Wednesday, February 14, 2007

Herd mentality?

BTL mortgages up48%

...or self fulfilling prophecy?

Posted by inbreda @ 01:42 PM (2871 views)
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12 thoughts on “Herd mentality?

  • Makes perfect sense, as more buy to letters enter the market, rents will continue to increase. I’m obviously failing to understand supply and demand.

    Portfolios would continue to thrive ‘particularly in a single digit house price inflation environment’. What’s this supposed to mean?? Is that better than a double digit house price inflation environment?

    It doesn’t even make sense….

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  • 48% more lambs to the slaughter. The carrot and the sentiment of permiment high house prices are producing more lemmings everyday. Its true greed blinds men as the ONLY way to make money on property NOW is to have bought low. Sell To Rent now or cash in as prices NOW will be at their highest level for the next 10 years at least. Its no fluke that luxury seaside apartments in my area are NOT meeting 2004 prices let alone these speculative 2007 prices, and its no fluke that prices reductions of up to 90k are lining local estate agent windows.

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  • The Capitalist says:

    I’m working with a property management company. They run 80 sites across the southern UK. This year has seen a marked increase in re-mortgaging (they need a consent form from us as the freeholder) and a huge increase in repossessions. It’s quite common for virgin BTLs to ask, “What are services charges and do I have to pay them?”..are you hearing me Glorious Sunshine?

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  • Another 330,000 FTB’s pushed out!!

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  • But as my example a week or so ago demonstrated – many BTLers are living on a knife edge, extremely vulnerable to IR increases, and the ‘mortgage industry’ has no way of monitoring or detecting this. The lenders are falling blindly through the air saying ‘Look, I told you I could fly…!’ – Pretty soon the ground is going to come up and hit them hard…

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  • Lets see now. A mortgage is normally somewhere between 15 and 30 years. 30 years is a long time. Are base rates never going to hit say for example 10% over this time? Well they have done several times in the last 30 years so there’s a good chance they will in the next 30 years, especially with the long term prospects for the UK economy not that great (dismal export performance etc) and other economies/currencies becoming stronger by the day. With a typical lender lending about 2% above the base rate anybody care to calculate the interest on a 12% £200,000 mortgage say for a couple of years? Very painful indeed even allowing for wage and rental inflation. Could even sink you completely. And just think if things get really bad that interest rate could go even higher during that long long long mortgage. Don’t say you weren’t warned.

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  • george monsoon says:

    Lets face it, people think houses are going to rise in value so they keep buying.
    How is it that many of the people on this site can see that this cannot continue, yet the cretins, morons, greedy snides, imbeciles, gullible, mentaly challenged and misguided sheep keep pushing houses further and further away from being affordable. We can speed the process up, but its a bit drastic.

    Anyone who cannot afford a house, simply petrol bomb the window of an estate agent near you.
    If we all do one or two, I think somewhere, somebody will get the message.
    Im getting tired of talking, its time for hard sensible action. kneecap a capitalist in your neigbourhood for the good of mankind I beg you.

    I want a home!

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  • Let’s say houses keep on rising because of MEWers and Buy-to-Launderers.

    The Mewing will eventually stop – esp. Bank of the Mum & Dad – and so supported FTBing will cease.

    Now what about the BTLers – there is a mess waiting to happen – say they push rents up in a desperate attempt to make profit.

    Yes – the BTL market will collapse (prob due to IRs) but how long to wait – and what pain for renters (the pushed out FTBers) – and what effects on society as a whole (see also UNICEF report)?

    2006
    Ave Income = £25K
    3.5X Mortgage (100%) = £87.5K ; so dual = £175K
    Ave House = £200K ; so ‘Bank of Mum and Dad’ invests 25K

    Fast Forward to 2010
    Wage Inflation @ 4% + HPI @ 9.9%

    Ave Income = £29K
    3.5X Mortgage (100%) = £102K ; so dual = £205K
    Ave House = £292K ; so ‘Bank of Mum and Dad’ invests 87K

    Now is that likely?

    What about – Wage Inflation @ 4% + HPI @ 5% (modest??)

    Ave Income = £29K
    3.5X Mortgage (100%) = £102K ; so dual = £205K
    Ave House = £243K ; so ‘Bank of Mum and Dad’ invests 38K

    2006 Bank of Mum & Dad = 25K
    2010 Bank of Mum & Dad = 38K (lower est.)
    Diff = 13K (they will exit pretty quick then!!)

    It would take flat HPI of near 0% for ave wages to catch up (4% p.a. – dual income though) with ave house prices!!

    This article only confirms that MEWers have been running the show for quite some time – esp. supporting FTBs – it will all implode soon as the cash runs out and the IRs hit home – no pun intended.

    In the death-throws of BTLers market – can’t guess how long that will take – if you get the banks involved – who knows? – it may take even a generation to sort this mess out!!!!! More pain for Joe Public as IRs rise.

    And for the humble renter – at least it is the cheaper option – for now!!!!

    Meanwhile – will the last FTB to leave the room please turn out the light!

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  • The Capitalist says:

    Steady on George – if you were selling your house – would you like to get the best price possible for it? Or take the first offer you received? Goes for anything one is selling really.

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  • dohousescrashinthewoods says:

    George, take heart, I don’t think market manipulation (kneecapping etc.) is even necessary. If you can, sit back, feel smug and enjoy the simple things in life. No point staring at the market for a sign (like I do – I admit). Enjoy your wife/partner/other, children, walking the dog and the occasional treat (like a new air-freshener).

    I think it’s important to decide how much money you need to live on / save (if anything) / etc. and enjoy spending the rest (if any!). I believe we are all fairly sure the market is moving our way in its own bittersweet time. It’s just a case of keeping tabs on (slow) progress and getting on with life. The only thing to do for now is position yourself as best you can for the probability of a recession. The Titanic looked fine for the first couple of hours after hitting the iceberg, but its sinking was assured.

    Our captains are busy telling us it’s full steam ahead for New York, but I doubt they believe we can make it before this ship founders. Anyone know of any good jobs going in Switzerland? Or somewhere else simply democratic and well run? “The time to mend the roof [flee a sinking ship] is when the sun is shining[before there is a scramble for the lifeboats]”.

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  • dohousescrashinthewoods is right george – not much you can do and like everyone here on this blog – we are ‘intelligent’ enough to signpost the problem but unfortunately in little position to correct it – we are merely the ‘Witnesses of History’ – as was our forefathers and before. In the old tradition of the Native American Indians we can only ‘Bare Witness’!

    Knee-capping – although a response – is not a very long-term or sensible solution unfortunately.

    Life goes on – as they says – or we assume!!

    Bigger things to worry about anyway – Peak Oil Problem [2008], Global Terrorism, Climate Change, Population Explosion etc etc….

    Sorry I was meant to be cheering you up!!

    Oh well – go out and tell a loved one that you care – that’s enough!

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