Deep Singh

C'mon then where's the hpc thread?

1) Libor rates at the highest for 9 years

2) BOE rate highest for ?4 years

3) Lowest number of mortgage approvals (for many years) last month

4) 0.5% increase in house prices last month which is also the lowest for ages

5) Share prices of banks tumbling

6) House prices in USA collapsing

7) Exposure of UK banks to subprime unknown

All this and no hpc thread??

davegtt

People might have finally realised its not happening (at least for a while yet)

john banks

HPCs take a while, and certainly year on year figures will take a while to turn negative, but I'm very happy to be renting in an area where the last quarter showed more than a 2% drop in house prices.

During a time where an interest only mortage would have 21% higher payments, my rent has gone up by 2.9%.

To me it is hardly worth debating any more, just a case of waiting until it is cheaper to buy than rent.

pslewis

As one who is guilty of crying wolf on house prices for a few years now .....

I am surprised that it has taken as long as it has ..... but the signs are now there.

'Reduced' houses appearing in Estate Agents windows.

Builders offering to pay Stamp Duty, Carpets and Landscaping .... anything but reduce their prices (but it all amounts to the same).

Property Developers advertising houses/flats/apartments with the words 'Buy now before the boom increases'.

In a healthy market there is no need for Free stuff from builders, no need to drop prices, no need to try and 'convince' buyers to buy.

I saw all of the above in 1989 ...... the housing market then went into freefall until 1994/5 - I know, I was trying to sell .... and buy!

Hold onto your hats .... we are in for a ride that has never been seen before!!

5% drop this winter, 8% in the Spring, 15% in the summer, 10% next Autumn, then 0% for 12 months with only the very best houses selling.

Petem95

I think its a one-way debate now!

I used to have many a happy discussion in work with the "house only go up" lot in my office, but now even they all anticipate prices falling (and to be fair they dont seem arsed about it!) so it's not so much fun discussing it!

The banks tightening up on lending was always going to be the trigger for a crash, but its so many other things have come at once - fairly big monthly falls by the end of this year I expect.

Cash is certainly king at the moment, and there's some GREAT rates out there at the moment as the banks and BS are desperate for liquidity!

Question is to I drop some cash into a 1-year fixed rate bond at 6.9% AER, or wait till next week when rates could be over 7%?....

exvaux

iTrader: (1)

tbh i hope it does,at least that way i can maybe afford to buy a house,as wel as many other folk my age/first time buyers

Petem95

Unless you have a good credit rating and a big cash deposit it may not get much easier.

Banks and BS's are getting MUCH more tough on how much they lend, and with higher mortgage rates, so even though the house you are buying will be cheaper, the cost to borrow the money might not be.

Petem95

Come on, surely someone out there thinks property prices wont crash - lets try and make a debate at least!

zip106

But surely it doesn't matter how much they fall by, unless you lose your job and need to sell or can't keep up the payments?
And by the same reckoning surely it matters diddly squat how much your house is worth 'cos if yours has gone up then it's a sure bet that the one you want to buy has gone up too. (unless downsizing)

Or am I missing something?

jjones

nope

people without houses like to talk up a crash, usually so they can afford to buy into the market where they then switch sides and join...
those with houses like to see the value go up as they think it makes them "richer"

Deep Singh

Telegraph today:

Spanish property market in serious trouble (like thats news ) 300 estate agents in Costa Blanca alone closed down. More houses built in Spain in the last 12 months than England, France and Germany put together. Prices dropping.....

Chris L

No you're not, but there are other factors to considered. The huge buy to let market in this country could well start to come undone. Where people have been pushing themselves to buy one or two extra properties (often on favourable fixed rate mortgages), the crunch will come when the fixed rate period ends. Rents haven't kept pace with house prices, so you could find yourself in the position of trying to find several hundred pounds more per month (per mortgage too) - this could be enough to push many people into serious financial trouble.

The Bank of England left rates unchanged this month (at 5.75%), however, that isn't the whole story either. The fact is they didn't have to change the rates. If you watch the financial markets you'll know that the real indicator is the 3 month interbank lending rate (as DS quoted in his original post), which this month hit 6.87% This is the rate at which banks lend money amongst themselves.

This in itself is good if you are a saver, as you will find saving rates going up. But as a general rule, banks don't offer saving rates higher than their mortgage rates - so this is bad news for variable rate borrowers, as mortgage rates will only go one way - up - putting even more pressure on home owners (a guy in the Telegraph wrote a good piece on this)

Traditionally the banks fund their mortgage lending from customer deposits, but in their rush to cash in on the housing boom, this has changed and more and more mortgage lending has been financed by raising money on the wholesale money markets - which goes back to the Interbank rate.

So to go back to using customer deposits they will need to attract more savers with better rates now that the wholesale market is too volatile. This takes you back to the point about lending rates needing to be higher than savings rates and you start to understand the vicious circle that the banks are in.

The upshot could well be a further tightening in lending criteria and further hikes in mortgage rates. If the criteria is tightened, then the ability for borrowers to over stretch themselves will be restricted and this will have a knock on effect on to the price of houses.

The Banks know that they have been slack in their lending and now it is coming home to haunt them.

_Meridian_

iTrader: (1)

Good - **** 'em. Sorry, but while individuals may be OK, the whole buy-to-rent market has done massive damage; to the properties themselves, the areas they are in, and to the market itself.


M

pslewis

The Inter-Bank Interest Rate rising without the trigger of a Bank of England Rate Rise is a worrying indicator.

Mortgage Rates are about to rise because of this Inter-Bank Rate - when the BoE raise general rates we are going to witness a Double-Whammy on Rates.

Once the Buy-to-Let Owners get the jitters at try to sell the market will be flooded with properties, some with sitting tennants, this will drive prices on a spiral downwards. Factor in the fact that money will be returning 7% soon and it's better to have cash on deposit than in property!

However, ask me to sell my house and rent while I watch the market collapse and I won't do it ...... the risk that it WON'T happen is too great a risk for me.

But, I still believe a correction is about to come and it could get ugly.

Terminator X

iTrader: (7)

I still maintain that they won't Pete

Still not enough houses to go round & they can't be built quick enough either. It may level out, still not sure though ... no big crash expected by me. If you sold a few years back cos it was just about to crash then you're still fooked & will remain fooked perhaps for ever more.

TX.

Chris L

Supply and demand is fine, as long as people can get the finance to buy them. If the bank's tighten their lending criteria and push up mortgage rates, then supply and demand matters less, because fewer people will be able to afford the asking prices of house - therefore to sell your house you would have to lower the price.

The biggest problem we have in the UK is that our fiscal policy is very lax - it is simply too easy and too cheap to borrow money. Some of this has been encouraged by the government and their blind following of Alan Greenspan's policies in the States. Watch the US market and economy very closely and you will see what will happen over here.

Petem95

Thanks for the input TX - glad its not a totally one-sided debate then

I dont buy the shortage debate at all - I think a lot more people are living in shared accomodation now - ie immigrants, and it also would not stop a crash in prices - just look at Japan - a genuine massive shortage in space/property yet prices crashed up to 80%.

EVERYTHING is going against the housing market to such an extent that IMO we could be in for a very sharp fall, whereas previously I would have expected fairly modest falls snowballing.

People simply will not be able to get hold of the required amounts of money anymore. Banks and BS's just will not lend like they have done for the last 5-10years - rates to higher risk lenders have already been pulled/rates up and lending critera have got harder - but now we are seeing interest only stuff being pulled;

Fears for British sub-prime crisis | This is Money

London has been a big driver in prices due to these record bonus's paid to city workers (irronically many on the back of profits from this irresponsible lending) - many forcasts saying 30% or more could be laid off, and the next round of bonus's will be very small - if any! This will really hit the London market.

On top of all this interest rates could still rise as inflation looks set to increase in the short to medium term.

Interesting times ahead!!!

Deep Singh

Its what you've been waiting for Pete

sti-04!!

Bring it on .................... no fixed rate for me either

pslewis

Indeed ........ the brave step in when all about are jumping out ..... I shall add to my portfolio a few more houses

gazza-uk

omg were all gonna die

DavidBrown

This makes interesting reading each month

http://www.nationwide.co.uk/hpi/historical/Aug_2007.pdf

Petem95

It's been expected for a long time. For me it will be interesting to watch things collapse - however I dont plan on buying any cheap repos as IMO the UK is in terminal decline, and emigration is the best thing for me (plan to bite the bullet in a few years!).

The city (financial) has been a significant part of the UK economy until now. We have little else as manufacturing etc is nolonger viable here. When the city takes a massive hit like the effect for the rest of the country will be significant (and in a negative way)

jjones

BBC NEWS | Business | Home price inflation 'picking up'

look forward to next months threads.

The Rig

iTrader: (13)

the way your saying houses will drop in price will not happen,sure they might reduce,from £259k to £245k for example,but they will not go from £259k to £100k.

its like 9/11,that wont ever happen again !

house prices may reduce,but with the amount of people wanting prices will always be good,sure,it may take longer to sell now,but thats because only a few can afford £259k instead of the £100k they once were when they were going of market as quick as they were on.

i`ve just bought a house (selling mine,buying another) and some houses were on monday,off monday night,that happened to about 5 houses i wanted to look at.

the house i bought,was on market friday, i provisioanlly bought it weds

marky1

I know a guy who bought a place in central london last year for £2.0m. Just sold it for £3.1. If he had held on, and prices had dropped 20% (which is a huge drop) the value would have been still well above what he paid a year ago. Even if prices come off, they will still be well above what they were a year ago. (Unless of course they drop 30 or 40% but I can't see it happening)

Deep Singh

CAB states today that there has been a 20% increase in people seeking help for debt problems over the last 12 months......

Luminous

iTrader: (3)

Yup, which posts the question...have the current rate increases done the job as they are starting to bite, or will they have to rise further. Personally I don't see them rising much more. No gov wants a crash, and flash wants to be elected. I can see him intervening if the BoE committee vote for a few more increases

Deep Singh

Except if the interbank lending rate continues to rise due to the liquidity squeeze then mortgage rates will rise independant of BOE rates.

Can anybody who understands these things confirm if that is possible or am I talking poo?

sti-04!!

Prices will drop no more than 20%, i feel sorry for the people like a member on here looking for a 125% mortgage who will eventually lose everything due to the slightly increased interest rates.
The people with the money in various "other" areas are the winners out of all this.
Capital Growth is something made up by FSA's