Tuesday, August 23, 2011

What we need is more people in negative equity

Persimmon Statement

“What we need to see is the 95 percent mortgage come back because first-time buyers are affected by that.” "The company has made provisions against further price declines of at least six percent" So he wants lending at 95% despite expecting falls of at least 6% - what could possibly go wrong?

Posted by timmy t @ 10:24 AM (1980 views)
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25 thoughts on “What we need is more people in negative equity

  • I say bring back loose credit…..fact is when prices fall back to 2-3x average earnings you could bring back 100% mortgages if you like,which is what happened in 1990’s

    its simple business sense…what is not simple business sense is lending 95% at todays prices which will fall dramatically when interest rates rise

    and btw people are less likely to pay thweir mortgages when in negative equity

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  • With all the indices showing YoY house price falls, and little optimism amongst potential buyers that this path is going to alter any time soon, what worse investment could there be than a 5% deposit on a mortgage?

    £10k of hard earned savings put down as a deposit could very easily be wiped out (and more..) by this time next year.

    House prices are a bit like cats up trees – they rush up with great noise and enthusiasm, then perched on a high branch they pitifully mew for help, until eventually hunger forces them to edge down, awkwardly and slowly – before losing their grip and crashing to the ground..

    ..and then, with great speed, the cat picks itself up, washes itself briefly, and then saunters into the house, begging for food – whilst trying to give the impression that they haven’t done anything stupid that day..

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  • out of curiosity i visited a mortgage website and the most they would lend someone on what is an average salary was 100k

    i entered 25k as the salary, how can the housing market hold up any longer with figures like these

    even entering a second person with 25k and entering outgoings at 200 a month they would only lend 183k

    i reckon most people are on a lot less anyway, especially as we are a society of supermarkets and staff working for them are not on a great deal

    the whole house of cards has to collapse soon

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  • Uncle Tom – very impressive the analogy of cats and homeowners “pitifully mew for help” – fantastic !

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  • 3. mark said…’out of curiosity’

    ~ Didn’t that kill the cat?

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  • Blimey! Even cats have been MEWing. How did things get this bad?

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  • Yes but unfortunately, just as that same cat will be back up the same tree tomorrow thinking everything will be fine, so the banks will continue to lend and people will continue to borrow with exactly the same expectation.

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  • i saw a cat chasing a squirrel

    not sure if it was the same squirrel saving money on the santander adverts

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  • [email protected]

    its a giant ponzi scheme,effectively bailed out by record low interest rates.

    buy to let has replaced ftb to some extent and ftb need to get money from parents normally in the form of remortgage on their inflated property price.

    btl even makes no sense if prices fall…if I had £200k cash and bought a house getting £1,000 per month rent then after fees etc I would get little more than in the bank…if prices fall it makes no sense at all,and with a MORTGAGE it makes no sense whatsoever

    In tokyo 1991 crash some properties fell 90-99%….google it.

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  • rantnrave..

    – I didn’t even think about that..:-)

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  • taffee

    what were the interest rates in japan at the time?

    sooner or later there will be a lot of pain in the UK as rates will have to rise and probably rise rapidly

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  • japan reduced interest rates to zero and it still happened just like here…also the yen ‘carry trade’ funded the dotcom boom and the US housing boom…borrowing at almost zero lending at 3-5%

    japan did raise interest rates then reduced them to zero again as they fell into recession…prices of property in japan are still 40% lower than 1991 in ACTUAL terms

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  • @ uncle tom ……… “forces them to edge down, awkwardly and slowly – before losing their grip and crashing to the ground..and then, with great speed, the cat picks itself up”

    Is this laymans language for a DCB (Dead Cat Bounce) ?

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  • jack c,

    No, I think the term is LBRBCB

    (Live But Rather Bruised Cat Bounce)

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  • hey be careful the RSPCA might be reading this

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  • Blimey its pussys galore!!

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  • did someone mention Gold? shhhhh the thread with a mention of it in earlier was unceremoniously dumped.

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  • oh yeh tescos own a gold business

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  • Eastern Daily Press: Pent-up demand drives house sales for Persimmon
    Bloomberg: Persimmon First-Half Profit Drops on Lower Prices and Falling Home Sales

    Same press release chewed up and regurgitated, yet the desperate EDP, which is probably desperately trying to hold on to its vested interest estate agency advertising, paints a picture that does a great disservice its readers.

    In the area I live, the South Hams, it wasn’t long ago that the Western Morning News ran what appeared to be an editorial trying to convince its readers that higher house prices would get the economy moving again – in an area where house price to earnings multiples are already much higher than every area outside London, due largely to wealthy second home owners and retirees from the Home Counties.

    No wonder our regional newspaper industry is in such a mess, with redundancies all over the place and 100-year-old plus daily titles in Torquay and Exeter becoming weeklies.

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  • “shhhhh”

    I’ve just been looking at some graphs.
    Wheeee!!!

    Do you think this is the ‘top’ you mentioned recently?

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  • hi quiet guy…. its a shame i gave a pretty detailed account this morning on the thread that was pulled. i dont want to repeat it here because it may be because of what i said on there that it was pulled. I think there are 2 things i said there that i can get away with here. The first is that if silver breached (and to be fair i didnt think it would) 4311 to the downside then the probability that a top was in was more likely although ideally i was looking for around 4600. As for gold all i can say is that i sold some more (but still have some left) , and said so this am, at 1900 and change.

    I said that the daneric blog (google it if you like) of yesterday showed the trendline resistance, and that it would be typical to back away and then march on for the final up OR to just spike up from here. Overall i did say this morning that people should be very careful around these levels, and agreed with UT that if you arent in it already you really are having a crap shoot by getting in now. I hope this doesnt get the wrath of the webmaster but if it does can he just delete this post rather than the whole thread!! So in summary i say a good place to take some profits although im not convinced we have had the top we may have. (not very helpful and i apologise for that).

    I tried to explain that TA is all about levels and that once one is breached you look for the next one. Obviously what i said of 1765 was wrong and so the next stop was around 1900, whether that is the terminal stop neither i nor anybody else knows but i am pleased to have liquidated some there. (i wont be buying them back).

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  • @Techieman

    Thanks for your thoughts. Partly influenced by your comments over the last week or so, I sold some of my sovs yesterday so kudos to you!

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  • thanks for the kind words but as i said was actually quite wrong at 1765. I do think its wise to take some profits even if eventually the market makes us look silly (it does that all the time). I do think the trick is not to be greedy, but pinpointing the top or bottom is as much luck than judgement – getting a high proportion of a move is really the best we can hope for.

    I just hope you will be happy with your sale if Gold does spike higher, which of course it might. I know i am (Happy i mean).

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  • You are mad selling physical gold. Having said that I bought SBUL to take advantage of Gold pullback……sorry first post and nothing to do with Property prices. Been hanging on for 10+ years being constantly ridiculed by friends and family of not buying a place to live. I sincerely hope some predictions of big house prices crash and imminent are true. My big fear though is sterling strength and possible delay in interest rate rises for quite a while yet and ending up a slow grind down for the next 3-4 years in property prices and only seeing 10-20% drop. Worst case scenario for those that have waited long enough. Still better than the price rises eh!

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  • @Funstermonk

    Welcome to the blog.

    “My big fear though is sterling strength and possible delay in interest rate rises for quite a while yet and ending up a slow grind down for the next 3-4 years in property prices and only seeing 10-20% drop.”

    I’m not sure about Sterling but a long slow grind is exactly what I’m expecting now. Sorry, but that’s the way I see it. This country adores property speculation and has deliberately chosen to favour the interests of borrowers over those of savers and people trying to live off savings interest.

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