Friday, September 21, 2007
LOL…this analysis was from 2002!!! – 5 years later we’re still at it.
Is it time to bust the boom?
Britain suffered an economic slowdown last year - but house prices still went up by 16%. The typical house now costs over £100,000, a level that prices most first time buyers out of the market. If, however, you had managed to persuade your bank or building society to give you a 100% mortgage and bought a house for £100,000 last year, you would have cleaned up. You would have received a £16,000 gain free of any taxes. Even after accounting for interest payments, you would still be £10,000 or more better off. Small wonder that people feel confident enough to spend so much money in the high street.
Posted by tyrellcorporation @ 10:27 AM (1091 views)
7 thoughts on “LOL…this analysis was from 2002!!! – 5 years later we’re still at it.”
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Dr K says:
The next 6 months offers the best opportunity for a HPC because mortgages are going to be harder to get (lower salary multiples with a larger deposit required.) Prices will inevitably fall, by how much, nobody knows. If IR’s stay at 5.75 or go above (hopefully!), the fall will occur more quickly.
Scott says:
IRs will not make a difference. So what! An extra £30 a month does not break the bank, so to speak!!
But the lowering of multiples will make the difference. If IRs drop to 3% but max multiple was 3.5 with 20% deposit, we would get a crash.
wage slave says:
As lending becomes more costly buyers (FTB and BTL) will only be able to afford smaller mortgages, pushing down house prices.
People with negative equity will not want to sell unless they have to, so what is required is a situation where they have to sell.
planning4acrash says:
And when they have to sell, they have to reduce prices if less cash is available to buyers.
C'mon Correction says:
Once the tide has turned a fall will a self-fulfilling spiral, much like a reverse of the self-fulfulling speculative boom.
Dr K says:
Scott: IR’s do make a difference in the sense that some of the current mortgage lenders have taken into account “affordability”, rather than just salary multiples. At a lower IR, you can lend more if “affordability” is considered as one of the lenders key criterion; so if you are used to paying 850 per month in rent, that 850 per month buys you more mortgage at 3% than it does at 5%.
Scott says:
It is still only a small difference Dr K. But assume my salary is 25k (I actually earn more (smirk on face!)) and the banks change the multiple from 5 to 3, the amount I can get drops from 125k to 75k. The big sums make the big difference.