The economic impact of Covid-19

[cheltenham_villa]

8 hours ago, Demitri_C said:

Yeah but you rent so that wont mattwe to you!

Problem is though snowy is your gonna have landlords losing their houses because they cant pay their bills. They cant even put the ones they renting up for sale because your tenant dont want to leave.

This is going to cause massive problems in the housing market as lots of moves will collapse now. Wont be resolved by March as now you have to give 6 months notice as well! So not many will benefit from the stamp duty reduction 

So good luck the housing market is going to going to completely implode 

i wouldnt expect this to have such a huge issue on the housing market, only a small proportion of house sales have tenants in situ. i could see some landlords thinking twice about purchasing another property but its more likely they will should look for vacant properties or those part of a chain.

[cheltenham_villa]

8 hours ago, bickster said:

If they were cheaper I could buy! or if rents came down I'd be better off. It is absolutely insane that people are paying such a high percentage of their income for putting 4 walls and roof around them.

If the housing market collapsed to a sensible level. Everyone would have more money. That would be more money to spend on luxuries and leisure, enhancing everyones well being, improving  employment.

Right now, the housing market is actually sucking huge amounts of money into banks and landlords, it is centralising where all the money flows to. That is really shit for a healthy economy and really shit for peoples mental health.

 

but if the housing market collapsed to a sensible level, i would still owe the bank the same amount of money, same goes for every other home owner. if my home became worth less than my borrowing then my remortgage options become 0, im forced onto a higher mortgage rate so now im paying even more money.

i think a housing market collapse would cripple this country and the economy.

[bickster]

Just now, cheltenham_villa said:

but if the housing market collapsed to a sensible level, i would still owe the bank the same amount of money, same goes for every other home owner. if my home became worth less than my borrowing then my remortgage options become 0, im forced onto a higher mortgage rate so now im paying even more money.

i think a housing market collapse would cripple this country and the economy.

Sorry but I lived through negative equity and was paying 13 or 14% on my mortgage. We survived. It's like any investment, the value of your investment may go up or down. This has to be taken into account when you make that investment

House prices cannot keep going up the way they have been. Interest rates are very low right now and have been for far too long. Realistically a readjustment has to happen. The continually low interest rates have been part of the problem fuelling the house price boom you've lived through. House prices are way out of kilter with where they should be, it isn't sustainable and its not good for the economy, it is centralising the money flow into the hands of very few people

[Demitri_C]

1 hour ago, bickster said:

Sorry but I lived through negative equity and was paying 13 or 14% on my mortgage. We survived. It's like any investment, the value of your investment may go up or down. This has to be taken into account when you make that investment

House prices cannot keep going up the way they have been. Interest rates are very low right now and have been for far too long. Realistically a readjustment has to happen. The continually low interest rates have been part of the problem fuelling the house price boom you've lived through. House prices are way out of kilter with where they should be, it isn't sustainable and its not good for the economy, it is centralising the money flow into the hands of very few people

I agree with most of that. But only thjng i would say is the value of your house back then was nowhere near as expensive as the properties are now. I think a lot of people have very high mortgages. 

If you had a 14% on your mortgage these days i think everyone would lose their homes. The cost of living is really and here top to add to that. 

 

[Vive_La_Villa]

2 hours ago, bickster said:

Sorry but I lived through negative equity and was paying 13 or 14% on my mortgage. We survived. It's like any investment, the value of your investment may go up or down. This has to be taken into account when you make that investment

House prices cannot keep going up the way they have been. Interest rates are very low right now and have been for far too long. Realistically a readjustment has to happen. The continually low interest rates have been part of the problem fuelling the house price boom you've lived through. House prices are way out of kilter with where they should be, it isn't sustainable and its not good for the economy, it is centralising the money flow into the hands of very few people

Wouldn’t you have took out the mortgage based on affordability that factored in the high interest rates? 

Edited August 22, 2020 by Vive_La_Villa

[chrisp65]

8 hours ago, Vive_La_Villa said:

Wouldn’t you have took out the mortgage based on affordability that factored in the high interest rates? 

‘Affordability’ has become very elastic.

When I was starting out, it was 3 times salary. If that was still the formula now, I could no longer afford the first house I ever bought, because my salary has doubled or tripled, but that house price has gone up five or six fold.

For my kids to do what I did and get a first house, based on the old measure of affordability, they’d need to land a job with a starting salary around £40/£50k

It’s within my adult memory that houses here were £25,000, and just 15 miles up the road, north of the M4, there were perfectly good houses for sale £10,000 less than that. Every time they come up with some plan to ‘help’, what it does is push the price a little higher. I think it all needs recalibrating.

[Vive_La_Villa]

4 minutes ago, chrisp65 said:

‘Affordability’ has become very elastic.

When I was starting out, it was 3 times salary. If that was still the formula now, I could no longer afford the first house I ever bought, because my salary has doubled or tripled, but that house price has gone up five or six fold.

For my kids to do what I did and get a first house, based on the old measure of affordability, they’d need to land a job with a starting salary around £40/£50k

It’s within my adult memory that houses here were £25,000, and just 15 miles up the road, north of the M4, there were perfectly good houses for sale £10,000 less than that. Every time they come up with some plan to ‘help’, what it does is push the price a little higher. I think it all needs recalibrating.

I agree but how does that happen without mass repossessions?

My first ever proper job was in mortgage sales. Customers would call asking for a further advance to help meet their monthly payment. A quick check of the annual salary that was declared for them when they took out the mortgage of 200k and it would show as 80k.  However when asking them they would say 20k.   All we could advice was they spoke to their broker but more often than not they would say they can no longer get hold of them. 

Then you’d get customers with perfect credit ratings put on high interest rate sub prime mortgages as the brokers would get a larger commission. 

I won’t even go in to the 125% mortgages that were on offer. 

I was too young and naive to understand what the consequences of all this would be. 

[Genie]

My first house was a 50% shared ownership, I had it for 2 years and built enough equity to buy my next house (100% share). It was in an area that had a lot of council and housing association tenants.

You can still get shared ownership properties.

I agree that prices have become out of reach for many younger people, but also I think many don’t want to start at the bottom. They want to have a lovely first house in a nice area, near to the places they want to go etc. 

[Davkaus]

There are still definitely "affordable" places, my the bed semi with a big garden and double drive was about 120k when I bought it a few years ago, mostly because it's in the middle of bloody nowhere.

It's a bit galling when people that bought their house for 30k and now it's worth 200k though. Especially when they're typically the kind of people telling millennials to stop eating avocado and pull themselves up by their bootstraps.

[Demitri_C]

1 hour ago, chrisp65 said:

‘Affordability’ has become very elastic.

When I was starting out, it was 3 times salary. If that was still the formula now, I could no longer afford the first house I ever bought, because my salary has doubled or tripled, but that house price has gone up five or six fold.

For my kids to do what I did and get a first house, based on the old measure of affordability, they’d need to land a job with a starting salary around £40/£50k

It’s within my adult memory that houses here were £25,000, and just 15 miles up the road, north of the M4, there were perfectly good houses for sale £10,000 less than that. Every time they come up with some plan to ‘help’, what it does is push the price a little higher. I think it all needs recalibrating.

Yes this is very true. My larents bought their first house i think for 80k many years ago in London.  You cant even a one bed for that price here.

Your looking at 180k for literally a box.  If you want a three bed house your looking at around 350k and the houses are bloody tiny.

500k here doesnt even get you much.  How are people suppose to ever get on the ladder with ridiculous prices like this? Our kids kids are going to be screwed.  Unless you have  a high paid job your going to be living in debt most of your life.

[Demitri_C]

1 hour ago, Genie said:

My first house was a 50% shared ownership, I had it for 2 years and built enough equity to buy my next house (100% share). It was in an area that had a lot of council and housing association tenants.

You can still get shared ownership properties.

I agree that prices have become out of reach for many younger people, but also I think many don’t want to start at the bottom. They want to have a lovely first house in a nice area, near to the places they want to go etc. 

I think the reason for that genie is because moving costs a fortune. You get stung on capital gains stamp duty solictor fees etc. It isnt like it use to be where people were moving all the time.  I think people want the nice house now so they are financially  better off in the next few years without paying all the ridiculous amounts of tax you have to pay.

[Genie]

11 minutes ago, Demitri_C said:

I think the reason for that genie is because moving costs a fortune. You get stung on capital gains stamp duty solictor fees etc. It isnt like it use to be where people were moving all the time.  I think people want the nice house now so they are financially  better off in the next few years without paying all the ridiculous amounts of tax you have to pay.

There’s no tax unless you have multiple properties (which is a completely different conversation).

[chrisp65]

3 hours ago, Vive_La_Villa said:

I agree but how does that happen without mass repossessions?

Why would there be mass repossessions.

The people that would be impacted would be those that want to sell us, with a mortgage to repay that’s higher than the value of the house they’ve bought. Even then, if they were ‘trading up’ but the new house was now the more affordable price, then it wouldn’t require a larger mortgage.

The whole property price / property investment thing is very much emperor’s new clothes. If you’ve bought looking at it as a financial punt, well then you’ve taken a risk and they don’t always pay off. If you bought it to make a home, it still is. 

[Genie]

It there was a drop in property value of say 10% my LTV percentage goes up and I will not get such good remortgage terms. I have to pay the bank even more than I am paying now so it’s not quite as simple of suggested. 

[Genie]

Also, If a price drop comes with interest rates reverting to a more typical number it’ll also cost more.

£120k loan over 25 years at 1.8% is about £500 per month.

£100k loan over 25 years at 4% is about £530 per month.

I’d be surprised if there was any significant price drop as a result Covid-19, if anything it’ll flatten off (like in 2008/9) but not really drop imo. 
 

[Davkaus]

11 minutes ago, Genie said:

It there was a drop in property value of say 10% my LTV percentage goes up and I will not get such good remortgage terms. I have to pay the bank even more than I am paying now so it’s not quite as simple of suggested. 

This is true. But it's going to happen at some point. Investments don't always work out, and the bubble can't keep on inflating.

I agree with you it's unlikely to happen due to covid though. The government is still determined to keep the prices propped up.

[chrisp65]

12 minutes ago, Genie said:

It there was a drop in property value of say 10% my LTV percentage goes up and I will not get such good remortgage terms. I have to pay the bank even more than I am paying now so it’s not quite as simple of suggested. 

I didn’t mean to make it sound ‘simple’, there would clearly be lots of things to sort out. Perhaps not impacting interest rates for those with pre existing mortgages could be one of them.

Do we really want to just shrug our shoulders and accept property will be unaffordable but there also won’t be social housing?

[Genie]

13 minutes ago, chrisp65 said:

I didn’t mean to make it sound ‘simple’, there would clearly be lots of things to sort out. Perhaps not impacting interest rates for those with pre existing mortgages could be one of them.

Do we really want to just shrug our shoulders and accept property will be unaffordable but there also won’t be social housing?

There’s places in my town for about 4 times an average salary, also help to buy, shared ownership too. Mortgage rates at historic lows.

I just had a 2 min look on moneysupermarket and £160,000 property with 5% deposit (£8k) is £709 a month fixed for 5 years from Barclays. That’s doable for a lot of people isn’t it? Especially if it’s couple purchasing.

I’m not saying it’s easy, but it’s not impossible.

[Demitri_C]

3 hours ago, Genie said:

There’s no tax unless you have multiple properties (which is a completely different conversation).

You pay stamp duty regardless if you have a property or not when purchasing a new home.

Capital gains is determined by the value of the property and how much profit (if any you made on it)

[chrisp65]

5 minutes ago, Genie said:

There’s places in my town for about 4 times an average salary, also help to buy, shared ownership too. Mortgage rates at historic lows.

I just had a 2 min look on moneysupermarket and £160,000 property with 5% deposit (£8k) is £709 a month fixed for 5 years from Barclays. That’s doable for a lot of people isn’t it? Especially if it’s couple purchasing.

I’m not saying it’s easy, but it’s not impossible.

We can’t rely on historically low mortgage rates, every time we presume they are normal, turns out they aren’t. It’s spectacularly dangerous to base buying a home on historically low interest rates.

Yes, there are plenty that can afford £709 a month, and well done them. But that’s not who needs a home, unfortunately needing a home applies to absolutely everyone.

House of Commons Library has ONS stats on last year, which for some reason I can’t grab. The average weekly income for the under 30’s is under £500 and without wishing to state the obvious, that means half of all people in their 20’s earn less than that.

Certainly doable for a lot of people. Utterly beyond plenty more. I wasn’t looking at redressing the system for those that could already afford it.

Why on earth should ‘not impossible’ be the benchmark for a 26 year old to have somewhere to call home?