John Doe

Good points, especially if the loans (assets) are nearer 50% underwater, a 25% discount at least means you get 75% back (rather than maybe less than 50%). I think Northern Rock did a similar thing back when they were in trouble. They then gave existing mortgage customers a 10% discount if they would remortgage with another lender IIRC.

Yes, I think the detail needs to be checked before we man the barricades, but I think Meralti might be about right. I would also assume they are referring to Eire as RBS & Lloyds are heavily exposed there. Their Housing Market is generally accepted to be about 50% down from peak and more than 25% of the loans given out by RBS and Lloyds have gone bad.

I know, I know, it is F**kin disgusting! But, sadly, I am not surprised. This is what I have been trying to say, the odds are stacked against us.

Haha, yes I know what you mean. It probably started way earlier than that (they just didn't let us all about it before then), and it will probably continue for a good 10 to 15 years yet! No, I meant the 90-96 uk crash as you well know. Besides, as I had eluded to on another post, it seems the debt forgiveness (the nuclear option as I called it then) has already been initiated! Copied from a post on HPC ca commence! Never underestimate the length the PTB will go to. Dr B, this is what I have been trying to let you know about then mindset here! (I hate it, but it is what it is!)

Yep, and with a better market their bonuses will increase, with a collapse, they won't. They know this. It doesn't matter how many empty houses there are, if the owners don't want to have them occupied (for all the talk of the gov). Hence, still a shortage. And BTL will increase further, and possibly be more profitable, as more people need to rent.

Lehmans collapse was just one of the outcomes of the problems that started way before. For example, Northern Rock Collapse was more than a year earlier. And those are the few who will suffer most no doubt. How are they coping at present?

Why I think it might not be doomsday. (from Br B's property cycles) I think a steady, slow reduction in prices over a few years (10 to 15% maybe) coupled with continued ultra low rates (which is currently a high probability) and inflation bubbling away in the background, would put things on a much more sustainable path. This would still hurt a few, but would not result in the death-cycle of falling prices = bank losses = bank bailouts = more pain for tax payer = more cuts = higher unemployment = more falls = more repos = more bank losses........ etc etc. Who benefits from this? No-one, no-one at all, and the banks and (most importantly) the bondholders and the government and most of the country realise this. We are not Ireland or the US, we never had the massive oversupply (I know it's not just about supply demand etc and all about credit, but it still does have some effects) and new building (which wasn’t keeping up even in the boom years) has practically stopped in the UK now. There is a housing shortage in the UK, there has been for years, this is one of the causes of the high rents. The vast majority of people who buy houses in the UK are not investors. They have a simple understanding that you get a mortgage then buy a house, live in the house and then, after ~25 years your house is yours, no landlord, no rent to pay, ever. This is a simple and very effective idea. Unless you are one of the poor soles to lose their jobs, and not be re-employed before your benefits/savings expire, you will not lose your house. If you are an investor, then yes, Dr B's arguments make perfect sense. Sell properties and buy them back cheaper later. But the vast majority still won't, and after all the discussions he has had with them, he must know that now. That’s their problem, but again, if they have tenants paying the mortgage, after 25 years, the landlord owns the property. I don't see a major problem arising from the sov debt either. Europe will mess about, but then will bailout Portugal and Spain if they have to. They are not going to let them go down. It took a once in a lifetime global meltdown to cause the last crash. Even with all the global imbalances and problems still existing from the, the most likely course is a gentle muddling along again for several years.

Who me? I think a steady, slow reduction in prices over a few years (10 to 15% maybe) coupled with continued ultra low rates (which is currently a high probability) and inflation bubbling away in the background, would put things on a much more sustainable path. This would still hurt a few, but would not result in the death-cycle of falling prices = bank losses = bank bailouts = more pain for tax payer = more cuts = higher unemployment = more falls = more repos = more bank losses........ etc etc. Who benefits from this? No-one, no-one at all, and the banks and the bondholders and the government and most of the country realise this. Again, we are not Ireland or the US, we never had the massive oversupply (I know it's not just about supply demand etc, but it does have some effect) and new building(which wasn’t keeping up even in the boom years) has practically stopped in the UK now. There is a housing shortage in the UK, hence the high rents. As for complacency< I just don’t buy it. As I have said many times, the vast majority of people who buy houses are not investors. They have a simple understanding that you get a mortgage then buy a house, live in the house and then, after ~25 years your house is yours, no landlord, no rent to pay, ever. Simple and very effective. Unless you are one of the poor soles to lose their jobs, and not be re-employed before your benefits/savings expire, you will not lose your house. If you are an investor, then yes, your arguments make perfect sense. Sell properties and buy them back cheaper later. But the vast majority still won't, and after all the discussions you have had with them, you know that now. That’s their problem, but again, if they have tenants paying the mortgage, after 25 years, the landlord owns the property. I don't see a major problem arising from the sov debt either. Europe will mess about, but then will bailout Portugal and Spain if they have to. They are not going to let them go down. It took a once in a lifetime global meltdown to cause the last crash. Even with all the global imbalances and problems still existing from the, the most likely course is a gentle muddling along again for several years. Or were you asking Tom?

That's true and when volumes are low then it is these sales that can dictate the market and can result in much lower average prices. But, this has been the situation for the last 2-3 years and prices are still relatively flat. Unemployment will surely rise but, once again, the young (non-home/mortgage owners) and poor will bear the brunt of it. Also, over the last couple of the banks have finally realised that it is just not in their interests to force repossessions any more. Unlike previous recessions, everything has/will be done to make this a last resort. E.g. Nice affluent areas have hardly dropped below their 2007 peak, and some are even higher, while poor areas have seen huge % falls.

True, but I was referring to loans given out now and a potential 20% drop over a year or so (as happened 2008-2009). Also, 2007 had a lot of IO mortgages given out (and many >>80LTV). People do not tend to sell their house in the UK when there are price falls (unless they are absolutely forced to) as they just do not see them as disposable assets. The vast vast majority see them as homes, which they are paying for over the 25 years of the mortgage. As long as they pay the mortgage, they don't have to sell and after 25 years they own it. That’s the overriding mentality here. They didn’t run for the exits in the 90-96 crash, nor do I believe they will now. A tiny minority look at it purely as an investment.

Copied from thread on main (I thought I had put a link in?) Well that's just saying the same thing. I'm under no illusion that if IR's rise then we are sunk. I have always said if that happens all bets are off. If the markets turn on the UK (which is not that likely compared to several countries, due to the long dated structure of UK debt and, like it or not, the deficit reduction currently under way), then of course there is not much the BofE / Gov can do (assuming they don't use the nuclear option of haircuts and debt forgiveness).

At the moment yes, I would agree, a bit bitter perhaps. But if/when credit really contracts that badly, then it wouldn't be long before inflation droped sharply. Also depends a little on everyone (US EU UK etc) printing together.

Sounds like a recipe for more printing.

With a 20% fall in house prices, the 80% LTV mortgage the bank just gave out, is now effectively ~100%

The Home.co.uk report mentions high rents as one of the factors that will support prices. That's pretty close to my expectation. However, I don't see a BTL tsunami (some problems yes, tsunami no). Rents are still way too high and no danger of hoards of FTB's being able to get mortgages, hence more renters for a long time to come.

Link to their main site http://www.fathom-consulting.com/research/.../latest-update/ Looks a bit grim, and I quote

Now that looks like good value I guess it would also imply about a 7-10% fall in wider market (seeing there was a 20% fall when the index read -40%).

The trouble is Dr B, we all thought things were way out of control many years ago (2003 for me, 2001 for you) and as you know, things kept going for many years after that. Eg, for someone who bought in 2003, when I was worried about overpriced housing, not only have they still got positive capital gains, but also have paid off several years of their mortgage. It is not a rosy scenario to imagine gentle falls over a period of years with inflation slowly taking its course. It is a very possible scenario and to be honest, could be the most likely outcome (with some ups and downs along the way). I totally agree that it would be daft for a stretched first time buyer to purchase now. But, for a couple with secure jobs and decent wage, what's the problem if they want to take the plunge? I know a couple like this who are over paying their mortgage significantly each month.

Well that's just saying the same thing. I'm under no illusion that if IR's rise then we are sunk. I have always said if that happens all bets are off. If the markets turn on the UK (which is not that likely compared to several countries, due to the long dated structure of UK debt and, like it or not, the deficit reduction currently under way), then of course there is not much the BofE / Gov can do (assuming they don't use the nuclear option of haircuts and debt forgiveness). I just believe that it would be better for everyone if we had a gentle fall in prices along with "some" inflation over several years. (Yes, an ideal world). In your scenarios, everyone looses.

I was being a little tongue in cheek. I would guess it reverts to the SVR, and prob neg equity to boot. However, as likely as it is, there is absolutely no guarantee that rates will be high in two years. As you have stated, the UK is unique in trying to avoid a crash because we are totally screwed if there is a big one. As such, everything will be done to avoid a big crash. The most likely course being moderate inflation for a long period (assuming the markets allow it). In fact, if rates do rise soon and cause the s**t to hit the fan, as it inevitably would, then the more likely rates will be lower again by the time the fixed rate ends.

I think some people see me as a bit of a bull now, but in fact I have said many times that I think prices will fall, but slower and less than many here believe (Until / if IR's go wild, then all bets off). Time for recovery is difficult and I think will depend on many factors, such as, IR's inflation/deflation and assuming these are mild (of which there is no guarantee) then property type and location will also have effects. So, bearing that in mind, I haven’t a clue.

People don't plan that far ahead

As I have said before, I think that’s what they are trying to do, and so far they are succeeding. It's 4.99% with a £99 fee, and beside, 5.79% is fairly cheap compared to the old days. But don't worry; they’re not handed them out to just anyone (like before), the credit score you would need to actually get one of these would imply you (or your guarantor) were good for the loss. Like the old days, when banks only lent to those who didn't actually need it

I'd go for the first anytime. PS not to worry, we are saved! http://www.lovemoney.com/news/make-good-pr...?source=1000578