Buying a house right now. How safe?

Nobody complains when their boots are being flled and the government is half-bright enough to know it can't take away the punchbowl with impunity. Some folks were warning about finance at Enron; about earnings manipulation etc, even while the NASDAQ was still rising. Nobody paid much attention until the bust was in. We're only just now seeing a sniff of some folks maybe being jailed.

It's very easy to hide financial problems in a rising market and it's even easier to get forgiveness from aparently rich stockholders. It's very hard to hide the holes created when the markets start falling. The stockholders by then are also looking for someone to lynch.

Here, nobody was much interested in the "Golden Circle" in the splits trade when the funds all seemed to be doing well. Everyone is trying to blame everyone else now.

If there really is fraud, then it'll become quite apparent when the holes in the accounts appear in the bust. At that point I suspect that homeowners will be lookimng for scapegoats to blame for their own stupidity, with shareholders and mutual members probably just as miffed. The government will go along with hanging the scapegoats out to dry just to avoid being hanged themselves.

Of course if things run to type, it'll turn out that some from the ruling party are in on it, whatever it turns out to be.

That said, you have to wonder whether you need dynamite if the fish will simply throw themselves into any boat with the word "loan" in its name. At least the folks selling endowments had to do some work.

FoFP

Reply to
M Holmes
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Relax. Yes, the markets gone mad, but you haven't. Booms and busts happen with boring monotony. See the property spreadsheet on my website . Do not buy a Dickensian mouldy shoebox as low quality properties lose most value in any price decline. You've spotted that BTL properties are remaining empty, so take advantage of the situation and rent. Ignore the published rents - they're negotiable. I'd say that letting one of the army of inexperienced newbie landlords who've decided it makes sense to invest on a 4% yield take on the capital risk at a time like this would be a good bet.

Daytona (Landlord & tenant)

Reply to
Daytona

It's obvious. You benefit from any gradual rise in prices and after so many years paying a mortgage you don't pay a rent/mortgage anymore allowing you to get by much better on your pension and savings. Seeing as most of us need to spend a big chucnk of our money on housing, that money may as well do us the most good.

Oh, and you don't need to stare at damp magnolia walls if you don't want to and you can fix problems properly, rather than having Mr Rachman fudge it with his spanner.

Some friends of ours bought in 1999 and have a mortage of less than £500 on a house that would be £1100+ to rent on the open market, albiet the figures are distrted by this present megaboom. They'd have been nuts to stay renting, with or without the boom.

d.

Reply to
David

Last year saw fewer homes sold than at any time since the early 90s crash when many were affected by negative equity. An estate agent told me that he had four times as many houses on his books this time last year. Is this a boom? Back in the eighties EVERYONE seemed to be moving or wanting to. Now nobody is.

Back in the real world this means first time buyers ecconomically cleansed from thier work or home regions, people unable to ever have kids because they'd never be able to afford to move to a larger house and make ends meet and a minority of investors actively creaming off the very homes slightly luckier first time buyers might have attained.

In fact, it's more usual for governments to get their

Yeah, that too - especially for buy to letters who now seem to need nothing more than a few grand to start putting down deposits on mouldy flats to rent out for silly money.

But people need more homes. I saw a statistic somewhere (sorry, can't remember/find the source) that suggested the Dutch - also 'suffering' a boom - made 12 times as much new housing available last year than the UK.

The present situation is becoming a social problem partially because since the 80s the government has taken a back seat in housing and the problem has become a railways-style, almost unsolvable nightmare.

d.

Reply to
David

In article , Neil Jones writes

Perhaps because it is nothing new. People have been allowed loans on exaggerated earnings for as long as I have been involved in property - which is getting on for 30 years.

Reply to
news

The price is set at the margin though, so it's the homes that are still trading which are setting the price. This is interesting though in that professional traders in stocks look for certain things which mark turning points at the tops of markets. One is divergence and the other is loss of breadth. It might be argued that yeilds moving in the opposite direction of prices, and lower trading volumes would supply the same signals in housing.

Austrian analysis indicates that at the end of a credit cycle, there will be economic inefficiencies created by perverse incentives which are a result of misallocation of resources. The solution is to return interest rates to neutral and let the prices distorted by credit to fall back to non credit-enhanced levels as a result of the deflationary period. Peope can then stop spending large tracts of their incomes servicing debt on inflated assets and redirect them towards productive activity, thus curing the malaise.

I'm skeptical that all are making gains on rent. Rents have been falling here in Edinburgh (or at least those moving tend to be able to negotiate lower rents). I'd bet that some are relying on capital gains to get them by. When those gains stop, the psychology immediately reverses and they're in competition with each other to bribe tenants to get out so that they can sell quickly.

I suspect there'll be a nice little game of Holdout blackmail to be played by enterprising tenants when it all kicks off.

Need is a funny word. People need food and water to live. They can easily live with relatives, or in flat-shares while they eat and drink it. They may not like it, but if they can't afford to do differently, then that's what they'll do.

Maybe they remeember the tulips.

You can't expect me to believe that government intervention is the solution? It's more like the problem. All the government neds to do is just let companies build houses where they want to, and they'll do it.

Besides, your claim that there's a "social problem" doesn't hold water. What we have is a bunch of people who think they ought to get enough credit to live in a house they can't afford. In the past these people would be living in smaller places; renting; or renting a room in a shared flat. Wanting something better than you can afford isn't a need, it's a wish on a par with my "needing" a personal Spaceship (donations gratefully accepted). That the credit bubble means that they can currently undertake debt to indulge these fantasies doesn't make them a "need".

FoFP

Reply to
M Holmes

Remind me: how new is the idea of someone without collateral getting a loan on a property at all? One generation? Two? Three?

FoFP

Reply to
M Holmes

The BBC has an article somewhere about how to get on the housing ladder - in it as number one is says about council housing and its obviously been written by someone who's never applied for council housing in their life. Current waiting lists are huge!

What I think would sort a lot of the UK's housing problems out is more council housing - real low cost rental accomadation with right to buy to insure people can put real effort into the area where they live. We need more houses in the UK why can't a good proportion of them belong to councils who can rent them out at sensible rents?

My 2 bedroom (council) maisonette costs me less than my 1 bedroom (private rented) flat did 13 years ago, and about half the amount students currently pay for a room in a flat block just down the road.

The government is very aware of the need for more low cost key worker housing across the UK - at the same time as it must realise this is one function a council carries out already.

Manchester City council is selling off a tower block to a development company to turn it into flats for new teachers. I assume they'd not be allowed to do this to a property and positively discriminate for types of people?

Reply to
mogga

My dad was given a loan (of one thousand pounds) to buy his house (the one that I grew up in) in about 1952 (before he was married). So count back from there, that's three generations isn't it?

tim

Reply to
tim

You count forward from then to now, or back from now to then. And it's one generation from your father to you, unless you have children with a mortgage themselves, in which case it would be two (three if you have grandchildren with a mortgage).

Reply to
Ronald Raygun

You'd think so; and maybe this is the case for most people. But I know that if I was buying the place I currently rent, I'd be paying approximately twice as much on the mortgage...

Reply to
Sam

Your point being? I thought the 'scandal' was about exaggerated earnings. Mine was that mortgages were effectively self-certification way back in the Seventies. It was common practice for a lender to write to your boss and he put in the earnings figure you requested. You might be asked for a 5% deposit but this was often overlooked if you could show regular savings in one of the lender's branches.

From rough memory, my first two loans were 4.5x and 6x real annual earnings.

Reply to
news

If owning property is important and your freelance work does not depend on a SE location, you could consider moving north. That sort of money could get you a good 4 bedroomed detached house here.

Reply to
DP

Council house?

Reply to
nospam

I don't think so. I have kept a very close eye on the situation since I wish to buy a bigger house (due to growing family). Most of the BTL houses were previously owned by elderly people who have moved on for obvious reasons.

Around here BTL's seem to be buying most of the decent houses up to

250K. M
Reply to
nospam

I'm still puzzled about how self-certify mortgage fraud could work. Yes, anyone can lie about their income but the lender will surely find out when they don't pay their interest?

M
Reply to
nospam

I can never understand how anyone could pay the interest on loans this large.

Reply to
nospam

Really? When and at what interest rate?

Reply to
Jim

happened -

Let's say I earn 25k and want to buy my first flat for 200k. I have saved hard for five years and have 30k as a deposit.

After fees and stamp duty and some furniture I reckon I need a loan of

175k. Clearly this is going to be 7 times my gross salary.

If I get an interest-only deal with a 2-year discount I can expect to pay 436 with a 3% discount for 2 years from Norwich and Peterborough Building Society.

Doesn't sound unaffordable, when my net salary is about 1500 per month. It's less than the 500 per month I have been saving.

Of course, I won't worry about having a savings vehicle to actually pay off the loan, nor will I think about what happens in month 25 when the payment goes up to 873, nor that for a repayment mortage otherwise the same the payments would be 829 for the first 2 years and 1104 thereafter.

When the discount ends I'll just remortgage. After all, my flat will be worth 250k by then, and I can get a cashback deal to pay some of the redemption penalty. And I'll have had a couple of years pay rise to soften the blow.

Let's not worry too much about scenario B - the flat falls in value by

25% and is now worth 150k. Interest rates have risen by 1%, but my salary has pretty much remained the same. I can't remortgage and the interest only payment is now about 967.

Neil

Reply to
Neil Jones

It's very hard to see how 'B' could be anything but inevitable. After all an inflationary wages-prices spiral which might possibly leave property prices 'fixed' as prices rise to meet them could only result in a peculiar international trading anomaly which would surely lead to a collapse of the pound. And then what? Even higher interest rates? Oh dear....

Reply to
Jim

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