeks.

The average loan approval for house purchases in April increase to £139,200, which is 5% higher than a year earlier.

The Council of Mortgage Lenders has revised up its forecasts for housing market activity for 2006 and 2007. The CML now expects house prices to end the year 7% higher than at the start, compared with a 2% forecast back in February. Next year, the forecast for house price inflation has been raised from 2% to 3%.

The amount of unmortgaged property wealth held by UK home-owners currently stands at £3.6 trillion. Housing equity is the largest component of total wealth held by people living in the UK. Mortgage lending has helped fund a dramatic expansion of home-ownership, from 60% to 70% of the population during the last 20 years. Roughly 40% of the housing stock is owned outright, mainly by retired and older middle-aged households,

Housing 1st Time Buyers: The average house price in the UK in June 2006 for first time buyers now stands at £149,215 which is an annual increase of 6.8%.

The average first-time buyer was paying 3.21 times their income to get a mortgage in June - the highest figure on record - according to data from the Council of Mortgage Lenders (CML). The average new mortgage for first time buyers has now reached £110,000. The average age of a first-time buyer was 29 and interest payments consumed 16.5% of the income of the average first-time buyer.

Half of parents feel responsible for helping their children on the property ladder. Parents intend to help their children onto the property ladder by giving them an average of £17,677. One in six are prepared to give or lend their offspring over £30,000.

The average couple needs to save at least £29,000 to pay for the deposit and stamp duty on their first home.

According to the National Association of Estate Agencies (NAEA) first time buyers accounted for 11.3% of properties purchased in August.

High Street Spending: Britons now spend more on eating out in restaurants, pubs and on takeaway meals than on buying fresh and processed food and drink products to have at home.

For the first time more than half of all adults made an online purchase during 2005 - 25 million or 52 per cent of all adults.

Parents typically spend £165,668 on raising a child from birth to the age of 21, according to friendly society Liverpool Victoria's most recent annual Cost of a Child survey. This works out at £7,889 a year and represents a rise of 7.8 per cent on last year's survey, more than three times the rate of inflation, and up 18 per cent on the 2003 survey.

The cost of running the average new car has grown to nearly £5,000 a year, or £14 a day, according to the latest RAC Cost of Motoring Index.

The average wedding costs around £19,595. 45% of couples - some 117,000 nationwide - have no financial planning to pay for the big day, a study by stockbrokers Brewin Dolphin Securities found.

Money Education / Financial Literacy: Classes on personal finance and budgeting in schools could make children richer by up to £32,000 between the ages of 35-49 according to the Institute for Public Policy Research.

25 million Brits (56%) spend 60 minutes or less per week reviewing their finances, with the average amount of time we dedicate as a nation reaching only 1 hour 19 minutes – the least amount of time in Europe, according to a study from Scottish Widows. We spend nearly twice as long (2 hours 11 minutes) chatting on the phone or texting each week, and 6 times as long (8 hours 4 minutes) watching TV.

A quarter of Brits (25%) have no idea how much they spend in a week, and a similar number (26%) have no idea of their monthly cash flow. This lack of knowledge extends into other financial aspects of life. Only half (51%) the population know the balance on their credit cards and nearly half (46%) have no idea what interest rates they receive on their savings or are paying on their accounts and debts.

Around 15 per cent of 18 to 24- year-olds think an individual savings account (ISA) is an iPod accessory, and one in 10 reckon it's an energy drink. With rising personal debt levels in Britain, and a lack of long-term savings, better money management seems a pressing issue.

Savings: A massive 72% of UK consumers believe they aren’t saving enough, but out of the people who are in a position to increase the amount they currently save, almost 8 million (18%) claim they enjoy spending their money too much to do so.

Halifax research shows that the UK saving ratio hit a four year high of 6.0% in Q1 2006. The household saving ratio measures the proportion of gross disposable income that households save rather than spend. The savings ratio has varied from a high of 14.1% in 1979 to a low of 3.1% in mid 2004 with a 7.8% average for the last 43 years.

Half the population (52%) could survive financially for just 17 days, should they suffer an unexpected loss of income, according to research by Combined Insurance.

Read Credit Action's debt statistics here.

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[JustYield]

Is now a bad time to buy or is now a good a time as any?

Yes, it's as good a time as any (assuming a willing buyer and a willing seller). Evidently you are not convinced, otherwise you wouldn't ask the question, so maybe you are not the willing buyer required for the transaction to occur.

What this means in practical terms is you need to establish if you have any extra negotiating power at the moment as a buyer. Can you put in a cheeky offer? Is there competition for the property you want? If there isn't what does this tell you - are you paying too much (and taking on too much debt)?

I suspect some will never find the 'right time' to buy as there will always be uncertainty. The seller obviously thinks now is the right time to sell.

JY

[Golden Shower]

moocow,

IMO we will be more likely to inflate our way out the debt, I suspect that prices will remain more or less stable over the next few years. Despite what you may read here, money supply is still on the up (likely to cause asset prices to rise) and the economy is generally strong. I suspect the case for big increases in IRs is probably over stated also.

Yes there are risks as always but you can mitigate these by not over extending yourself (perma bears on HPC assume everyone is maxed out on debt and on the verge on being bankrupt).

[OverInflated]

At the end of the day you have to make your own decision based on what you know.

The first house I bought was 8 years ago in Bristol - it was a 3 Bedroom Terrace House costing £60,000 - the mortgage repayments were about £340 a month. I could have rented the property out at that time for around £600-700pcm

To buy that property now would cost me £1200 per month in mortgage payments and I could rent it for around £900 -£1000 pcm.

I would love to own a house there again, but it doesn't make financial sense.

You need to work out the real cost to you of owning this house compared to renting.

Don't let your emotion control the situation, you never know how your circumstance might change in 5 years - you may have to sell.