davros Posted May 23, 2007 Share Posted May 23, 2007 This is true.Yes there are stupid people who have overstretched themselves, but there are also allot of sensible people as well who... 1) purchased and spend within their means 2) have enjoyed good pay increases over the past few years (both them and a partner) So the stupid will suffer more if interest rates continue to rise - but that's the way it goes. ...and it is the stupid (and mis-informed) that shall be the downfall of the property asset bubble - not the sensible. Quote Link to comment Share on other sites More sharing options...
Prof Posted May 23, 2007 Share Posted May 23, 2007 The really nasty thing for those that fixed 2-3 years ago (especially FTBs and people that moved "up the ladder") is that prices, at the time, were already reaching silly levels,IMO. The size of mortgage that was fixed would often have been fairly hefty. That is going to really hurt when the rate goes from around 4% to around 6%. I said it a while ago, the combination of borrowing to the limit + fixed rate = high probability of financial trouble a few years down the line. If rates are low, and you borrow a lot and fix at a low rate, it is certain that your rate will end in X years and highly likely that the low rate that you fixed at will no longer be available. Wage rises might save the day, but what if you have changed career or not had the pay rises that you were expecting ? A mortgage is for 25 years, not just a couple. If only people would stop and think about the financial risks that they are taking on, instead of "it`s OK, property only goes up in value", we wouldn`t have such a dodgy looking housing market that we do at the moment. Quote Link to comment Share on other sites More sharing options...
Smell the Fear Posted May 23, 2007 Share Posted May 23, 2007 this is smug even by your at least twice daily 'I've got a recession proof job ' postsyou've alluded to the nature of your job (public sector) but what exactly is it that you do? I do hope it's not one of those parasitical nonsense publice sector jobs that seem so prevalent nowadays. Inland Revenue? Insolvency Practitioner (business inversely correlated to recession elsewhere)? Member of the judiciary? debt collector? Planning officer? Policewoman? Quote Link to comment Share on other sites More sharing options...
The Ayatollah Buggeri Posted May 23, 2007 Share Posted May 23, 2007 Wage rises might save the day... ...but other increases in the cost of living might well bugger it again. Remember, a mortgage isn't the only thing your salary has to pay for. So even if the percentage rise in your wages roughly matches that of your mortgage repayments after your fixed rate deal expires and you start a new one, rises in other living costs are outstripping salary increases. My salary as a university lecturer only increases by 3.1% this year, compared to a 5% increase in council tax, petrol heading towards a pound a gallon, electricity, gas and water all up around 10% on this time last year, £40 more tax on a domestic or European air ticket, food up 5-10%, car and household insurance up 7-8% on average ... the list goes on. I can't see any one factor causing a large and dramatic HPC like it did in 1989; rather, it'll be a drip-drip-drip of households being pushed over the edge as the gulf between earnings and the cost of living gradually increases. Quote Link to comment Share on other sites More sharing options...
Fool's Gold Posted May 23, 2007 Share Posted May 23, 2007 Bailiffs! hmm.. yeah. Tara, are you a bailiff ? Quote Link to comment Share on other sites More sharing options...
maricopa Posted May 23, 2007 Share Posted May 23, 2007 paying off the capital also saves the day (ie - if you didnt overstretch yourself, and you are overpaying, you are getting ahead of the game) Quote Link to comment Share on other sites More sharing options...
Prof Posted May 23, 2007 Share Posted May 23, 2007 (edited) ...but other increases in the cost of living might well bugger it again. Remember, a mortgage isn't the only thing your salary has to pay for. So even if the percentage rise in your wages roughly matches that of your mortgage repayments after your fixed rate deal expires and you start a new one, rises in other living costs are outstripping salary increases. My salary as a university lecturer only increases by 3.1% this year, compared to a 5% increase in council tax, petrol heading towards a pound a gallon, electricity, gas and water all up around 10% on this time last year, £40 more tax on a domestic or European air ticket, food up 5-10%, car and household insurance up 7-8% on average ... the list goes on.I can't see any one factor causing a large and dramatic HPC like it did in 1989; rather, it'll be a drip-drip-drip of households being pushed over the edge as the gulf between earnings and the cost of living gradually increases. Agreed, lots of factors are involved. As I said, if people stopped and realised what they were taking on with a mortgage, they`d probably have second thoughts. When I took on my mortgage (which was quite well within my means), I took the decision seriously, and 12 years later, my mortgage is still going out every month. The value of my home may have tripled (or may not, why should I care ?), but the monthly payments linger on. Easier to afford now, yes, but that`s only because I haven`t added to the mortgage. Some of the levels of debt that many people are now taking on would give me sleepless nights. No thanks. marcicopa mentioned making overpayments. That`s exactly what I`m doing, I can also recommend getting an offset mortgage, that also get`s you "ahead of the game". Edited May 23, 2007 by Prof Quote Link to comment Share on other sites More sharing options...
Guest vicmac64 Posted May 23, 2007 Share Posted May 23, 2007 What would that be? Inflation only in house prices and not in the shops?A 'collapse' in house prices would not happen in isolation, there would be repercussions throughout the whole economy. It's a common theme on here that people seem to be sitting around waiting for the much waited for crash yet they fail to see that it would have financial implications for them too. You are right of course, however, bring it on - in spades!! The rest of us will have problems - yes, but at least we'll have the flexibility to deal with them. Maybe just maybe it will sort a lot of other problems out too - like too many civil servants, migrant workers, the EU and more... If it brings nothing more than an end to the 'greed' factor that permeates our society it will have brought enough. So roll on the recession. Quote Link to comment Share on other sites More sharing options...
Flat Bear Posted May 23, 2007 Share Posted May 23, 2007 Can you quantify that on, say, a £150k mortgage? Realistically, how painful will it be? We talk about hikes breaking people's finances, however what is the hit, really... can it, for example, be accommodated by cutting back on chav-mags and lippy or are we talking arms and legs?? I think you have to look at the bigger picture which will be much easier to see in 5 years time There are fixed rate deals coming to an end now which were below 4%. The variable rate they will revert to would be around the 6.5% mark? which would increase the interest part of the mortgage by around 60%! and if these morgagees want to re-fix they will have some heafty re-fixing costs to pay so it is likely to be a very painful adjustment for many. But even more important is where the rates and "products" available go from here as lenders start to find cheaper money harder to come by there will be less "products" on the market at special rates ie rates below or around the base rate and will go back to the traditional base rate + 2% It may be the norm in 3 to 5 years of around 12% mortgage rates even if the base rate only gets to 9% The fact is money has got more expensive and is likely to get a lot more expensive. Quote Link to comment Share on other sites More sharing options...
Ash4781 Posted May 23, 2007 Share Posted May 23, 2007 Does anyone work in corporate restructuring ? Quote Link to comment Share on other sites More sharing options...
HenryWeston Posted May 23, 2007 Share Posted May 23, 2007 Inland Revenue? Insolvency Practitioner (business inversely correlated to recession elsewhere)? Member of the judiciary? debt collector? Planning officer? Policewoman? waste / sewage? people dont stop shitting even in a recession Quote Link to comment Share on other sites More sharing options...
ca-uk Posted May 23, 2007 Share Posted May 23, 2007 waste / sewage? people dont stop shitting even in a recession good point - if anything people will poop more! Quote Link to comment Share on other sites More sharing options...
peemac Posted May 23, 2007 Share Posted May 23, 2007 I think she's a housewife, if the hubby stops bringing the bacon home she gets benefits. Et voila, recession proof job. Quote Link to comment Share on other sites More sharing options...
HPC Convert Posted May 23, 2007 Share Posted May 23, 2007 I may be wrong but I think most fix rate deals are for 2 years, which means that many who bought in 2003 when base rate was 3.5% fixed again in 2005 when base rate was 4.75% (then dropped to 4.5% Aug 05). They are now due to fix again when the base rate is 5.5% and rising, this surely means that any buyers fron 2003 face huge increases in there monthly payments. Also 2005 buyers lured by the crazy rate cut now face fairly substantial increases. 2008 will bring big changes to the 5 year fix merchants. Repos will start to go through the roof this year IMHO. Although I want a total collapse in house prices I feel for these people as they were all misled by the city and the media in being told low interest rates would last forever. Smith, Bootle etc watch out for the backlash - useless pri*ks Must be a slow news day for the bears, so we need to speculate on the meltdown that will afflict the sinners etc. Always enjoy the "i dont want to see misery but i want a crash". People should be honest, you want a 90% crash so you can pick up the bargains as the people are evicted in front of you. Lets have some honesty here. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.