House prices 'drop 1.9% in March'

Nathan said:
Aye, and Lloyds will show a rise - just they did in February. Its good news, its backed up further by a survey carried out by the Bank of England on credit conditions released yesterday and it found that banks expect to increase lending to individuals and businesses over the next three months. All good news for home owners!
Click to expand...

why is it good news? explain? high prices means the next property normally a bigger one will cost you more.
 
nydryl said:
Why is it a bad news? Explain? Low house prices mean the sale price of your current property will be less, and a bigger house will still cost you more than a smaller one. See what I did there? I turned your argument on its head.

Can I politely enquire what your current housing and job situation are?
Click to expand...

erm if you house price drops by 5% and a bigger house drops by5% then you pay less, if the house price rises on you house by 5% and the bigger house price rises by 5% you pay more. You gain much more on a price drop than many think.
 
Dolph said:
But you have to consider the underlying causes of the price drop (in this case a very limited supply of money to borrow) and the effect of potential negative equity on your existing mortgage...

Just because the price has gone down it doesn't mean the house is more accessible for ownership to you.

Price is nowhere near as important overall as accessibility in the housing market.
Click to expand...

no matter what you do your on negtive equity when you take interest into account. A house dosent cost you 200k it costs you 350k. 100k would cost you 175k.

btw the vast majority over the last 3 years has been IO mortgage, because people can't afford repayments so the opt for cheaper mortgage and unable to save the difference not only that if they did manage to save they would be taxed on their savings and if they lost their job and have over x amount of money they get no help from the government.
With IO, your mortgage doesnt go down like a repayment mortgage for example IO mortgage for 20 years at 5% you'll always pay the full 5% of a 200k mortage, your just servicing the interest not thr debt.
If youve taken out a repayment mortgage at the start you pay towards the interest and a little toward the mortgage itself, after x amount of time you pay more of you mortgage and less in interest rates. you service the interest and the debt.

Now after x amount of years you sell your home for 450K youve got to give back to the bank 200k then add the interest they repayment of 150K = 350k you only make 100K and have no home as the price has gone up to 450k you have 100k bring down the amount you have to borrow to 350k, then youll pay 650k, and thats if you can sell fast and hope your not caught in a down turn, you need to factor in the maintance costs etc.. and you actually worse of than a renter.

The only way an IO mortgage works if you dont lose you job and dont take any gaps in your work history and save the right amount per month. in other words youve got to save much more to compensate for the tax on you savings, meaning have far less money then you thought.
 
Last edited:
Bes said:
You seem to have equity confused with interest. You will definately pay more than you bought the house for, but if you buy a house on a mortgage at 200K, pay off the mortgage (say 300K) and sell it for 200K, then you are not in negative equity. (Assuming inflation was 0%)
Click to expand...

Negative equity does only work when the house value drops compared to a morgage it also applies to when it doesnt rise as fast as you interest payments, all things being equal.
 
Bes said:
You seem to have equity confused with interest. You will definately pay more than you bought the house for, but if you buy a house on a mortgage at 200K, pay off the mortgage (say 300K) and sell it for 200K, then you are not in negative equity. (Assuming inflation was 0%)
Click to expand...

Do you really think a house you paid for now say 200k will be worth 400k in 20 years, the last 10 years wages havent go up as fast, your paying more tax, then take into account fiscal drag, so many other factors, wages need to be kept low to compete with china.
 
a1ex2001 said:
Please leave this thread. I resisted pulling holes in your firts post after someone esle did but your just spouting nonsense. Negative equity only occurs when you owe more on your mortgage than the house is worth if sold, that is the definition.
Click to expand...

If you dont understand or dont see how interest rates can pull you into negative equity,its not my problem really, and what you said is the basic definition.
 
Bes said:
You seem to have equity confused with interest. You will definately pay more than you bought the house for, but if you buy a house on a mortgage at 200K, pay off the mortgage (say 300K) and sell it for 200K, then you are not in negative equity. (Assuming inflation was 0%)
Click to expand...

Read what you said. then look at who has negative equity you or the bank, ok i'll help the bank isnt but you are, for you not to be in negative equity the price of the home must be sold for 300k plus any addtions you've done to teh property. When they talk about negative equity they arent talking about negative on behalf of the home owner but on behalf of the bank.
 
Last edited:
oli collett said:
But you've paid off the mortgage and no longer have the asset, so how are you in negative equity :confused:

It's the outstanding balance of the loan, not the amount you need to pay it off long term.
Click to expand...

because the term is used in favour of the financial firms not the home buyer, it isnt in their interest to tell people this.

The banks mortgage equity point is 200k your equity point is 300k, your equity point changes over time, the banks stays unchanged.
 
Last edited:
Bes said:
No one. The house is paid off (say 300K- 200K house, 100K interest), the bank has collected 100K in interest, and I have my 200K asset. (Or cash if I sell)
Click to expand...

But your down 100k. the value of your total mortgage is more that the value of the home.


i hope you understand this.

The banks mortgage equity point is 200k your equity point is 300k, your equity point changes over time,depending on the risk spread, the banks stays unchanged,
 
Last edited:
nydryl said:
What do you want the banks to do, not charge any interest? You are always going to end up paying more than the market value of your property unless you happen to have a few hundred thousand sitting around in cash. I don't see what point you're making.
Click to expand...

What iam saying is low house prices are good for buyers, sellers that want to trade up and long term good for the economy.
High prices are good for banks, EAs, property industry workers, newspapers and speculators long term bad for the economy.
 
You must log in or register to reply here.
Back
Top Bottom