Monday, April 6, 2009

“Some buyers are so desperate they have resorted to using credit cards to make mortgage payments”

Downvaluing leaves high fliers reeling

New-build property schemes are in disarray as buyers run into trouble. Some Canary Wharf flats were sold off-plan in 2006 at sky-high prices. Investors paid 20% deposits. Now it's 2009, building work is complete, and buyers have to pay the remaining 80%. However they can't get a mortgage because the lenders' surveyors say the properties have lost 17-35% of value. The developers have told buyers they are "required to proceed with the purchase at the contract price" as the purchases were not made "on a subject-to-mortgage basis". [I guess this means they'll lose their 20% deposits. Oh noes.] Businessman Denesh Bhabuta bought his 335 sq ft studio flat for £264,000 in 2007. [Yes, a studio for £264k] Some buyers are so desperate they have resorted to using credit cards to make mortgage payments

Posted by drewster @ 02:00 AM (1718 views)
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12 thoughts on ““Some buyers are so desperate they have resorted to using credit cards to make mortgage payments”

  • Another BTL investor caught unawares by the collapsing market…

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  • britishblue says:

    Déjà vu.

    I worked as a consultant for a major developer in he 1990’s. Exactly the same complaints! Exactly the same issues.!Canary Wharf was really hit last time. But last time the people that were hit were called ‘yuppies’ and their mobile phones were 6X the size.

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  • Ha ha ha. Obviously trying to buy off-plan and sell on at a big profit, but 20% deposit is about £53k, but if it’s lost 35% of it’s value that means the 264 flat is only worth about 172, so he’s lost his entire 53,000 deposit AND is in negative equity to the tune of nearly £40,000 with absolutely no hope of selling the property to recover costs and nowhere to go but either the bankruptcy courts or to continue paying the debt down in the hope that inflation wears it away – which is looking verlikely unfortuately for us.

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  • stillthinking says:

    In a way they are lucky to have the stop on their losses.

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  • inflation is eating my savings says:

    poor things, they have my sympathy, esp the ones who just wanted somewhere to live.
    A 20% deposit seems a bit steep.

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  • little professor says:

    Surely it would have made more sense for him to just walk away from the deal and forgo his deposit. Losing £45k is hard, but better than taking on the £65k devaluation

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  • little professor says:

    The buyer in the article offers more information in his blog:

    “The Guardian article is well written, however the caption does not give the full picture. It is not the case that I am struggling to pay the mortgage. In fact it is near impossible to get a mortgage.

    A down valuation of £65,000 on the property value means that the (60% LTV) mortgage if available will be £120,000. On a property purchased for £264,000, a 20% deposit is £53,000, and thus the shortfall will be £91,000 – and this is not an expensive apartment in Pan Peninsula either. There are 1 and 2 bed apartments in the development that have been purchased for anything upto £750,000

    Simply walking away and forfeiting the deposit is not an option. Ballymore are taking this further and pursuing the remainder of the purchase price (they already have 20% as the deposit) via the courts. Despite Ballymore’s public statements of wanting to help purchasers, they are not entering into any dialogue to that effect.

    When these properties were originally purchased, there were lots of mortgages around, even at 95% LTV. However with the economic downturn there are much fewer mortgages available, they are harder to get (even though the Government has pledged to help the economy by reducing interest rates) and are mainly a max of 70% LTV. Mortgage products are still advertised in the paper, but once you try and apply for them you will see them wither away into thin air.

    From the few mortgage products currently available, the amount that can be borrowed as a percentage of the purchase price is down by 40-45% due to the fall in valuations.

    I am also FSA registered so would lose my ability to work in my profession if I was sued and made bankrupt.”

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  • Capitulatesoon says:

    There’s a good reason why FSA registered people lose their capacity to work under that banner should they be bankrupted. Often these people are entrusted with other people’s money or are trusted to give them sage investment and other financial advice. Whilst I have a tiny amount of sympathy, buying one tiny room with a small balcony for £254k is evidence of his inability to make sound financial judgements.

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  • “I am also FSA registered…”

    I can understand plumbers, taxi drivers, and other amateur BTL investors not seeing the crash coming. I can even understand financially naive FTBs buying at the peak. But this guy works in the financial sector – how could he not have seen the risk he was undertaking? Sorry, no sympathy.

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  • drewster

    Not only is there no sympathy, there’s actually a sense of amusement watching these greedy self-interested brainless idiots losing money that they probably can’t afford to

    These are the people that deserve to live on the streets

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  • george monsoon says:

    drewster said…

    “I can understand plumbers, taxi drivers, and other amateur BTL investors not seeing the crash coming. I can even understand financially naive FTBs buying at the peak. But this guy works in the financial sector – how could he not have seen the risk he was undertaking? Sorry, no sympathy.” – The answer is simple.. greed GREED G>R>E>E>D…

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