pslewis

'One reason why the UK economy is doing better than its European counterparts is that UK consumers are in the midst of a serious spending binge. According to the Financial Services Authority, the UK's financial regulator, we are spending £100 for every £90 we earn.


So, where are we finding this extra tenner? In an ideal world, it would come from savings - but this is a far-from-ideal world! Debt statistics show that this extra spending is coming from debt: bigger mortgages, more personal loans and larger credit-card bills.

In fact, according to the Bank of England, mortgage equity withdrawal (capital taken out of our homes that isn't re-invested into property) hit £53 billion last year. This means that we increased our mortgage debt by £53 billion and then spent this money elsewhere. Note that this figure roughly equals the interest bill for our total debts in 2003!

Worryingly, in the last quarter of 2003, we withdrew a sum equal to a twelfth of our post-tax income (8.3%) - the highest on record. Buoyed by the UK's apparently unstoppable house-price boom, homeowners are spending tomorrow's money today - and like never before. The problem is that house prices are largely a matter of opinion, and are governed by numerous factors. Debt, however, is harsh reality'

Something has GOT to give soon!!??

Or am I missing something? I have been through booms and busts over the decades and have a nasty feeling that this one will be harder than all the rest - people are REALLY going to suffer ............. all you need is a few terror attacks, the markets to get the jitters, confidence to drift, pushing up interest rates and its going to happen! BUST!!

I am so glad my borrowings are NIL

Pete

GaryCat

Nah it will be fine Pete. All you need to do is call Ocean Finance and consolidate all your monthly outgoings into one easy to manage payment.

unclebuck

Hello

Blimey... thought you'd died mate.....

UB

ALi-B

iTrader: (1)

Your right, something really has to give. Just a matter of when

I for one will be at the auctions when the mortgage companies are selling off the repossesed houses - It'll be the only way for me to get a house at a sensible price

pslewis

I am ready and waiting for the bubble to burst!

I will be stood next to you at the auctions, unlike in the last dire housing situation in 1990 I am now primed with a pocket full of gold and will be buying the stock!

Just wish it would hurry and POP so I can step in and mop up ..... I'm getting sick of waiting!

I see they are now offering 6 times salary on mortgages!!??

Complete and utter madness!!

Pete

unclebuck

"I am ready and waiting for the bubble to burst!"

...waiting... waiting.... me too. What will it take?

dpb

.ill be in the back row giving the ........but im wonderin who has actually promoted this insane rush..

jjones

think there are lots of people in the position to do this. it will lead to a quick recovery if there is a drastic fall.

pslewis

Maybe there are lots waiting ..... but, remember, when the market is falling fast (as it will) .... it will take a brave soul to step in and mop up!

I have been on both sides now, I have seen my property drop in value at £500 a week - as I have seen it rise the same amount.

Only this time I have cash on the hip, not cash from value in my main property as many who want to step in have! And thats just the point, when you see your house value dropping like a stone its VERY difficult to step out and buy another property if you have to borrow at high interest on the first falling asset!

Nope, I am ready and willing this time ........... last time I got slightly fried - this time it will be different (The falls will be HUGE and catastrophic!)

Pete

jjones

there willl be plenty of cash buyers. people will have learnt from last time that it will rebound in 5 years time and in 10 years they will have doubled/tripled their investment.

housing is down to supply and demand. there are not enough properties available as it is and with the ever increasing population the situation will only get worse.

Tiggs

lol- its all talk, if the market crashes i'd like to see when you choose to step in!

Ohhh...and if you have a pot of gold pete you should have bought years ago and got out now....why are you waiting for a drop? so they will then rise? what....like they are now?

pslewis

Well, Tiggs ............. I wanted to buy 2 years ago BUT I thought it would have dropped by now (and unlike some, I am not about to plough money into something I feel will crash!)

I was wrong then, so am waiting for when I am right

The time to step IN is just after the renters start buying in ernest, why after? well, imagine all those buy-to-let properties they are leaving to buy? Well they will flood the market causing another big fall!!

I have it all worked out!

Pete

imlach

Absolutely. There are FAR too many sitting on the sidelines with cash such that a crash will be quite soft. I am quite certain prices will soften, but a crash is unlikely apart from in really small hotspots.

There are some being silly though - buy-to-letters for instance who take out 100% LTV interest-only loans which are only just covered by rental income (and has to be rented 12 months out of 12). Add in to this that they are renting out in new devs where 75% of the other flats are buy-to-let.
They are the ones I hope burn. Their understanding of the economics of buy-to-let are flawed.

As is often said in overheating markets, if the shoe-shiner is starting to talk about these things, it is time to move out of that area. Every man & his dog is into buy-to-let right now, so the time to get out is soon if you are 100% LTV.

However, if you are sitting pretty with low LTVs on your properties, no need to worry. Long termism will keep things sweet.

dpb

what about a property in dundee Mr.lewis _

imlach

Nobody wants to live in Dundee during the boom, so heaven help you in the bust

pslewis

Some relatives of mine have just ploughed £250k into a Buy-To-Let property, they are getting £1000/month in rent ............... which is equal to the interest they were making on that money.

They are relying on the hope that the property will increase at around 12% a year, which is real growth on their money. I am not as brave as them. Indeed, they bought last October and its increased by £25,000 allready - they seem confident .............. I don't.

Pete

imlach

Fair play to them if they bought for cash. Long term, they should be ok. It is certainly more exciting than leaving £250k in the bank. Personally, I would have bought several smaller properties instead, which would allow one to chop & change/reduce/increase exposure to the market in the future.

pslewis

What they bought was a SMALL 3 bed end terrace - a new property that looks like a cottage - but no garage, no En-Suite, non of the requirements of life! We are talking Maidenhead in Berkshire!!

Ok, yes, they could have bought most of Scotland - but who wants blokes wearing frocks in yer hooose!!??

Pete

imlach

HAHA - wanna bet?!

Per sq/ft, I bet my house is worth more than yours, and it is in Scotland

pslewis

Thats a GOOD one!!

Pete

PS. do we include my 20 Acres of Hampshire?

imlach

20 acres eh?

Is it this 20 acres?

http://www.hmprisonservice.gov.uk/pr...,15,2,15,417,0

dpb

..i guess your talkin edinburgh imlach ? ......we sold our sixteen acres o hampshire (beaulieu) + eight bedroomed mill for mill last year ....~ 1/2 price ..needed some work

imlach

£1m doesn't even get you a terraced house in some parts of Edinburgh now....

fatherpierre

It doesn't get you a studio flat in some areas of London.

Mental.

mart360

ahh the joys of a ten year fixed rate mortgage

hving watched the rise and fall of the market in the 80,s we were forearmed so to speak

got a very good rate on our new place, although the current rate is slightly below it wont be long...


Mart

ocean finance look so attractive,, helping al those genuinly hard up people......

P1_BEN

This is something I take great interest in. My GF and I have just bought our first house at 250!!(Well exchange in 2 weeks) Something that we'll probably regret but after putting it off for so long we had to take the plunge.

My opinion is that from a longterm point of view house prices can go up and down all as many times as they want. We have factored in an over payment of 1000 each month so as long interest rates don't go up too much we will have a significant amount of equity in the house.

I have no other debts and can quite happily cover the mortgage but I do think there are a lot of people out there who are going to seriously struggle should interest rates rise 1 or 2 percent.

My GF didn't realise quite how much a mortgage would go up when interest rates rise just 1%

Biggins

I've been thinking of acquiring a few properties (buy to let mortgages) to let in my home town and surrounding villages. The area in Leicestershire is widely tipped as a major growth hotspot for the next 5-10 years. There is good potential for both Professional & Student lettings. However, i'm mindful of the shaky economic position and am in 2 minds as what/when to make my move.

My personal financial situation is pretty strong as I only have a £50k mortgage remaining on my £135k home. I own outright my business property which is valued as £450k commercial but would sell for at least £750k as residential/developer site. I also have £250k cash sum (in the business) which I am planning on using to outright buy property to let or use for mortgage deposits.

Funny thing is, although I am financially sitting pretty, the decision of what/where/when & how to invest seem more difficult than ever. As my manufacturing business is becoming more & more difficult and less & less rewarding, I am seriously thinking of taking all my wealth out of this messed up country and investing in a more stable economy overseas.

Answers on a postcard please!!

Leslie

That has been the trap of low interest rates of course and looks like the government is going to do the same by borrowing from the IMF.

I think too that eventually there will be a terrible slump and many people will be below the bread line with nowhere to live.

Like PSL I am glad I did not get into the borrowing trap, always saved up to buy something rather than go to the moneylenders.

I do feel very worried for the future of this country though.

Les

Ringpeas

I think the biggest threat will now come from rising inflation, as wage earners push for bigger salaries to pay for mortgages and debt. This will push up interest rates and start a downward spiral that will be hard to stop.

Hopefully I am wrong

StickyMicky

me as well