Property crash, just maybe it really is different this time

[Ash4781b]

https://www.theguardian.com/business/2022/oct/13/uks-13-year-housing-market-boom-to-end-in-2023-surveyors-predict

 

Article is a bit gloomy

 

 

“The knock-on effect of a slowing of house sales has been a significant surge in demand in the rental market, alongside a fall in landlord instructions for new lettings.

“Near-term expectations point to a further strong growth in rental prices over the coming three months,” said RICS.

Increasing rental rates will help landlords when they come to remortgage their properties, but as many as 30% of those with buy-to-let loans are likely to fail their renewal test, according to a report by credit rating agency Moody’s on Wednesday.

In order to refinance, buy-to-let mortgage holders have to meet affordability criteria, based on a minimum interest coverage ratio (ICR), that soaring interest rates makes more difficult to meet.

“A 4% increase in interest rates by the end of 2023 would push 30% of buy-to-let loans below their minimum ICR requirement,” said Carmen Brunetti Llavona, analyst at Moody’s Investor Services.”

Edited October 13, 2022 by Ash4781b

[spygirl]

19 hours ago, spygirl said:

https://www.dailymail.co.uk/news/article-11306979/Bank-England-issues-warning-mortgage-repayments.html

• Two-year fix rate is now average 6.43% and five-year fix is now average 6.29%

Mortgage borrowers face a new wave of rate rises

Loans become more expensive as bond market turmoil continues

https://www.ft.com/content/0091bcdc-fbe8-4326-a66d-c6d391d1741e

Barclays raised rates on fixed-rate home loans by 0.8 percentage points on Wednesday; its 10-year fixed rate deal, for example, rose from 4.85 to 5.65 per cent for borrowers with a large deposit of 40 per cent or more. This followed increases on Monday of up to 1.29 percentage points by Halifax.

Yikes!

OK 10y fix is unusual. But a 40% deposit down and thats what you get.

12 months ago that would (maybe not the 10y fix) been sub 1%

.

 

 

[spygirl]

12 hours ago, sancho panza said:

SOunds extreme but I'd put nothingpast a banker defending their leverage ratio

https://www.telegraph.co.uk/personal-banking/mortgages/banks-pulling-mortgage-offers-costing-homebuyers-thousands-legal/

Prospective homebuyers have lost thousands of pounds in deposits and legal fees after lenders pulled mortgage offers in anticipation of a market downturn. 

Estate agents reported a rise in banks cancelling offers in the past two weeks – after a backlash to Chancellor Kwasi Kwarteng’s tax cuts caused markets to price in higher interest rates. 

It is rare for banks to renege on an offer – the measure is usually reserved for when there has been a significant change in affordability or a legal problem has arisen. 

However, Marc von Grundherr, of London estate agency Benham and Reeves, said banks were even U-turning on offers after contracts between the buyer and seller had been exchanged. 

He said: “In my 25 years, I have never seen a lender pull a mortgage offer but we have heard of at least 10 cases. To go back on a firm mortgage offer is pretty awful and very stressful for everyone involved.” 

In one instance a buyer purchasing a property worth just under £3 million in London had secured a mortgage offer at 2.2pc with a 35pc deposit. Mr von Grundherr said: “The property was off-plan and he had already exchanged and paid the deposit, then just under two weeks ago the lender, who is a major high street name, pulled the offer and hiked the rate to 4.8pc. 

 

“It has more than doubled the financing costs and the buyer could lose their deposit and be sued by the seller for legal costs.” 

The average two-year fixed rate has soared to 6.43pc, up from 4.74pc on the day of the mini-Budget just under three weeks ago. Meanwhile the average five-year fixed rate has jumped from 4.75pc to 6.29pc, according to analyst Moneyfacts. 

The Telegraph spoke with one estate agent who had 20 sales fall through in the week following Mr Kwarteng’s mini-Budget, some because lenders withdrew offers and agreements in principle. 

Banks are more likely to pull the latter, which is a less formal indication of how much a buyer can borrow and a precursor in the application process. 

Mr Lamdin added: “This is just the beginning. I have been contacted by concerned parents desperate to talk their children out of buying because of the risk that comes with a large mortgage. 

In his 25y of EA ... mortgages have only been regulated for ~10y.

Once a customer gets a mortgage then the bank has to operate by a very strict, expensive  framework.

The onus is very much to protect the customer.

This means if a bank has an inkling of doubt, if its funding or customer ability to pay, then it needs to pull the plug before the mortgage is drawn down.

The mortgage game has changed; banks have changed too.

New game, new rules.

 

 

 

18 hours ago, JoeDavola said:

Well anedotally 30-35 year mortgages seemed the norm for the last few years for young folk.

25y+ mortgage are possible with low rates.

Once they get 4%_ then they are ruin,.

 

[spygirl]

10 hours ago, Frank Hovis said:

 

I have noted before that I bought in London in the mid nineties because buying was half the price of renting.

So London needs to fall ~75%, which is does actually make sense.

 

[Noallegiance]

Homebuyers lose deposits after lenders pull mortgages (msn.com)

[HousePriceMania]

10 hours ago, Wight Flight said:

A mortgage on my place would be £3,500.

Rent is £1,200.

Both numbers are nuts.

I checked out my numbers a month of so ago.

Same sort of result.

with a 10% yield the house is 60/70% over priced

29 minutes ago, spygirl said:

Mortgage borrowers face a new wave of rate rises

Loans become more expensive as bond market turmoil continues

https://www.ft.com/content/0091bcdc-fbe8-4326-a66d-c6d391d1741e

Barclays raised rates on fixed-rate home loans by 0.8 percentage points on Wednesday; its 10-year fixed rate deal, for example, rose from 4.85 to 5.65 per cent for borrowers with a large deposit of 40 per cent or more. This followed increases on Monday of up to 1.29 percentage points by Halifax.

Yikes!

OK 10y fix is unusual. But a 40% deposit down and thats what you get.

12 months ago that would (maybe not the 10y fix) been sub 1%

.

 

 

Tory MPs demanding bail outs.  If they get them then its game over for the £, the economy, democracy, Britain.

[HousePriceMania]

2 hours ago, Noallegiance said:

Homebuyers lose deposits after lenders pull mortgages (msn.com)

This is very unfair, but might save them money long term.

[sancho panza]

https://www.mansionglobal.com/articles/u-k-market-meltdown-shocked-londons-luxury-housing-market-01665428512

U.K. Market Meltdown Shocked London’s Luxury Real Estate

 

 

During the last seven days of September in London’s luxury market, the property data firm said the number of sales falling through jumped 88% compared to the same time last year, the number of price reductions spiked 76%, and the number properties withdrawn from the market increased 48%.

While one week’s data would typically be taken with a grain of salt, “the underlying trends are indicative of what happened, as it happened,” the report said in its analysis of the city’s prime market, which includes upmarket neighborhoods such as Chelsea, Notting Hill, St. John’s Wood and Hampstead. 

Looking ahead, prices are expected to fall 3% next year in prime central London before “rising modestly in subsequent years,” according to a separate report, also released Monday, by estate agency Knight Frank. 

“The relative value in [prime central London] compared to 2014 will underpin an overdue recovery in the medium term,” Knight Frank said, referring to when the city’s market peaked. 

[spunko]

PaTMa have the option to search by biggest price drops.

For example, using a demo postcode:

https://app.patma.co.uk/prospector/listing/search/?postcode=TN1+1AQ&distance=2&min_bedrooms=&max_bedrooms=&min_price=&max_price=&property_type=&time_on_market=&price_reduced=&relisted=&min_estimated_rent=&max_estimated_rent=&estimated_yield=&sort=price_change_from_original_amount&order=low

You need to register for a free account to view all of the results, but worth it.

 

[sancho panza]

Bears having a big picnic today

Intersting that instructions to seell are falling at the same time as invetory appears to be rising aka chains must collapsing

 

https://www.theguardian.com/business/2022/oct/13/uks-13-year-housing-market-boom-to-end-in-2023-surveyors-predict

Homeowners will struggle to make mortgage repayments and repossessions will rise next year as soaring interest rates and falling prices mark the end of the UK’s 13-year housing market boom, according to a sobering report from the Royal Institution of Chartered Surveyors (RICS).

The number of inquiries from potential homebuyers fell for a fifth month in a row in September, while sales fell to the lowest level since May 2020 when the housing market all but ground to a halt during the early stages of the coronavirus pandemic, it said.

The number of new instructions to sell has continued to fall – stock levels are at historic lows with estate agents on average listing just 34 homes on their books.

 

House prices have remained resilient due to the limited supply for sale, but the pace of growth is rapidly slowing with forecasts of at least a 10% price fall next year as surging interest rates heap pressure on household budgets.

On Wednesday, the average two-year fixed mortgage rate hit 6.46%, while the average five-year deal was 6.32%, the highest level since the financial crisis in 2008, according to Moneyfacts.co.uk.

The Bank of England’s financial policy committee on Wednesday said that the proportion of households struggling to pay their mortgages could rise to levels not seen since the 2008 financial crisis, if interest rates and living costs continue to climb. “It will be challenging for some households to manage the projected rises in the cost of essentials alongside higher interest rates,” it said.

However, policymakers said this was unlikely to result in a banking crisis, given that borrowers were in a “stronger position” than they were before the financial crisis. The Bank said this was partly due to caps on the amount that people could borrow for mortgages, compared with their incomes.

Soaring mortgage rates are pricing new buyers out of the market, while homeowners looking to remortgage are facing crippling increases in payments.

Rising mortgage costs and the broader cost of living crisis will outweigh any potential benefit from the government’s move to cut stamp duty to prop up the housing market, said RICS.

On Wednesday, Barratt, Britain’s biggest housebuilder, said that the average number of weekly reservations by buyers of new homes slumped by a third year-on-year between 1 July and 9 October.

Last month, RICS said that the number of homes sold in the UK over the next year will record the biggest fall in at least a decade.

[Democorruptcy]

When you are looking at a property on RM they have an example mortgage payment with Nationwide at the bottom. I noticed the rate 3.8%, just for fun I clicked through on one to Nationwide and was quoted 6.49%. I did one of my "Is your website broken?" to RM this week suggesting the mortgage rate was now out of date and got a reply today:

Quote

We would like to reassure you we routinely review the interest rates displayed onsite monthly and an update was due in the coming weeks. However, your feedback has prompted an early review and we have since updated the interest rate to 5.96% in line with recent changes in the mortgage market. 

It is now 5.96% instead of 3.8%, those monthly mortgage payments have gone right up!

[spygirl]

US but FED is driving the worlds IR...

[spygirl]

Lets assume the BoE is forced to follow, with the usual 1%-2% spread above FED/$

Mortgages have a ~3% spread on BoE base

So .... ~11%-13% SVR???

[Ina]

New instructions have collapsed at my firm in new build and residential conveyancing.  Lots of work in the pipeline from earlier in the year so there is a time lag before the shit hits the fan.  I’ll keep you informed but in 6 months time I reckon it will be carnage.  In probate I have a few properties due to complete shortly on which I am keeping a close eye on.

I genuinely think that when the collapse comes which it undoubtedly will, it will be the ethnics that will be hit very hard as recent arrivals have known nothing but boom and zero interest rates.  Lots have highly leveraged portfolios.

[dnb24]

1 hour ago, Democorruptcy said:

When you are looking at a property on RM they have an example mortgage payment with Nationwide at the bottom. I noticed the rate 3.8%, just for fun I clicked through on one to Nationwide and was quoted 6.49%. I did one of my "Is your website broken?" to RM this week suggesting the mortgage rate was now out of date and got a reply today:

It is now 5.96% instead of 3.8%, those monthly mortgage payments have gone right up!

With mortgage rates as they are they’ve knocked 30% off House prices and they aren’t stopping where they are as @spygirl says up thread-

Back of fag pack maths currently 5.96% rates had  knocked £200k off a £600k house. 1.96% rate 2 years ago on a 600k house- 10% deposit- £2200 month mortgage payment over 25 years.

Now with a rate of 5.96%- that’s £3400 a month mortgage cost. 
 

For same mortgage cost per month as 2 years ago with same deposit at 5.96% you’re looking at a £400k house. 

[haroldshand]

33 minutes ago, Ina said:

I genuinely think that when the collapse comes which it undoubtedly will, it will be the ethnics that will be hit very hard as recent arrivals have known nothing but boom and zero interest rates.  Lots have highly leveraged portfolios.

That's why I genuinely believe that when it comes it will be hard and fast, normally YOY falls of between 10-15% are nasty in any downturn and don't get much bigger than that, but this time time it could be different. We have been avoiding this pullback for a long time now and people became to used to it and more worryingly far too cocky.

Like you said too many people over leveraged and I am pretty certain their are many  business plans out there on high leverage based on house prices rising and out pacing say credit card debt for example. In a few years time this property crash is going to uncover some right horror stories that we were unaware of and far more gems than we know today.

Always remember in 2006 ish a lad that was on £18,000 getting a £200,000 plus self cert, his finances were totally fucked technically and it should have been a life lesson for him, but the c*** pulled it, little prick I wonder though how many more times he did it thinking he was a genius or even people copied him

[AWW]

20 hours ago, Bear Hug said:

Renting is half price of buying in my house right now!! Guess it will have to fall in price by 50%, because no way they can double the rent

It's amazing, I had to go into the office today and overheard a conversation in the kitchen. Guy who is a landlord saying that his mortgage is going up so of course rents will go up to cover it, "because rental yields will have to go up because people can get better returns on cash in the bank."

His thinking is more advanced than your average BTL LL, so I didn't have the heart to tell him another way that rental yields can increase.

[Boon]

 

Well to me at least a short term way is degradation of standards of living. That simply continues the trend though.

Ie. a 1-bed flat used to be for 1 person, now you have 2 people living in it.

Will it be more common that 2-beds have 3 or 4 people living in it? Two couples presumably doesn't mean HMO.

It's gonna be a very slow grind downwards. But that's like everything. The public don't want to accept a decrease in the standards of living, so they will be whinging on TV saying how unfair everything is. But eventually the hard reality is that we will have to.

Much the same for the landlords as rent is ultimately driven by what people can afford, not what their mortgage costs. But it may take some time for that reality to bite.

 

[apples]

https://www.telegraph.co.uk/property/house-prices/house-price-falls-have-begun-just-cant-see-yet/ (full article text in quote, but the graphs are interactive in the real thing)

House price falls have begun – we just can’t see it yet

Quote

Five charts that unveil Britain’s fragile property market

House prices in Britain are likely already falling – but lags in collecting the data mean that we cannot yet see the impact. 

Official figures only show sold prices of completed purchases, which reflect deals done months earlier, when mortgage deals were far lower. That means soaring rates will only filter through to property prices in some time. 

So when will we see the effects of the current crisis on house prices?

The mortgage rate blow 

During the financial crisis, house prices began to fall four months after there was a large rise in mortgage rates. 

Before the market turmoil of the last few weeks, rates were steadily rising. 

Gabriella Dickens, of Pantheon Macroeconomics, an analyst, said: “While mortgage rates have been increasing most of this year, there was a step change in June.” 

Between June and the start of September, the average rate on a two-year fix jumped by one percentage point, climbing from 3.25pc to 4.24pc, according to Moneyfacts. 

This increase alone pushed up the monthly cost of taking out a £200,000 loan by £165. 

That means we could start to see the effects of rising rates on house prices soon, said Ms Dickens. “We think it’s plausible that we will start to see strong evidence of house price falls in October.” 

But this will not yet reflect the recent impact of the mortgage market disruption in the wake of the mini-Budget. 

“That likely won’t feed through until December or January,” she added. 

House price indexes based on mortgage approvals – namely those of lenders Halifax and Nationwide – offer a more immediate picture. 

In September, Nationwide reported that monthly growth was flat, while Halifax recorded a 0.1pc drop. These reports suggest month-on-month falls are likely in October.

Plunging demand 

Buyer inquiries have fallen for the last five months, according to the Royal Institution of Chartered Surveyors, a professional body. 

This is a crucial bellwether for market sentiment, and the last time those polled were as negative about the level of property sales was in May 2020, when the housing market had closed down.

 

Back in 2007, when agents were as negative as they are now, house price falls were recorded five months later.

How much worse will it get?

House prices could be falling right now, but they are a long way from their trough. Four fifths of homeowners are on fixed-rate deals, meaning that they have been protected from the immediate effects of rising rates. 

That protection will end as those fixed-rate deals expire – and an estimated 1.8m fixed-rate deals will end during 2023, according to UK Finance, a lender body. 

These homeowners will be hit by “rate shock”. They will have to remortgage at rates that are four percentage points higher than what they were on previously. 

Some will be unable to afford the higher payments, on top of rising energy bills and the huge drop in real earnings. In turn, this could bring a rise in forced sellers next year, which pushes down prices significantly.

The affordability crunch 

Even amid the mortgage chaos, rates will still be relatively low historically. 

Back in 1990, the average rate was 17pc. But house prices have climbed so much higher than wages since the financial crisis that 6pc mortgage rates today will be as unaffordable as during the early 1990s downturn.

 

With 6pc mortgage rates, the share of household income needed to cover monthly payments will be 59pc from now until next spring – up from 37pc at the end of last year, according to Capital Economics. 

That is on par with the level in both 2008 and 1991, when the average mortgage rate was 13.5pc.

Affordability has crossed a watershed. In 2007, house price growth began to slow after the share of income needed to cover mortgage payments hit 59pc. 

A year later, values started to fall – and did so for six consecutive quarters.

What can we learn from overseas?

New Zealand, where house prices are already falling, suggests the unravelling could be slower. 

There, falling transactions were a key lead indicator for the ensuring house price falls. 

Transactions began to dip in July 2021, according to Knight Frank estate agents. It took another five months before monthly house prices began to fall consistently – and a further seven before the annual growth rate became negative.

The latest UK data from HMRC showed that transactions in August in the UK were marginally up year-on-year, as buyers rushed to push through deals before interest rates climbed higher. 

But Capital Economics expects transactions will fall from 1.23m in 2022 to 925,000 next year.

 

Edited October 13, 2022 by apples

[HousePriceMania]

1 hour ago, spygirl said:

Lets assume the BoE is forced to follow, with the usual 1%-2% spread above FED/$

Mortgages have a ~3% spread on BoE base

So .... ~11%-13% SVR???

Latest from Labour on the subject....this change is a finance manager it seem.  Ginger Tosser

 

I still dont concede that the establishment are willing to collapse everything so they can keep their house prices up.

Nothing coming from Labour/Tory/BoE/Westminster/HOCs/MSM says they are fighting inflation and willing to let house prices suffer.

Maybe they cant stop it but it looks like they want to try

My reply to the RedTories

[Boon]

One fucking funny thing that we'll be seeing more of, is people trying to emotionally sugarcoat things, stuff like 'my mortgage payment has gone up, and that would have been money that would have gone back into the economy supporting small business'

I don't think one person will call them out on this hypocritical bullshit.

Did anyone complain about the funds being sucked out of the economy due to rising house prices?

[Wight Flight]

56 minutes ago, HousePriceMania said:

Latest from Labour on the subject....this change is a finance manager it seem.  Ginger Tosser

 

I still dont concede that the establishment are willing to collapse everything so they can keep their house prices up.

Nothing coming from Labour/Tory/BoE/Westminster/HOCs/MSM says they are fighting inflation and willing to let house prices suffer.

Maybe they cant stop it but it looks like they want to try

My reply to the RedTories

My partner and I.

Fucking retard.

[Wight Flight]

1 hour ago, dnb24 said:

With mortgage rates as they are they’ve knocked 30% off House prices and they aren’t stopping where they are as @spygirl says up thread-

Back of fag pack maths currently 5.96% rates had  knocked £200k off a £600k house. 1.96% rate 2 years ago on a 600k house- 10% deposit- £2200 month mortgage payment over 25 years.

Now with a rate of 5.96%- that’s £3400 a month mortgage cost. 
 

For same mortgage cost per month as 2 years ago with same deposit at 5.96% you’re looking at a £400k house. 

That is exactly my place. Bought for £400k three years ago. Street price rise to £650k in 12 months, now probably back to £400k.

Rent still £1,200.

[HousePriceMania]

22 minutes ago, Wight Flight said:

My partner and I.

Fucking retard.

I was just copying wot they wrote. 

[Wight Flight]

35 minutes ago, HousePriceMania said:

I was just copying wot they wrote. 

I know. It wasn't directed at you.