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I think it has a way to go but speaking with a friend yesterday he thinks it will start to pick up soon given the lack of housing stock, building work being reduced significantly (thus worsening the lack of housing situation) and the banks now starting to lend again....... what are your thoughts?

...when did the banks start lending again? i thinks there's a long way to go.


there's over 1 million mortgage deals at around 4.3% coming up for renewal between now and december - most of which will end up on standard variables on over 7% (as they wont be able to move mortgage provider, and probably wont be eligible for new deals with their current provider - as the loan to value is likely to be above the new stricter levels). reposessions loom!


we need the bank of england to start cutting rates fast, and to hell with inflation (its not as if they can do anything about food and energy prices anyway)...otherwise were in for a lot more pain before any hint of pleasure!


IMHO

It's a very rare day indeed when I find myself in agreement with Mr Jon Hunt, founder and former owner of Foxtons, but he recently said that we'll know when the fall is over when people stop talking about property prices, because they've become so boring a topic of discussion.


Guessing from the amount of interest we have on the board to this and other threads, we may have a while to go yet.

Agree with JimmyD. There are affordability issues ahead when people move onto the SVR's and then attempt to re-mortgage with a lower LTV, likely based on a lower valuation price to boot. The BoE will need to move rates much lower at the risk of inflation, but unfortunately it's still up to the lender to reduce their SVR's. However, they are mostly based the LIBOR and not the BoE rate and recently there has been a large spread between these rates due to the banks basically not trusting each others' balance sheets!


Unless borrowers all have high expendable income and enough equity to fund additional borrowing, then I think we're in for more trouble ahead. This is particularly worrying for the BTL landlords out there who may need a whole lot of equity to remortgage many properties.

My reckoning is at least two more years of falling prices possibly longer, house prices have to return to some sort pf sensible relationship with earnings in an environment without free credit. Rental yields are always a good indication with the long term average being around 7-9%, they are substantially lower than that at the moment. The economy is also beginning to seriously falter. Without sufficient cash its not demand just want.


Cutting rates won't provide much comfort for mortgage rates, as AcedOut mentions they are pricing in the risk associated with the credit binge of the last few years, collateral effects tend to make cycles in the housing market more severe. Cutting rates will also lose all credibility the BOE has built up over the last ten years on inflation, not sure the rest of the populace should effectively bail out those who overstretched themselves.

I wasn't suggesting that you could buy one for that at the moment but that it would represent 'fair' value. Of course rents rising can make up part of the difference but looking on Rightmove suggests around a 30-35% fall would be close to the mark (less if you consider few places are reaching their asking price at the moment).

Why do you think people coming off 4.3% rates cant

move mortgage provider?They have been mortgaging for up

to 5 years,surely its easier than a first time buyer?


Surely in that 5 years theve seen there investment go up

in price meaning smaller ltv


JimmyD Wrote:

-------------------------------------------------------

> ...when did the banks start lending again? i

> thinks there's a long way to go.

>

> there's over 1 million mortgage deals at around

> 4.3% coming up for renewal between now and

> december - most of which will end up on standard

> variables on over 7% (as they wont be able to move

> mortgage provider, and probably wont be eligible

> for new deals with their current provider - as

> the loan to value is likely to be above the new

> stricter levels). reposessions loom!

>

> we need the bank of england to start cutting rates

> fast, and to hell with inflation (its not as if

> they can do anything about food and energy prices

> anyway)...otherwise were in for a lot more pain

> before any hint of pleasure!

>

> IMHO

I'm banking on the market going down further for sometime yet, have signed up for a year's lease when I could have afforded to buy on the grounds I'm sure I will get more for my money in a year or two's time.


This isn't going to resolve itself overnight, prices haven't come down that much and are still near an all time high with plenty of people who are well above poverty line not being able to get on the first rung of the housing ladder never mind buy something large enough to raise a family in.


I don't think the Bank should be cutting rates to promote the market, it's a bubble, it needs to burst and get back to reality.


In any case, the cost of borrowing issue isn't caused by the central bank, it's the margin over the base rates the mortgage providers are charging. With most having taken a hammering on their balance sheet they are charging a bigger margin over base rates than usual. Until they are financially more strong they won't necessarily cut their rates even if the Bank of England does.


Most people will still have plenty of equity in their home, and interest rates are hardly at the 15% high they went to in the early 90s, they are still low in the grand scheme of things.


I appreciate some people who bought near top of market and stretched themselves to the limit will be in trouble if they can't remortgage to a decent deal when their fix runs out, but you are always taking a big gamble if you take on a mortgage you can only just service... surely the experience of the early 90s with interest rates up to 15% should have taught people that?

I'm sorry, ????, but I don't understand your "arithmetic".


If you expect house prices to have a severe fall, say 50% by the end of 2009, then house prices would need to increase by 100% to get back to where they were. For this to happen by the end of 2013 there would need to be four years of massive price increases.


MacRoban

???? Wrote:

-------------------------------------------------------

> To illustrate in REAL terms, house prices didn't

> reach their 1989 peak until 1996 after the last

> recession (which you don't think happened)


this isn't correct. In real terms UK house prices didnt return to peak 1989 values until 2002. In nominal terms (actual rather than inflation-adjusted prices), it wasn't until 1998 that we got back to peak values. So recovery took 9 years in nominal terms and 13 years in real terms.


as for how long house prices fall - the crash didn't reach the bottom until 1994 for nominal prices and 1996 in real terms. So actual nominal house prices fell for 5 years before hitting the bottom. This is true of London (where the crash was worst) as well as for rest of UK. London prices fell 29% nominally.


interestingly, prices were stuck in the doldrums for several years around the bottom, with very little movement before they started rising again. if this pattern repeats, it will be very easy for anyone waiting for the bottom to time their purchase correctly. As they say, the housing market turns like an oil tanker - very slowly, stubbornly, and predictably - which makes it much easier to play the market than with say shares etc.

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