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Mr Blobby

Bbc Q&a: Mortgage Squeeze Tightening

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I thought this quote near the bottom was interesting...

The number of second homes in England has risen by 30% in the last decade, the CML said.

Around two million people in couples still maintain their own separate properties which, depending on what they do with them, would affect supply.

So bang goes the "shortage of supply" argument :lol:

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They will be forced sellers.

1. They got cocky and racked up credit cards and MEW keeping up with the Jones. Tightening credit ends the good times.

2. We ve had low unemployment for 10 years - odds are this cant last forever.

Unless - they were smart and have been paying down debt HARD and lived a frugal life with little debt. Not many in this category eh?

2 million second properties - wow that would increase rightmoves inventory by 3x!

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One wonders how many of those second-homes-in-a-couple are actually let out despite having a residential mortgage on them.

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How many of these 2nd homes are double-counted in with BTL properties? Difficult to know what to believe.

With regards to "proper" 2nd homes; I would imagine that it's mainly older folk that have these, i.e. paid off mortgage on 1st home, low or no loan on the 2nd. Just my personal speculation, though.

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I'd like to know some real numbers on this... I suspect that of those 2 million second homes there is at least a substantial number that belong to people who either

a ) do not seriously want a second home

b ) are not seriously trying to make money letting one out.

I can think of at least two categories of people who are lumped into this group who might rather be out of the market if they could be.

1) Couples who just kept on two houses, but don't really feel they need them.

2) People who did 'let to buy' because they couldn't sell the previous house.

I think things will get pretty scary for sector 2, because I think that they will be

a ) Older people preserving capital

b ) Looking for the 'safe' option

In the past it seemed 'safe' to just let out the old house as prices are rising, and selling is difficult.

Once prices appear to drop I think both categories may suddenly see an advantage in taking out £200k in equity rather than wait and risk only being able to take out £100k.

Let-to-buy stats may be available somewhere even if couples stats are not.

Interestingly I had friends who I advised some 10 years ago to effectively hang on to a property while they moved abroad. This was before the property boom and their attitude was 'we cant be bothered with the hassle of maintaining a rented out property in the UK'. I find it highly unlikely that they would have made this same decision in the period 2003-2007 as by this time it had become common place and well understood that it was worthwhile to hang on to property.

So. In a slowdown, you can expect two things.

1) People who already have more houses than they truly want to have... but they have gone along with it in the bubble, wanting to sell up.

2) People who are currently making a decision about whether to hang on to one when they have to move, or move abroad or move in together etc.

While it may take some time for the first category to decide to sell, the market will lose potential category 2 buyers, again helping to rebalance supply/demand.

Edited by 2MeterBear

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1. False flooring

Junk debt issues (lie-to-buy mortgage parcels) have underwritten artificial demand at the low end of the market. It's not such a huge leap of faith to imagine that the worst abuses of mortgage fraud (riskiest debt) have a market focal point nearer the starter property than the mansion. This bias, if present, would tend to mean that whilst 10% (for example) of the whole market by capitalisation is in RMBS issues, some significantly larger proportion of FTB and BTL transactions (ie - starter property purchases) are capitalised this way. It would also tend to mean that depth and liquidity supporting the base of the market is being (now entirely?) provided in this manner.

Let's see how that bit plays out eh?

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  • 297 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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