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Housing market

laughingboy said:
I see your point (repayment capacity at low rates is higher than at low rates) but isn't one of the lessons of the 2007-8 Financial crisis that banks, following the originate-to-distribute model where they securitised the mortgage to pass on the risk to investors, thought that they could lend risk-free. In reality, they had created a highly unstable system that, when it unwound, could crash not just their banks but the whole system.

And the lesson of the government response to the crisis is that the banks can lend risk-free: in extremis, governments will bail out the banks. So, to my mind, the continuing high price to earnings ratios are a sign that nothing has been fixed.
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They fixed a debt issue with loads more debt. Geniuses really...
 
When I bought my first house in 94, interest rates were around 10%. An awful lot of mortgage payers have never seen the like.
 
It was also just about the bottom of the market. My mum bought her house at about the same time, for £27k... Mortgage repayment was next to nothing over the whole period, she probably spent more on food shopping a month than the mortgage, 10% or not.
 
If i recall back in 87 when interest rates were 15% well over a quarter if not more of my wages went in mortgage payments ....
 
matt j said:
It was also just about the bottom of the market. My mum bought her house at about the same time, for £27k... Mortgage repayment was next to nothing over the whole period, she probably spent more on food shopping a month than the mortgage, 10% or not.
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There must be plenty of people now whose monthly energy bills are more than their mortgage.
 
hifinutt said:
If i recall back in 87 when interest rates were 15% well over a quarter if not more of my wages went in mortgage payments ....
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That was around the time that house prices fell dramatically due to the interest rates, and the end of MIRAS, reducing demand. The result of that was repossessions, possibly in houses with negative equity. I’d be surprised if there were as many defaulting mortgages now, just because salaries should be able to cover the increased repayments - the mortgage companies have become so much more selective. People will just weather it out for a year or two, tighten their belts, and when interest rates drop again any lost value will be recovered - and some.

The interesting question is how the rental sector will respond to higher mortgage repayments, presumably landlords will have to increase rents to cover their costs and make money - especially if their asset values start to fall, so selling isn’t an attractive way out. Add to that the not insubstantial costs of meeting new EPC standards. It doesn’t bode well for tenants with CCJs or lower incomes - they’ll be excluded from the private sector and the public sector isn’t a good place to be. Once again, the least well off suffer most. It could be a good time for landlords with cash to invest, as there are bound to be some repossessions.

All this makes me wonder how rent increases will take place when no fault evictions come to an end. If that procedure isn’t clear and simple and rapid, then it’s a major problem - you never know when you may need to put the rent up to cover costs.
 
matt j said:
It was also just about the bottom of the market. My mum bought her house at about the same time, for £27k... Mortgage repayment was next to nothing over the whole period, she probably spent more on food shopping a month than the mortgage, 10% or not.
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I was there and that’s not my recollection.
My mortgage, one earner, was crippling.
 
Woodface said:
When I bought my first house in 94, interest rates were around 10%. An awful lot of mortgage payers have never seen the like.
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They may have been. It was still cheaper to buy than rent. I bought my first house in 1995, a modern 2 bed end terrace in a decent area for £40k. 10% deposit, £220 a month. My rent on a crappy flat had been £300 or maybe £350. This was the norm in the mid 90s, a friend started a property empire like that. She now owns about 6 houses, lives overseas, works when she wants. She's been in that position since about age 45.
 
hifinutt said:
If i recall back in 87 when interest rates were 15% well over a quarter if not more of my wages went in mortgage payments ....
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The mortgage payment on my first house was about half of my net monthly income and was more than double the rent I was previously paying. Buying a house has always meant massive sacrifice.
 
matt j said:
It was also just about the bottom of the market. My mum bought her house at about the same time, for £27k... Mortgage repayment was next to nothing over the whole period, she probably spent more on food shopping a month than the mortgage, 10% or not.
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Lucky her, then. The early to mid 90’s was around the time I couldn’t get anyone to even look at our home for an asking price ~30% lower than we had paid in 1988. We did manage to sell it in 1998, for ~10% less than we paid, because a recovery was underway by then.

Bob McC said:
I was there and that’s not my recollection.
My mortgage, one earner, was crippling.
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Exactly. Love the way some these days so easily dismiss the effect interest rates have on repayments.

stevec67 said:
They may have been. It was still cheaper to buy than rent. I bought my first house in 1995, a modern 2 bed end terrace in a decent area for £40k. 10% deposit, £220 a month. My rent on a crappy flat had been £300 or maybe £350. This was the norm in the mid 90s, a friend started a property empire like that. She now owns about 6 houses, lives overseas, works when she wants. She's been in that position since about age 45.
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Yep, it must have been nice to buy during a period house prices had fallen.
 
many of my wifes students live in rented accommodation in deprived areas . some are are being evicted even after a short while because landlords are selling up as houses fetching some stupid prices. really not good for addressing homelessness
 
hifinutt said:
many of my wifes students live in rented accommodation in deprived areas . some are are being evicted even after a short while because landlords are selling up as houses fetching some stupid prices. really not good for addressing homelessness
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Universities are building accommodation blocks at a rate of knots, it seems the money now charged for the Uni courses is being pumped into this, it’s seen as a cash cow by them, almost like they’re being run as businesses…
 
yes i guess so , the ones I am talking about are Syrian refugees or asylum seekers that attend college . they bare the brunt of all this and the appalling Gp services in these areas making things worse for health and living conditions
 
Woodface said:
When I bought my first house in 94, interest rates were around 10%.
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House prices outside London were just beginning an upturn from the slump. I bought in '96 (in Thanet) without a mortgage as I vowed I'd never have another after the repayment shenanigans on the previous 15+ years.

mandryka said:
That was around the time (1987) that house prices fell dramatically due to the interest rates, and the end of MIRAS, reducing demand. The result of that was repossessions, possibly in houses with negative equity.
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I know that different areas varied in timing, but Lawson (?) announce not just the forthcoming MIRAS reductions but importantly, the cessation of 'joint' (but unrelated) mortgages based upon separate salaries. This fiscal rot took a couple of years to stabilise the market from previous good growth, then slow the market prior to the plummeting prices in '90/'91; there were a lot of repossessions increasing supply. The decline stabilised in about '94/5 and started rising slowly shortly thereafter. My memory was on Thanet prices; London was ahead as usual, with the north a year or so behind the south.

Between '97 and 2001 the appreciation in values rocketed; my detached house bought Nov. '96 for £63K sold in June '01 for £136K. Some of this uplift was due to improvements, but still.....

Brian said:
The early to mid 90’s was around the time I couldn’t get anyone to even look at our home for an asking price ~30% lower than we had paid in 1988. We did manage to sell it in 1998, for ~10% less than we paid, because a recovery was underway by then.
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Yup; sounds about right. '88 was close to the peak; '90 was the start of the decline.
 
That sounds plausible. I remember buying a flat in London in 1989 for about 90k and then thinking a couple of years later that it must be worth much less than what I paid. I sold it in 1998 for about 150K. My strongest memory of that time is how vigorously the property market bounced back as soon as interest came down again, as if all that pent up libido for property ownership found an outlet.

MIRAS was extraordinary, how on earth was that every allowed to happen?! I remember that I got a lot of it because it went up if you were on a higher earner bracket! I suppose the right wing thinking is that it was an incentive to earn more, and there’d be trickle down from a buoyant property market. The trickle down bit seems right.
 
Before 1974 tax relief was available on any loans.
After 1974 it was restricted to mortgages on property. In 1983 a new system called MIRAS was introduced and limited at mortgages of £30000 from 1988 before being abolished in 2000.
Many countries still allow tax deductions against domestic mortgages.
 
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