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Potential Trigger For Huge Cascade In Price Falls...

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Now Banks are only lending a maximum of 90% of total mortgage costs, what happens when people who now find themselves in negative equity due to price falls, as well as all those who lent on 125%, come to re-mortgage???

THIS COULD BECOME VERY VERY SIGNIFICANT.

If they cant re-arrange a new mortgage, because either the surveyor will not value the home above the value of their mortgage, or they lent more than 100% near the top, how the hell are people going to carry on paying the standard variable rate??? Think of the significance of this to BTL investors who must have already lost a humongous chunk of equity.

Many I have spoken to have always argued that when their current fix lapses, theyll just remortgage, no issues.... Yeah right. If prices slip only 10% we could have a rather large self-effacing crash of mammoth proportions :huh:

Has anyone else thought of this before? This, in my opinion is the final smoking gun that puts the nail in the supply and demand issue; individuals are going to have to take massively punatitive rates on the variable, or sell up, causing a flood of properties... which will take down another load of house owners... This is starting to get a little scary non? :unsure:

What do you all think?

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Guest muttley

They will have to pay the new rates. If they can afford it they will be fine, if not they're knackered. The day of the mortgage tarts is over though.

Before we get the "Could this be the trigger?" posts, I should point out that IRs have fallen, and will be reduced again to protect a catastrophic meltdown of the economy.

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Now Banks are only lending a maximum of 90% of total mortgage costs, what happens when people who now find themselves in negative equity due to price falls, as well as all those who lent on 125%, come to re-mortgage???

THIS COULD BECOME VERY VERY SIGNIFICANT.

If they cant re-arrange a new mortgage, because either the surveyor will not value the home above the value of their mortgage, or they lent more than 100% near the top, how the hell are people going to carry on paying the standard variable rate??? Think of the significance of this to BTL investors who must have already lost a humongous chunk of equity.

Many I have spoken to have always argued that when their current fix lapses, theyll just remortgage, no issues.... Yeah right. If prices slip only 10% we could have a rather large self-effacing crash of mammoth proportions :huh:

Has anyone else thought of this before? This, in my opinion is the final smoking gun that puts the nail in the supply and demand issue; individuals are going to have to take massively punatitive rates on the variable, or sell up, causing a flood of properties... which will take down another load of house owners... This is starting to get a little scary non? :unsure:

What do you all think?

One scenario missing -

The amount of people suffering from the actions of the debt system mean the debt system fails, freeing up more or less everyone from a life of chasing paper tokens that probably don't even exist anyway.

2 in 100 go bankrupt - a problem for the 2.

20 in 100 go bankrupt - The 20 form groups and tell the other 80 to go ****** themselves. System fails.

No house prices - because no currency to measure them in! Houses revert to being what they are - boxes built of bricks that start to decay the second they are finished.

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Guest Steve Cook
...I should point out that IRs have fallen, and will be reduced again to protect a catastrophic meltdown of the economy.

By the central banks...yes

By the lenders....no

There is now a decoupling occuring between the central bank's and lender's interest rates.

As you rightly point out, the central banks want people to borrow and spend as they are in abject fear of a massively deflationary recession. Hence the reduction in central interest rates. Inflationary fears can go to hell....and so can fears for the currency....just no deflation please!!

The lendors, on the other hand, are simply trying to stay afloat and recoup some of their monumental losses by raising interest rates

Steve

Edited by Steve Cook

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They will have to pay the new rates. If they can afford it they will be fine, if not they're knackered. The day of the mortgage tarts is over though.

Before we get the "Could this be the trigger?" posts, I should point out that IRs have fallen, and will be reduced again to protect a catastrophic meltdown of the economy.

IRs have fallen, the SVRs for most lenders has not changed or has even gone up to cover the increased liability they must be factoring in for the crash; as pointed out elsewhere today, all lowering rates has done is soften the losses of the banks by allowing them to lower savings rates...

This has bugged me for a while, and until tonight, I couldnt figure out what exactly hadnt clicked. Why have we been assuming that just because the lenders are pulling the 100% mortgages that would only affect the FTBs? We also have to figure in the fact this is just the beginning of what is rapidly turning out to be a VERY NASTY correction of the economy. EVERYONE who gets within 10% of neutral equity, as of this week, will HAVE to live at the SVR or downsize. Now that IS scary. I dont know what proportion of the country have significant mortgages outstanding (say 80%), but if prices start to go down significantly, people will not be able to remortgage. THATS BEFORE WE GET ONTO THOSE CURRENTLY ON IO MORTGAGES. They will struggle even more, as they dont have the cash to simply refinance, especially if the price of their pper thin walled 1 bedroom rabbit hutch has lost 25% of its value.

on the flip-side, what concerns me is this; if all the banks get together and come clean with their losses, LIBOR may drop significantly. Not a chance in my view, but certainly something to consider. It MAY be something they consider once the whole system is looking close to collapse.

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Many will have unsecured debt along with the mortgage and they will default on that first IMO. Implications?

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Guest Steve Cook
Many will have unsecured debt along with the mortgage and they will default on that first IMO. Implications?

I thinkI read that the average unsecured debt (i.e. not taken out against bricks and mortar) is in excess of 8k. That's 8k for every man and woman in the country.

Now, I don't know how many people that actually represents. It's merely an average (mean?). One might hazard a guess that it probably only applies to about 1/2 to 2/3 of the adult population at most. So, I am guessing it's probably over 14k for those who are actually in unsecured debt.

Steve

Edited by Steve Cook

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I thinkI read that the average unsecured debt (i.e not taken out against bricks and mortar) is in excess of 8k. That's 8k for every man and woman in the country.

Now, I don't know how many people that actually represents. It's merely an (mean?) average. One might hazard a guess that it probably onlu applies to about 1/2 to 2/3 of the adult population at most. So, I am guessing its probably nearer 20k for those who are actually in unsecured debt.

And they will be the ones closest to the wall when the switch to SVR comes. Can these mortgagors default on their cards and loans, diverting the cash flow to the mortgage while remaining in their home? I'm not sure if the fact that the mortgagee has a charge on the property will protect them from the other creditors seeking to liquidate it (if there was NE for example, meaning the mortgage would not be repaid in the event of repossession).

Edited by huw

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Guest Steve Cook
I thinkI read that the average unsecured debt (i.e. not taken out against bricks and mortar) is in excess of 8k. That's 8k for every man and woman in the country.

Now, I don't know how many people that actually represents. It's merely an average (mean?). One might hazard a guess that it probably only applies to about 1/2 to 2/3 of the adult population at most. So, I am guessing it's probably over 14k for those who are actually in unsecured debt.

Steve

Actually...need to ammend that last figure

The average unsecured debt per houshold is £8985

Steve

Edited by Steve Cook

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Guest Steve Cook
And they will be the ones closest to the wall when the switch to SVR comes. Can these mortgagors default on their cards and loans, diverting the cash flow to the mortgage while remaining in their home? I'm not sure if the fact that the mortgagee has a charge on the property will protect them from the other creditors seeking to liquidate it (if there was NE for example, meaning the mortgage would not be repaid in the event of repossession).

As I understand it, the creditors can force a liquidation of all assets (including the sale of the house). However, the mortgage company will be entitled to recovery of all of the debt owing to themselves before the creditors can get their hands on whatever might be left. If it is the case that a forced sale instigated by the creditors merely releases money that is going to be swallowed whole by the mortgage company, there would seem to be little incentive for them to do so..

Steve

Edited by Steve Cook

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I had £25,000 of unsecured debt, which I have thankfully nearly paid off. In comparison to how a lot of people have used debt recently, I would say that I was very very prudent. The banks are going to have to right off debts or delay payments or something if they are to avoid a total collapse, there is no way all the sheeple are going to cough up all they owe on time now that the endless trough of credit is drying up.No way. Depending on when people bought they will either sh*t themselves when big drops are reported, or just think "Oh well there goes a lot of my gains, but at least I still have my home" (I`m thinking of a guy who told me his flat was valued at £160k, but he bought it for £60k) This would surely provide him with a psychological buffer, and could not compare to the pant soiling realisation that the

newbuild "Excecutive, better than others, I have made it, f*ck you" flat you bought for £300k is now worthless. Could it?

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Guest muttley

Just out of interest, the main topic of conversation on this site when I joined was the potential time bomb of people coming off fixed rate mortgages. That was 2004, and we were talking about spring 2005.

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Just out of interest, the main topic of conversation on this site when I joined was the potential time bomb of people coming off fixed rate mortgages. That was 2004, and we were talking about spring 2005.

when I joined, only last summer to be fair, we were talking about total anarchy and the need for a machine gun and lots of tinned food.

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As I understand it, the creditors can force a liquidation of all assets (including the sale of the house). However, the mortgage company will be entitled to recovery of all of the debt owing to themselves before the creditors can get their hands on whatever might be left. If it is the case that a forced sale instigated by the creditors merely releases money that is going to be swallowed whole by the mortgage company, there would seem to be little incentive for them to do so..

If this is the case then unsecured debt (or at least the capacity to service it) could be seen as a buffer against mortgage rate increases ... if so then it's not looking good for the card companies and other unsecured lenders :ph34r:

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Guest Steve Cook

Over the last 4 or 5 years, as prices have jumped up, people have taken out extensions to their mortgages. I would very much like to know the average current mortgage debt in relation to given ranges of house prices. This would give us a good idea of which price range is going to have the most distressed sellers.

I am guessing, rather obviously, that it is largely going to be the FTB section of the market. The reason being that this is where there will be the lowest wage earners and so this is also where the will have been the greatest pressure/temptation to take out mortgage extensions

Steve

Edited by Steve Cook

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when I joined, only last summer to be fair, we were talking about total anarchy and the need for a machine gun and lots of tinned food.

<shrugs> we always talk about that :lol:

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Over the last 4 or 5 years, as prices have jumped up, people have taken out extensions to their mortgages. I would very much like to know the average current mortgage debt in relation to given ranges of house prices. This would give us a good idea of which price range is going to have the most distressed sellers.

I am guessing, rather obviously, that it is largely going to be the FTB section of the market. The reason being that this is where there will be the lowest wage earners and so this is also where the will have been the greatest pressure/temptation ot take out mortgage extensions

FTB and BTL who have leveraged one property to buy another.

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Guest Steve Cook
when I joined, only last summer to be fair, we were talking about total anarchy and the need for a machine gun and lots of tinned food.

its coming my friend......its coming........ :blink:...... :lol:

Steve

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Guest Steve Cook
FTB and BTL who have leveraged one property to buy another.

BTL...absoloutely Huw...yes

Steve

Edited by Steve Cook

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Just out of interest, the main topic of conversation on this site when I joined was the potential time bomb of people coming off fixed rate mortgages. That was 2004, and we were talking about spring 2005.

I dont disagree, when I joined in mid-2005 I remember discussing it. What I am trying to emphasise here is the banks are actually compounding the issue by pulling 100% loans... that 100% is only 100% of its present value, not what some jumped up little sh*t driving an MX5 thinks its worth 2 years ago... What we discussed was not LTV values changing but increased IRs putting pressure on mortgage holders, that people lapsing off their fix would get whalloped by a massive increase from their fix to the increased fix when remortgage time came around. This is what I firmly believe the boe where considering when they spouted all that cr*p about soft landings. They thought they had relatively good control of the market with central bank rates, however, this dynamic COMPLETELY changes everything. This couldnt have been accurately predicted, so to state openly that a soft landing was definately going to happen proves they dont have control of the plot and are just trying to control the sentiment.

Prices have fallen already in my area around 5%, that going to put anyone who bought in the last 12 to 18 months in dodgy territory when they come to renew. Now, as most fix rates are around the 5 year mark, I think I can start to understand where the "slow painful declines" come from..

As an aside, indviduals over at the singing pig are cliaming no-one saw the credit crunch coming, thats funny because I remember others discussing it here in late 2006... Talk about hindsight. This website, I believe in time will become a legacy to behold all those who doubt they are living in a speculative bubble, that prices only ever go up, as I personally believe this site has offered a fantastic commentary on what was happening, the emotions, the analysis. I think in 6 to 12 months they will be turning around and asking 'why didnt we listen?' :lol:

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Over the last 4 or 5 years, as prices have jumped up, people have taken out extensions to their mortgages. I would very much like to know the average current mortgage debt in relation to given ranges of house prices. This would give us a good idea of which price range is going to have the most distressed sellers.

I am guessing, rather obviously, that it is largely going to be the FTB section of the market. The reason being that this is where there will be the lowest wage earners and so this is also where the will have been the greatest pressure/temptation to take out mortgage extensions

Steve

I think the distress is going to cover probably most ranges of house price. Smart rich people and prudent savers have not played in the casino of HPI ( and if they have they probably got out some time ago).We can assume that anyone getting into property in the last seven? years( and not getting out, while still paying a mortgage) is going to get burned. The individual mania regarding MEW`s is almost impossible for us to gauge just now, but I am sure horror stories will emerge in the press over the next couple of years. The people at the bottom of the education/income ladder have probably gone the most crazy because the last few years have been their big chance to live life like a "celebretee" many of them will be toasted beyond recovering, but many of them will also not give a f*ck!

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I dont disagree, when I joined in mid-2005 I remember discussing it. What I am trying to emphasise here is the banks are actually compounding the issue by pulling 100% loans... that 100% is only 100% of its present value, not what some jumped up little sh*t driving an MX5 thinks its worth 2 years ago... What we discussed was not LTV values changing but increased IRs putting pressure on mortgage holders, that people lapsing off their fix would get whalloped by a massive increase from their fix to the increased fix when remortgage time came around. This is what I firmly believe the boe where considering when they spouted all that cr*p about soft landings. They thought they had relatively good control of the market with central bank rates, however, this dynamic COMPLETELY changes everything. This couldnt have been accurately predicted, so to state openly that a soft landing was definately going to happen proves they dont have control of the plot and are just trying to control the sentiment.

Prices have fallen already in my area around 5%, that going to put anyone who bought in the last 12 to 18 months in dodgy territory when they come to renew. Now, as most fix rates are around the 5 year mark, I think I can start to understand where the "slow painful declines" come from..

As an aside, indviduals over at the singing pig are cliaming no-one saw the credit crunch coming, thats funny because I remember others discussing it here in late 2006... Talk about hindsight. This website, I believe in time will become a legacy to behold all those who doubt they are living in a speculative bubble, that prices only ever go up, as I personally believe this site has offered a fantastic commentary on what was happening, the emotions, the analysis. I think in 6 to 12 months they will be turning around and asking 'why didnt we listen?' :lol:

Exactly, and past crashes are not a good guide to this one because the drivers are always slightly different. As years pass I think the sheeple become more brainwashed, that is the only reason I can see for this not already being a pile of dust. The manipulation of sentiment seems like the only weapon left to the VI`s?

Edited by dances with sheeple

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when I joined, only last summer to be fair, we were talking about total anarchy and the need for a machine gun and lots of tinned food.

Interesting. This morning, on another thread, we are discussing the joys of ringside seats at the end of the universe.

(On a serious note, I've been lurking here for years, back when I was an EA. When I joined up in Spring 2007, it was simply to make a post to prove I called the top. My reasons at that point (and consider my background...) were that sentiment was fading, the media was turning, and that credit providers seemed to be a bit nervous.)

Compare that with today!

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  • 292 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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