First time buyers make up a small percentage of the market, the rest of the market tends to get their deposit from equity in their house with a bit of top up funding. This measure will destroy that idea.
at last some positive news on housing 3x caps
- Thread starter mattheman
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First time buyers make up a small percentage of the market, the rest of the market tends to get their deposit from equity in their house with a bit of top up funding. This measure will destroy that idea.
Soldato
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*Facepalm*
Is this for real or just a government idea? Because if it goes through I won't be able to buy a house around these parts for years. Also, is it just my reading it or does this sentence make no sense:
Is this for real or just a government idea? Because if it goes through I won't be able to buy a house around these parts for years. Also, is it just my reading it or does this sentence make no sense:
Are they banning the banning?
Explain?
If all house prices fall they will only be in the same situation, as their current house price would have fallen, and so would the house price of the the one they are looking at. So they would still have about the same percent deposit for their new house, But they would have to take out a smaller mortgage as the prices would be less.
previous their house £200,000 wanting to buy a £400,000 house they still need £200,000 on a mortgage
new prices their house £150,000 wanting to buy a £300,000 house they now only need £150,000 mortgage so they are better off
It works on a sliding scale, so the people at the lower end of the run gain the most. And the people who can afford to lose a little more when upgrading can do.
But their house in the future may become more accessible to first/second time buyers, and making it easier to sell when the price is more realistic.
The part you've forgotten is the size of their existing commitment on their current house, because very few trade ups are done with a fully paid of mortgage. The numbers suggest we're looking at taking house prices back to mid 90's levels, a very big drop.
To use your example a bit more.
House value £200k, Outstanding mortgage £100k, new house £400k.
Equity in house £100k, remainder to be found £300k
After drop
House value £150k, outstanding mortage £100k, new house £300k
Equity in house £50k, remainder to be found £250k
still looks ok so far?
Now lets look at the sort of figures we're actually talking as a drop in average house prices. I'll use the most generous figure from earlier (the 2.5 times joint average income), the £200k price is close enough to the peak price for now.
House value at peak £200k, outstanding mortgage £100k, new house £400k
Remainder needed £200k
House value after drop £81997, outstanding mortgage £100k, new house £163k
Equity in house = -£18003, remainder needed = £181003
Suddenly, we see the crux of the issue, the amount that needs to be found now exceeds the value of the new house, just to move, this person needs to find £20k, so they haven't benefitted at all from the change in house prices, in fact they've been significantly disadvantaged by it.
This is the reason why this sudden approach by the FSA is so stupidly misguided, it's completely the wrong time to attempt such a change in practice, and the likely consequence is to ensure we get a full blown depression rather than just a recession. Forget an economic recovery, no matter how much money is pumped in to other areas of the economy.
Exactly how are people missing this.
This has made interesting reading seeing as me and my girlfriend have today got our mortgage in principle (first time buyers) and was going to make an offer on a house tomorrow..... Don't know what to do now 
... why do the government always have to **** things up!!!!.
... why do the government always have to **** things up!!!!.
Soldato
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for me the timing is brilliant. i've been looking at mortgages and it seems unless your married your resigned to a flat at best! on my salary i'd be looking at £90k but that will buy you a flat or a craphole.
I can see where you are coming from, but you are using in my view worst of the worst case scenarios and examples to try to put a point across.
For example I highly doubt house prices will go as low as the mid 1990 levels, I can see them hitting early 2000s.
Another thing is you chose a buyer who bought at peak prices, and is then choosing to sell at the market low point. Which magnifies the effect to the maximum. The number of people this would affect would be minuscule, the vast majority would not even come close to negative equity.
Also being in negative equity is not always the end of the world, if you are in it for the long run and are moving into a long term home not a quick investment property.
I must say that I agree with the proposal except it is too late. Maybe 4x or 5x would be better.
Reason is that 7,8,9x mortgages have not helped the economy and have pushed house prices to silly, un-sustainable levels. Take my village which is fairly undesirable and has resisted the effects of the housing market for years until the last few. It cost £100k to buy a one up, one down terraced house in my village.
With a single person average earnings round here being £20k they need to do 5x mortgage to buy their first house which is ridiculous.
Hell my 4 bedroomed house with 6 acres of land cost £95k in 1999 and was last year worth £400k which again is silly. Me and my partner on sensible multiples could afford a mortgage of only £240k which is £160k short of buying this house which is totally silly bearing in mind that as a joint income of £80k we are well above the average salary and house income.
Reason is that 7,8,9x mortgages have not helped the economy and have pushed house prices to silly, un-sustainable levels. Take my village which is fairly undesirable and has resisted the effects of the housing market for years until the last few. It cost £100k to buy a one up, one down terraced house in my village.
With a single person average earnings round here being £20k they need to do 5x mortgage to buy their first house which is ridiculous.
Hell my 4 bedroomed house with 6 acres of land cost £95k in 1999 and was last year worth £400k which again is silly. Me and my partner on sensible multiples could afford a mortgage of only £240k which is £160k short of buying this house which is totally silly bearing in mind that as a joint income of £80k we are well above the average salary and house income.
Soldato
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Good.
House prices based on how risky people are willing to be isn't right imo. Just buy what you can afford and live with it. Prices will come down so it shouldn't make much difference to what you can afford as it will effect everyone. It means cheaper housing for all and less money in the form of interst to the banks.
House prices based on how risky people are willing to be isn't right imo. Just buy what you can afford and live with it. Prices will come down so it shouldn't make much difference to what you can afford as it will effect everyone. It means cheaper housing for all and less money in the form of interst to the banks.
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Classic example of stable door management by the utterly useless FSA. The conservatives are right - they should be dismantled and regulation handed back to the BoE.
Makes no difference if you've borrowed 3x your salary or 6x - if you lose your job then you won't be able to make your repayments. This won't do anything to help the UK have a soft landing in future global recessions.
Makes no difference if you've borrowed 3x your salary or 6x - if you lose your job then you won't be able to make your repayments. This won't do anything to help the UK have a soft landing in future global recessions.
And screws the economy up even more. At a time when we aren't spending. This is going to drive us into a deeper and far longer depression. You guys haven't though of this at all.
At early 2000s prices, we're looking at £100k average house prices, which is a fair way above the borrowing that will be available to all people (remember, the 3x multiplier will apply to everyone, not just first time buyers).
No, the value of the house at peak wasn't linked to the cost. I took the average mortgage size for the UK (£100k) as being a good figure to balance it out.
If there is a 60-70% drop in house prices, the number of people affected by negative equity will not be miniscule, it's already not minscule.
http://www.telegraph.co.uk/finance/...ready-in-negative-equity-researchers-say.html
That's from feburary. I wouldn't have said nearly a third of mortgage holders is miniscule, and that's from the current 18% drop...
I agree, negative equity is not a problem provided you don't need to move. However, in terms of the overall effect on the economy of everyone saving to counteract the effect of negative equity, that's where the problems really lie.
Perhaps this (or much stricter lending) will serve to alter the British attitude of "must.... have.... my.... own.... home, at all costs!". That would be a good thing, although we'd need more long-term lettings ala France (for example).
Soldato
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I agree it isn't good for the economy, which obviously plays havoc with our exchange rate and ceap imports, but would you rather pay a bit more for certain goods or is it better to pay 1000s of pounds intrest every year, not to mention the amount the banks have cost us in tax.
I believe I've already made that point myself.
As Dolph has said, this system shouldn't be implemented now, at the top of the boom, as a means to force a more stable housing market in future. If it was to be done, it should have been done 10-15 years ago.
The point I was making above is that we do need to avoid this situation happening again in future, and once the market has settled to a more realistic level, then we should maybe look to learn from the mistakes that were made in the last 10-15 years. And imo, one of the biggest mistakes was to artificially inflate the price of houses, with the excessive availability of cheap credit.
It won't be a bit more. we are already paying a bit more. This is not the time to mess about with housing. Wait till the economy is fixed then start bringing these in. This will have a massive effect not a minor effect.
It's not cheap imports. It's the entire export and import industries. Which are corporate based not joe blog buying a dvd from abroad.
This has made interesting reading seeing as me and my girlfriend have today got our mortgage in principle (first time buyers) and was going to make an offer on a house tomorrow..... Don't know what to do now
I don't like giving financial advise to anyone, but this regulation hasn't come into effect yet. If you move quickly you might be able to avoid getting caught up in this, if that's what you want...
This has made interesting reading seeing as me and my girlfriend have today got our mortgage in principle (first time buyers) and was going to make an offer on a house tomorrow..... Don't know what to do now
Are you planning on buying somewhere you can stay in for a reasonable amount of time? Now is certainly not the time to buy somewhere that you'll quickly grow out of or anything like that.
As Scorza has said though, this isn't in effect yet, so you should still be able to proceed if you want to.