Property crash, just maybe it really is different this time

[satch]

Satch’s New Exclusive Special Report – An Estate Agent Rights

I know two people who have bought houses recently. One is a retired public sector boomer who has a final salary scheme and bought another property as he has not gone on many long-haul holidays recently. The property will probably be left empty or used as a second home as there is a lot of hassle with renting it out apparently. Fortunately there is no housing shortage in the UK and the capital gain will be better than having the money in a bank account. And ironically keeping the property empty will increase the demand for housing and push up the price. Win – win.

The other person has a business that gets people to pay a fee and the business helps them to apply for and get benefits and grants from the government. The fee is a fixed payment for the interview and filling in the relevant forms and I think that if after the application is processed you do not qualify for the free money then part of the fee is refunded. A sort of ambulance chaser business to get government grants for individuals on a ‘no free taxpayer money’ – ‘no fee’ basis.  

Both see that interest rates have not been above 0.5% for over a decade so one person has bought to get a return on capital and the other person has bought because a large mortgage costs very little to service and both see house prices are continuing to rise whatever happens in the world.

No wonder the country is fucked. For those amongst you that can think back ten years and remember TOS … Sibley was right … well right for over a decade and counting.

Edited December 11, 2021 by satch
speeling

[Bus Stop Boxer]

On 11/12/2021 at 17:42, satch said:

Satch’s New Exclusive Special Report – An Estate Agent Rights

I know two people who have bought houses recently. One is a retired public sector boomer who has a final salary scheme and bought another property as he has not gone on many long-haul holidays recently. The property will probably be left empty or used as a second home as there is a lot of hassle with renting it out apparently. Fortunately there is no housing shortage in the UK and the capital gain will be better than having the money in a bank account. And ironically keeping the property empty will increase the demand for housing and push up the price. Win – win.

The other person has a business that gets people to pay a fee and the business helps them to apply for and get benefits and grants from the government. The fee is a fixed payment for the interview and filling in the relevant forms and I think that if after the application is processed you do not qualify for the free money then part of the fee is refunded. A sort of ambulance chaser business to get government grants for individuals on a ‘no free taxpayer money’ – ‘no fee’ basis.  

Both see that interest rates have not been above 0.5% for over a decade so one person has bought to get a return on capital and the other person has bought because a large mortgage costs very little to service and both see house prices are continuing to rise whatever happens in the world.

No wonder the country is fucked. For those amongst you that can think back ten years and remember TOS … Sibley was right … well right for over a decade and counting.

I think they have bought at the very top of the market.

[HousePriceMania]

1 hour ago, Bus Stop Boxer said:

I think they have bought at the very top of the market.

Unless we see -2% IRs and £2Tb to hand out this time.

[HousePriceMania]

https://www.thisismoney.co.uk/money/markets/article-10299287/Banks-plan-50-YEAR-home-loans.html

 

"Banks plan 50-YEAR home loans: Bank of England to relax mortgage rules to help first-time buyers in move that could send house prices soaring

• Bank of England is expected to dilute mortgage rules as soon as tomorrow
• Loosening of restrictions will make it easier for borrowers to take out larger loans
• It is likely to add fuel to house prices which are already soaring to record highs"

I know that they'll stop at nothing but just seeing this in print is beyond belief.

 

Average of of FTBs, 35, 50 year mortgages, 85.

That's a working lifetime of debt + 20 years.

[Axeman123]

Surely a 50 yr mortgage is effectively a generational one? Unless they are giving them to school leavers who has a 50 yr working life to service it? Few people are on good money before their mid twenties, and many people's earning power drops off after their mid 50s. A 50 year mortgage is basically gambling on the kids to take it over.

[HousePriceMania]

17 minutes ago, Axeman123 said:

Surely a 50 yr mortgage is effectively a generational one? Unless they are giving them to school leavers who has a 50 yr working life to service it? Few people are on good money before their mid twenties, and many people's earning power drops off after their mid 50s. A 50 year mortgage is basically gambling on the kids to take it over.

40 year mortgages are bad enough, they reduce the monthly payments which in turn have been used to push up prices.

This whole scam is beyond reproach now.

Edited December 13, 2021 by HousePriceMania

[steppensheep]

6 hours ago, HousePriceMania said:

 

• Bank of England is expected to dilute mortgage rules as soon as tomorrow
• Loosening of restrictions will make it easier for borrowers to take out larger loans

Would those be the rules they brought in after the last house price bubble, to stop it happening again?

[spygirl]

21 hours ago, HousePriceMania said:

40 year mortgages are bad enough, they reduce the monthly payments which in turn have been used to push up prices.

This whole scam is beyond reproach now.

They dont, not materially.

100k, IR fixed at 5% for the example.

10y - 1k/m payments.

15y - 790/m

20y - 660/m

25y - 585/m

30y - 537/m

35y - 505.m

40y - 582/.m

 

Theres just 80/m between 20y and 40y.

Thats 40/m each for a couple - dinner time cup of starbucks.

Total cost for -

40y - £231,454

20y - £158,389

Really fucking cheaper.

 

*ONCE YOU GO BEYOND 25Y THEN YOU  DONT SAVE  WITH LONGER TERM MORTGAGES*

 

 

[Axeman123]

2 hours ago, spygirl said:

25y - 585/m

30y - 537/m

35y - 505.m

40y - 582/.m

Surely the monthly payments being almost identical for 25 and 40yr terms, with 35yr representing the lowest point on the curve is the real story here. An 80 extra per month and an extra 60 months of payments going from 35 to 40!

[spygirl]

43 minutes ago, Axeman123 said:

Surely the monthly payments being almost identical for 25 and 40yr terms, with 35yr representing the lowest point on the curve is the real story here. An 80 extra per month and an extra 60 months of payments going from 35 to 40!

482!

bad copynpaste.

 

100k, IR fixed at 5% for the example.

10y - 1k/m payments.

15y - 790/m

20y - 660/m

25y - 585/m

30y - 537/m

35y - 505.m

40y - 482/.m

 

Point remains.

 

[Wight Flight]

8 hours ago, spygirl said:

482!

bad copynpaste.

 

100k, IR fixed at 5% for the example.

10y - 1k/m payments.

15y - 790/m

20y - 660/m

25y - 585/m

30y - 537/m

35y - 505.m

40y - 482/.m

 

Point remains.

 

It is an interest only mortgage in all but name.

[spygirl]

7 hours ago, Wight Flight said:

It is an interest only mortgage in all but name.

Which is a problem.

Dunno whether or not they are being honest or nott. bt yo ucan see whey they are banned ofr all but the richest 3% -

https://www.theguardian.com/money/2021/nov/20/mortgage-prisoners-uk-interest-rate-rise-deals-bills

Marc Jelfs and his partner are among those who have been unable to make the most of record low interest rates and are worried about what will happen to their payments when the Bank decides to act.

Will the Bank of England raise interest rates before the year is out? Photograph: Thomas Krych/SOPA Images/Rex/Shutterstock

They took out a mortgage with Northern Rock in 2004. At the time it was possible to “self-certify” – where, instead of providing evidence of your income, you only needed to state what it was on the application form – and, as Marc was self-employed, they took that option.

In November 2007 they were lined up to move to a new deal with the bank when it was pulled – and then the credit crunch hit. “We were moved on to a rate of 6.5%-7%. My monthly payment was £1,100 interest-only,” Marc says. “That lasted for three years, and I got into debt on my Visa.”

The family’s mortgage ended up with the bailed-out bank and then got sold to a company called Cerberus, which bought up mortgages from the failed lenders. Despite guarantees that they would be able to move on to better deals after the sale, borrowers such as Marc found they were unable to move and stuck on the lender’s SVR.

“I’m paying 4.18% now, which includes a 0.25% discount because I’ve been a good customer,” he says. “It’s £682 a month interest and we have eight years left on our mortgage. After that my home will be taken from me.”

[Boon]

It's funny how the papers never call out people's stupidty when it comes to stuff like this and try to present it as hard luck or something like that.

There is something quite insiduous about these long-term mortgage deals. Presented as helping buyers but when you look at the total interest paid over time you can see why the banks like it.

To me the lifetime interest rate thing is a bit of an impossibility unless the government chooses to do it.

[HousePriceMania]

3 hours ago, spygirl said:

I’m paying 4.18% now, which includes a 0.25% discount because I’ve been a good customer,” he says. “It’s £682 a month interest and we have eight years left on our mortgage. After that my home will be taken from me. THEY'LL TAKE BACK THEIR ASSET

 

[spygirl]

1 hour ago, HousePriceMania said:

 

Problem was identified in early 00s when 80% of mroitgages sold were IO - a hefty number of people only hear 'mortgages'. Theyve got a mortgae, itll pay for the house.

It might seem obvious to epople on here but a lot of people are that dumb.

https://www.fca.org.uk/publication/research/fca-interest-only-mortgage-review.pdf

Bottom chart from the PDF.

The rise in maturity, mid chart, starts in 2025.

I know several people where I guess their  entire life style is based on 200k+ of IO mortgage about to mature in 5 years.

 

 

 

[HousePriceMania]

12 minutes ago, spygirl said:

Problem was identified in early 00s when 80% of mroitgages sold were IO - a hefty number of people only hear 'mortgages'. Theyve got a mortgae, itll pay for the house.

It might seem obvious to epople on here but a lot of people are that dumb.

https://www.fca.org.uk/publication/research/fca-interest-only-mortgage-review.pdf

Bottom chart from the PDF.

The rise in maturity, mid chart, starts in 2025.

I know several people where I guess their  entire life style is based on 200k+ of IO mortgage about to mature in 5 years.

 

 

 

With 10% inflation, they'll clear that in weeks.

[Axeman123]

21 hours ago, spygirl said:

Point remains.

Restating your numbers:

Term     Marginal saving/month

10y -       0

15y -       210

20y -       130

25y -        75

30y -        48

35y -        32

40y -        23

As you say, the marginal saving on the monthly payment is pathetic on anything over a 25 year term. Even going from a 20 to 25 year term would actually be dubious, if you could afford to choose. 

[Axeman123]

6 hours ago, spygirl said:

“ After that my home will be taken from me.”

Lies to bid up housing, denying someone else a home.

Gets caught out by his own flash wheeze.

Cries about the bank taking back the house he was really only renting.

I get the feeling that the banquet of consequences is about to start for a great many people.

[spygirl]

26 minutes ago, Axeman123 said:

Restating your numbers:

Term     Marginal saving/month

10y -       0

15y -       210

20y -       130

25y -        75

30y -        48

35y -        32

40y -        23

As you say, the marginal saving on the monthly payment is pathetic on anything over a 25 year term. Even going from a 20 to 25 year term would actually be dubious, if you could afford to choose. 

60/m.

30 each for a couple. Less than price of  2 takeaways.

Banks win when you borrow long n high.

 

[HousePriceMania]

5 minutes ago, spygirl said:

60/m.

30 each for a couple. Less than price of  2 takeaways.

Banks win when you borrow long n high.

 

No No No, they are helping you.

[HousePriceMania]

https://www.telegraph.co.uk/business/2021/12/15/ftse-100-markets-live-news-inflation-bitcoin-covid-shares/

Live 

 House prices go into reverse as market cools - live updates

 

A fortuitous headline the day before the MPC meet.  You could make this up.

[spygirl]

On 19/12/2020 at 10:11, spygirl said:

One thing I try to do is to put things into longish term perspective.

As far as the UK n housing, IIRC the majority of Brits still rented in the 60s.

From the 60s to 70s mortgages were not really a mass market product.

Its only a combination of the financial deregulation in the early 80s and the bulk of baby boomers (mid age boomer was born in mid 1950s) hitting 30, prime house buying age.

The whole 'cant loose with property' is a daft mindset, prevalent in the UK, which doesnt put the demographic change into perspective.

A lot of baby boomers went bust in the late 80s to early 90s slowdown, so its not that theyve not seen it before.

The assumption that banks are going to lend like they did in ~85-89 or 2002-2008ish is wrong. You can see it in the post 2008 mortgage lending stats.

One, unlike the 89-96 slowdown , which saw borrowers go bust, the 2008-today slowdown has seen the borrowers 'saved' but the banks go under.

Huge amounts of lending capacity has been destroyed and is not coming back. Most boomers houses are not going to sell at anywhere close to what they think its 'worth'

 

Two, the finsec used to create its down demand - the mass expansion othe finsec ~82 -> 2009ish, saw 100k of employees, all well paid, some with access to cheaper products.

The biggest winner for this job bonanza was the south - I dont men The City, which is whole sale trade, I mean the large number of retail banks and the support services around housing sales/mortgages - lawyers, treasury management, debt, life insurers  selling endowments etc etc.

Theres barely a fraction of the people still employed compare to ~85-2007.

The jobs have been automated, regulated away.

You want a mortgage today?

You go to a bank with ~20% deposit and verified income with a good track record and get a repayment mortgages.

Theres no vat array of scammers offering liar loans, allowing people without a pot to piss in a mortgage, which pushes up housing costs.

There's no magic repayment like an endowment  mortgage, which was the cause of the 80s boom - the repayment method was a made up WP return, so allowed people to borrow 2x the amount they could afford.

The liar loans and IO mortgage were the cause of the 2002-2010 bubble.

These have gone for resi customers.

Theres a massive adjustment for UK housing esp. in the South where the mass well paying jobs have gone and the high LTE multiples are a no go.

 

 

 

 

 

 

 

 

 

 

 

 

 

A year ago.

The go-go SD holiday long over.

Covid still not cleared...

Heres my local biggest town that people could live in -

https://www.home.co.uk/guides/house_prices_report.htm?location=scarborough&all=1

)I can post the graph as its generated by javascript).

What this shows isnt house prices going up - the rise is detached homes.

Rather is a the purchase of a lot of expensive property begin brought forward to take advantage of the stamp duty holiday.

Even then, Id guess therell be a lot of buyers remorse shortly

Now the issues is - Does that green  -and other - line carry on falling?

We are now looking at the rapid of ZIRP?QE, something that a lot of people on and TOS where claiming theyd never do.

No choice.

Assuming that base rates go back to 3 - 4%, assuming the SVR spread is 2%  - so 5%-6$ mortgage rates., assuming the prices keep rising and that benefits and public sector spend starts a rapid fall - ukgov spend will be too constrained by higher borrowing costs.

Id bet big money that those nominal prices will go back to the mid to late 90s, removing that great genius Browns 'economic' miracle.

And that will mean real prices will be back to way before the 80s finsec deregulation.

Now this, is Scarb, a place where al lthe jobs died when everyone went to Spain.

Now imagine London/Se a place where all the  jobs died when the finsec was vlew up, automated and regulated.

 

 

 

[spygirl]

On 15/12/2021 at 13:18, HousePriceMania said:

No No No, they are helping you.

For the Pleb, ZIRP has offered a means to beat the banks, which is by buying and taking out a low fixed rate and over paying.

My fix ends next year. The remaining balance will be sub 10k.

The amount of IR Ive paid is fuckall.

Compare that to someone whos 'made' 100k from their house, but were paying a 80k mortgage for 25 years at average APR of 6%.

 

My guess is the ZIRP HPI increases will be shortlived  as soon as rates start going up, which they will, rapidly.

London has  been falling for a good 65 years. Noone buying after ~2015 is going to have a lot to show.

 

[AWW]

1 hour ago, spygirl said:

Now imagine London/Se a place where all the  jobs died when the finsec was vlew up, automated and regulated.

I share your view that London housing will fall and fall quite hard. I already know of people who bought starter flats in the last 5 years and have sold at a 15-20% loss to upsize to a family home, always outside London, because good-sized family homes are the one type of resi property that has held up.

But I disagree on the jobs front.  There are still tons of jobs here; yes, even in banking. I moved to "fintech" (hate the word, using it for wont of a better term) and I get badgered by recruitment agents weekly, offering salaries much higher than what I'm on. I don't plan to move jobs, because I quite like where I am, but I will be using those offers next year when negotiating a pay rise.  Contractor pay is through the roof - I've got mates doing bog standard IT BA jobs in tier 2 investment banks being paid a grand a day.

I think there is an outside chance that soaring pay makes up for IR increases.

[spygirl]

20 hours ago, AWW said:

I share your view that London housing will fall and fall quite hard. I already know of people who bought starter flats in the last 5 years and have sold at a 15-20% loss to upsize to a family home, always outside London, because good-sized family homes are the one type of resi property that has held up.

But I disagree on the jobs front.  There are still tons of jobs here; yes, even in banking. I moved to "fintech" (hate the word, using it for wont of a better term) and I get badgered by recruitment agents weekly, offering salaries much higher than what I'm on. I don't plan to move jobs, because I quite like where I am, but I will be using those offers next year when negotiating a pay rise.  Contractor pay is through the roof - I've got mates doing bog standard IT BA jobs in tier 2 investment banks being paid a grand a day.

I think there is an outside chance that soaring pay makes up for IR increases.

Isnt your statement confirming theres few employable people in London?

covid is massive killer for the tube and buses.

At best, you are looking at large offices near the railway terminals. Fuck dragging yourself across town in the tube.

Once companies start understanding that the people they want dont live in london, theyve start moving offices to where it makes sense.

London still has a massive  advantage, being the end location of 50% o train journeys. But then its disadvantages after all of that.

Everything feels like its up in the air at the mo - WFH, massive skills shift/employment shift.