you're reading it out of context, look back at the chain of posts - that conversation was about 'well paid' Londoners. Commenting on 'average' Londoners is irrelevant there.
Im calling it.....
- Thread starter Dr House
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you're reading it out of context, look back at the chain of posts - that conversation was about 'well paid' Londoners. Commenting on 'average' Londoners is irrelevant there.
No it won't.
All those sub 300k properties are going to more than double are they.
It's not going to happen.
Caporegime
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i fail to see how average londoners are supplying a huge demand for mortgages. i dont know many people younger then 35 that have there own mortgages as its very hard to save up for a deposit on say a 400k property.
There are lots of people who are renting. Look at the renting market. its far bigger then the mortgage market because not a lot of people can afford a mortgage
There are lots of people who are renting. Look at the renting market. its far bigger then the mortgage market because not a lot of people can afford a mortgage
Maintaining demand is completely different to being a major cause of the demand. The demand was already there in the first place. Basically HTB may have stopped the market from slowing down or dipping but 'old skool' 100% deposits and massive amount of BTL's combined with current foreign investment and increasing population with lack of housing to keep up are far greater factors. The only HTB scheme that's worth doing is the equity loan and that's only available on new builds which are a tiny % of overall sales.
This was in reference to well paid Londoners, not typical average Londoners. However, the example I provided are for individuals at a relatively low end of the seniority spectrum at a bank. When you take into the account the amount of people that work across all banking functions in London (investment, capital markets, corporate, private, retail, etc.), then chuck in all of the staff at hedge funds, private equity funds, asset managers, wealth managers, brokers, etc. and you're looking at a fairly sizeable selection of people. Add into the mix that many banks have been trimming their senior staff force and hiring more and more Analysts (1-3 yrs experience) and Associates (4-6 yrs) then these new incomers will most likely be looking to buy property in the coming years.
Factor in all of the decent to well paid staff in law, insurance, risk, IT, technology, accountancy, medicine, architecture, media, etc. There are huge parts of the London demographic that earn good money, and while plenty of that cash gets swallowed up by the high costs of living in the city, it's the levels of base salaries that contribute towards qualifying for mortgages. It's for these types of reasons, plus the relatively low deposits required in certain instances, that I don't think the London property market will drop significantly any time soon. Instead I reckon that London property values will go through many mini-cycles (similar to the effects on the market the recent BTL levies, stamp duty restructuring and Brexit concerns) but will remain relatively stable in the medium to long term.
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HTB allows purchases up to 600k I believe and whilst I agree that most people will not utilise it up to that amount it is going to cause a whole host of issues further down the line.
FTBers will probably opt to shoot for more than they originally budgeted for because the down payment ( the major obstacle for FTBERS) was hurdled. So potentially they are going to be at the cusp of affordability with their mortgage with a 20% equity loan hanging around their necks which has a slowly increasing interest rate.
Once the loans get called in and the base interest rate moves it is going to make life tricky for some people. This is the very definition of debt encouragement.
100% mortgages have a similar effect.
If I remember correctly is it correct that you can only pay it off in one or two installments?
So its not as though you can chuck 500 quid a month at it, you need to pay off half at a time or all at once?
This can be worse saving for a deposit. I am guessing most people are going to have to rely on property prices increasing and remortgaging to get rid of it?
No it's not. Because 100% mortgage are gone and house prices dropped massively, then htb come out, so it's not really different at all. HTB is a major contributor to current prices,
shouldn't make much difference whether you pay it off in increments or chuck what would have been payments into a high interest savings or current account then pay off in a couple of big chunks... in fact the latter might well save you a bit depending on the rates for the loan
HTB is relatively recent, it is low interest rates in general that are fueling this, 100% mortgages have been rare for a few years now and were rare for the years prior to HTB being introduced while the market rallied/recovered post crash. That recovery was driven by low rates, deliberate quantitative easing. Some FTBers taking advantage of a govt scheme adds to it sure but I'd not go so far as to call it a 'major' contributor.
Htb has been available for years. It's far from a recent thing.
It is becuase without new people entering the market it stagnates. So fib are extremely important, and if mortgage weren't available it doesn't matter what the interest rate is. It's that mortgage are still to easy to get for far to many times your salary. And that also applies to no ftb.
Trouble is everyone seems to think it's normal, but other than the last ~20 years, mortgage where never this easy to get, never had this many multipliers to your salary. They were far less accessible. Despite the increase in price it's still incredibly easy to get on the market, without the sacrifices that most in history have had to make.
Also because it's so easy, starter homes are far better than what used to be considered starter homes. People expect more and expect to be able to afford more of the market.
It is becuase without new people entering the market it stagnates. So fib are extremely important, and if mortgage weren't available it doesn't matter what the interest rate is. It's that mortgage are still to easy to get for far to many times your salary. And that also applies to no ftb.
Trouble is everyone seems to think it's normal, but other than the last ~20 years, mortgage where never this easy to get, never had this many multipliers to your salary. They were far less accessible. Despite the increase in price it's still incredibly easy to get on the market, without the sacrifices that most in history have had to make.
Also because it's so easy, starter homes are far better than what used to be considered starter homes. People expect more and expect to be able to afford more of the market.
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Thats very true, the only issue relates to the discipline required. Take out a bank loan, and afford it or not that direct debit is coming out of your account every month.
Moving money to a savings account is completely optional, and when times come become tight its all too easy to decide to not put the cash away. When interest rates rise this will be an easier discipline to be tempted away from.
Pretty much what you think.
In the first 5 years if you want to pay it back you can staircase it in set increments (which i think is 10 or 20% at a time) or you can just pay it all back as and when you have the money. I'm doing what dowie said and just putting money aside into savings account then paying it off in a few big chunks or one big chunk at year 5. The end result, if you can afford to pay off part or all of the loan in 5 years is a huge amount of equity that you wouldn't have been able to achieve with a normal mortgage with a less than 20% LTV.
If people can't afford to pay it off with cash then they can either pay it off when they sell, stay in property and remortgage to cover the amount, or just carry on paying interest on it (worst option obviously).
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I can't see house prices falling until either interest rates go up and/or there's recession that the market freezes and people stop buying.. There ma be a high demand for housing but not when no one can afford it...
Something must give at some point though. Eventually, if everyone's priced out the market can't move so it kind of "snuffs" itself out.
Something must give at some point though. Eventually, if everyone's priced out the market can't move so it kind of "snuffs" itself out.
The main problem with staircasing is that any time you do, it is done at the property's current value.
My gf has this problem as she only owns 35% of her flat, but the flat itself has gone up 60% in value over the past 4 years, making it even more expensive for her to own more of the property she already lives in, and netting a nice chunk for the HA/government when she does.
I can remember when you used to only get 2 x income and the second earner wasn't taken into account (usually a women/wife so they thought they'd go off an have babies and leave work)
It then changed to include a percentage of the second earners income.
It then changed to include all of the second earners income.
It then changed to be 3 x income.
etc etc etc
As long as the Banks think of new ways to lend people more and more money then house prices will continue to rise.
If people could only borrow 2 x income of one breadwinner then house inflation wold be curtailed
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Market trends would suggest that we're going to experience a drop in prices relatively soon.
However I really don't see that happening. Prices may plateau for a while, or the rate of increase will go down slightly. Our economy is recovering and demand still outweighs availability. Especially in London.
However I really don't see that happening. Prices may plateau for a while, or the rate of increase will go down slightly. Our economy is recovering and demand still outweighs availability. Especially in London.
interest rates were multiples higher than they are now... consider the amount you're paying over the life of the mortgage
3 times income used to be standard, 2 times income is a bit archaic and you're talking several decades ago... back when people would join building societies and have to join a queue for a motgage