So the law doesn't actually give any real protection to ordinary people then?
There is a small claims procedure, but AIUI it cannot award expenses. Whether the expenses are limited to those incurred in raising or defending the action, or are incurred elsewhere, I cannot say.
Crowley,
A reasoned reply to my post. Thanks.
You brought up > My house at the time dropped in nominal value by over 35% from 1989 to
Many people did suffer similar drops in value at the time.
Can we compare the other factors? My information is second hand and might not be accurate so correct me where I am off.
Around 1989 to 1992:
- Unemployment was rising.
- Interest rates peaked at 15%
- The pound fell out of the ERM.
- Inflation was in the double digit range. I heard a really high figure. Too high to even repeat as it is likely a bit off.
- The tax code changed in 1989 to reduce the interest deduction (later phased out totally). There was a bit of a rush to get in under the wire.
- The economy was different with less global competition and the tail end of the Thatcher years still playing out at some level.
- There was no real rental sector. 93% of all residential rental property was owned by the government. The rules for eviction left no reasonable way to get a tenant out. Private landlords focused on bedsits and other types of rentals where eviction was possible.
- Lenders refused to lend to what we now call the BTL borrower. If you can not evict the lender can not lend and expect to get their money out if there is a default on the loan.
- The average age of a first time buyer was 19 or 20 and they were borrowing 100%.
If we were to look at today's numbers the details are rather different.
The debt levels compared to overall property values (in total so not for any one person) indicate less debt and more equity in the UK property sector as a whole. Yes, people have more consumer debt so are less able to pay. They still have to live so they will end up renting if they sell and cash in the equity. With rising rental demand comes rising rents and happy landlords who can justify buying property. If the prices are soft or falling then the combined effect is a really positive gross rental yield so even more reason for a landlord to be happy with the income.
I would speculate that the housing market is much less likely to see a correction like the last one given present conditions. Even if a correction takes place the average first time home buyer and others actually have less debt and more equity in their home. Hence less possible chance of negative equity and lower levels if people do see large drops. They would be losing value but not have an upside home in many (most?) cases. The average age of a first time buyer is now 30. More in line with the US as there is no reason that a recent graduate or school leaver should be buying a home if they can rent. Part of the logic for a low age for the first time buyer in the past was you either purchased or you lived at home given the lack of rental property on the market.
No market goes up for ever.
I think people are too focused on a model of the past and then applying it to today without adjusting for the fact that almost all the major variables are different between the two points in time.
As they say in the stock market, past prices are no indication of the future.
Custos Custodum wrote in news: snipped-for-privacy@4ax.com:
respective
Not unless they can afford a full blown court case, which few can.
I'm not sure either, but it doesn't seem as well used as the English procedure which suggests its fairly restricted. Maybe it's time we had something similar to the Small Claims Court.
snipped-for-privacy@gmail.com wrote: .
Some good points many of which I wouldn't disagree with. One where I would differ is with your statement :
As I recall from the eighties it was far more difficult than today to get a mortgage. I can't remember hearing about 100% mortgages, a deposit of at least 5% was required and multiples were far lower than in recent years ie 3 or 3.5x main income = 1x any second income. So while rates were considerably high in the early nineties (9 to 15%) debt was considerably lower. Inflation was also higher so pay rises eroded debt more quickly than today.
In recent years credit has been cheap and far more easily available.
100 and even 130% mortgages are around, deposits are not always required, some mortgages are self-cert, and multiples can be anything from 5x income to 7 or more and 2x for any second income.Strains are becoming evident in the UK economy ........ record trade deficit in 2005, unemployment rising for 14 consecutive months, reports like yesterdays from the FSA re 2.5 million households on a 'financial knife-edge' (see other thread) Signs of a recession in the retail sector which has accounted for a huge part of the economy in recent years.
This house price bubble was created largely through the availability of vast quantities of cheap credit but it looks like this credit cycle may now be drawing to a close.One BS has stopped BTL mortgages for new-builds, Barclaycard have knocked back an unprecedented 55% of applicants, anecdotal evidence of lenders examining more closely mortgage applications and cutting out self-certs, rows between the CML and RICS over RICS members allegedly valuing some new-builds too highly etc. The strains are beginning to show.
But perhaps one of the biggest indicators that the credit fuelled party is coming to an end is the moves by the Bank of Japan to withdraw liquidity from the market (ie cheap lending to western banks..... the "carry trade") and even increase their interest rates later this year.
See here for more on the carry trade and it's effects on asset prices in the west ......
Here's an interesting graph on the peaks and troughs of the housing market in conjunction with the recessionary cycle.............
In article , Crowley writes
Try the FT today. All the top doom-mongers have now changed their opinion.
Bingo! The chat here should get a lot more interesting wen folks begin to realise that we're not in a housing bubble, we're in a credit bubble.
FoFP
Feel free to send me a cheque anyway, but I don't have a house to sell.
FoFP
That you believe that inflation is as necessary and ubiquitous as air?
Sure I do.
FoFP
Not at all. Since 1929 shares have risen in value by a great deal more than property. The real terms rise in property has been between 1 and 2 percent per annum over the entire credit cycle.
FoFP
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