Reply With QuoteOriginally Posted by jwg663
Pick your Ohm?
______
Jim.
Don't just do something, sit there. - TNH
Posted in the other mortgage thread.
Last edited by noTAGlove; 25th September 2022 at 11:23.
A very interesting watch from someone who has a vested interest in a thriving property market, but pull no punches with his current advice.
https://youtu.be/Esx6RTOkZo0
Yes
I haven't exchanged yet but I'll be honest, I'm having a wobble.
You still need somewhere to live. Unless you're maxing out your finances and have minimal deposit, most people can afford to wait out the storm just as in 2008. Though to be fair I think the next few years are gong to be rougher than back then.
It's a perfect storm at the moment, you'd have to stick your head in the sand not to recognise that, but with Ukraine playing a significant part, it is extremely difficult to predict how things will play out. A good time to be cautious.
Not maxed out as such (I can comfortably afford both mortgages) but I'm remortgaging my current place as a BTL. It'll be 75% LTV. I've got a fixed rate for 5 years of 3.09% interest only. If the market crashes and / or interest rates go bananas it's entirely possible that the rent won't cover the mortgage. At that point one might look to sell but many will do the same, driving prices down. Rental rates are likely to dip too further adding to the problem. Its also an EPC cat D so will need money spending to get it to a C by 2028 as will be the law.
I'm taking a mortgage based on my income too (plus using a big chunk of my savings) to buy the new place. Its ideal and I'm in love with it but watching that YouTube video has panicked me. If there is a serious economic down turn, I will lose clients so even the 'income' mortgage may be in jeopardy. I've got a 5 year fix repayment at 3.25%.
Tempted to start a thread in the BP with more detail but what does everyone think? Am I being paranoid?
If anyone has a bit of spare cash lying around, this is a bt of a bargain:
It’s actually only no.184, not the whole street.If anyone has a bit of spare cash lying around, this is a bt of a bargain:
When prices dropped before, there was a high proportion of sellers who held the belief "We're not selling at 0.95 of £XXXXX - the house was 1.0 £XXXXX two months ago!" and they held out. Most didn't sell and there was significant stagnation.
With the financial markets in a similarly wobbly place, where best to store wealth? When in doubt the historic consensus for individuals has been bricks and mortar, so I predict house prices won't slide.
That said, my opinion has proved to be hopeless on many topics.
I thought it was gold.
I met a guy who's a mortgage adviser yesterday. He said he's going on holiday to relieve some stress from a trickier mortgage market he said is worse than even 2008.
Sounds like He's one of them there anti growth coalitioners.Needs a better attitude and a bit of graft.
Last edited by Passenger; 9th October 2022 at 19:36.
Three houses in our street have gone on the market in the last month at what we thought were ambitious prices, yet all have sold within a week. Must be stressful getting the mortgage in place
I know an owner of a chain of estate agents and he is very concerned for the future with interest rates, might well get properties for sale but if no one is buying then there isn't any income to pay the business.
Most properties I'm dealing with are older people selling to move down, deceased or similar, not many young couples moving and the ones that are seem to be porting their mortgage so not being affected by the recent rises..
We put our house up a few weeks back and had just the one viewing from a guy who viewed 12 houses, so maybe the market is starting to shift from a sellers to a buyers market. We fit into the downsizing category so no finance required on our part.
What you may be seeing is the effects of a lag in the system.Three houses in our street have gone on the market in the last month at what we thought were ambitious prices, yet all have sold within a week. Must be stressful getting the mortgage in place
Mortgage offers validity is between 3 and 6 months, with fixed rate mortgages not much above 2% at the start of the year, and 3% in early summer. So there will be many people completing in September with 2.5% fixed rate mortgage offer agreed in late spring/early summer.
The rise since the summer has been like a whirlwind and once the 6% mortgage rates fully feed through, and mortgage affordability falls by around 35% compared to spring, things should start to get interesting.
New BTL is being stressed tested at 8.5% mortgage rates, and unsurprisingly rents in my part of SW London do even begin to cover 3% mortgage rates, never mind 8.5%. New BTL is dead as a dodo.
An FTB would be mad as a hatter to buy now with the risk of wiping out any equity they put in.
Without new BTLers or FTBs there is no bottom rung of the housing chain. No bottom rung of the chain equals no chain.
Significant increase in properties, mainly flats, being advertised in Zoopla in my part of the world, which I suspect is a leveraged BTLers trying to get get out before they get wiped out.
Interesting perspectives in here, a good read.
I work for a house builder. Sales rates have dropped from 1 a week to 0.5 if you’re lucky. Some sites bucking the trend but those in areas with high competition - sales have just vanished.
We were going to put our house on the market in Jan to move up. We have 2 years left on our fixed rate from 2019, just not sure what to do now. Going to need a real think. I’ve been quite risk adverse until now (we borrowed only about 40% of what we could’ve done as FTB’s and I now earn 65% more than when we were approved for that), but this could be a real risk if we were to move, unless we got what we thought was a bargain.
Really is interesting.
Not too difficult to understand why either.
£250k repayment mortgage @ 2% = £1060 pcm
£250k repayment mortgage @ 6% = £1611 pcm
Increase in mortgage payments £551 pcm or +52%.
Now the properly scary stuff is interest only mortgage favoured by BTLers
£250k interest only mortgage @ 2% = £417 pcm
£250k interest only mortgage @ 6% = £1251 pcm
Increase in mortgage payments £834 pcm or a mahoosive +200%
Last edited by noTAGlove; 9th October 2022 at 22:29.
You guys are talking like this is an immovable force of nature. This situation is as a result of higher interest rates in order to combat inflation. It is a deliberate policy by Central banks. Once it has done what it needs to do and inflation has cooled and froth taken out of the economy then rates will come back down.
Last edited by ryanb741; 9th October 2022 at 23:15.
My mortgage ran from 1984 through to 2011 and in that time the average was probably around 5%. It did touch 15% at one point under John Major and that nearly lost us the house, but things settled until 2008 when the interest rate dropped to bugger all. I enjoyed 3 years of that until my mortgage finished. I had an endowment which were popular in the 80s, so an interest free only mortgage. It was supposed to pay £70k at the end, but only paid £45k so for the last ten years of the mortgage I was making double payments.
People who have enjoyed bugger all interest rates from 2008 until now have had the cheapest mortgages on record. At some point the interest rate will stabilise and average out at 5%.
Spoken like a relative youngster who has never seen 6%+ interest rates before.
Not what I am reading in numerous articles at the moment. Interest rates are still too low at 2.25%, and it is the money markets driving U.K. Gilts and hence mortgage rates to 6%. Seems like more hikes to come.
And with the end of globalisation, and more so in the U.K. with the B word, it could be that when rates come back down, it will be to 5-6%, from what looks like over the next year will be higher.
Low rates have been toxic for the world. Explosion of debt, risk and speculation. Those who have assets (generally older) are winners, while the asset-poor youngsters suffer.
Good riddance in my opinion. Make money through hard work, rather than accumulating debt.
Will be interesting to see how the over leveraged make out now cheap money has gone and doesn’t look like it is coming back anytime soon.
The What Do You Drive thread will take a hit given lease payments are also going to go the same way as mortgages.
Last edited by noTAGlove; 9th October 2022 at 23:44.
Round our way. Many properties sold (at what I thought were overinflated prices) have fallen through and returned to the market.
Most new to the market are new builds. These seem to have rocketed in price many 8% to 10% increase.
6 months ago many properties were sold within days. Not any more, anything overpriced
Is being reduced.
Here, the bubble is burst.
Can't see there's really much froth in a more or less stagnant economy, to be taken out.
Well, a huge amount of house price froth.
Around me in the outskirts of Greater London, new build 1 bedders are going for £450k and then rent for around £1600 pcm.
An FTB with a 10% deposit would land themselves with a £2642 pcm mortgage @ current 6%. For a pokey flat in suburbia and 12 miles from the centre of London.
A landlord with a 75% interest only mortgage would pay £1688 pcm, exceeding the rent that could be achieved. At 2% rates (achievable only 8 months ago) the mortgage payment was £563, so you can see why BTL was so attractive, but not any more.
Also, that is without £23.5k stamp duty, letting fees, maintenance and voids etc. Plus the landlord has had to stump up a deposit of £112.5k which is providing no return on capital, and at risk of being lost if the flat price takes a 25% tumble.
I think it is good to illustrate the numbers, because at 6% mortgage rates it just tells you how insane the market really is, and why it is going to take a massive tumble, especially in London and the SE.
Repayment mortgages up by 50+% and interest only repayments up by 200% in 8 months, means this can’t end pretty.
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Market expectations for the BOE's policy rate as at 27th Sep were 6% in 8 months' time and still 5.75% in 24 months, which is what the market is pricing in. The point being it takes a while to get these things under control, a significant amount of the housing market is exposed to a rate increase that will represent a serious increase on current levels and for a number of years. The war ending in Ukraine is the biggest wildcard, unfortunately that currently looks like it could escalate yet further which would bring further bad news.
Aye. And how many people early in to a £250k mortgage have a spare £600 a month kicking round?
Carnage ahead.
The knock on effect for the 'real' economy is going to be huge then, given how totemic house prices are for the UK's sense of wealth/ well being.
I've got a couple of friends who've been adding to their rental portfolio's very recently, I hope they've done their sums.
Last edited by Passenger; 10th October 2022 at 09:01.
In the 80s and 90s house repossessions were a common thing unfortunately. The last 15 years of virtually no interest rate helped put a lid on that, but I fear it will come back just as before.
The current level of house prices has been fuelled by the viability if cheap money due to a sustained period of very low interest rates. The impact of an increase in mortgage rates to around 6% will be huge, maybe the word ‘carnage’ is an exaggeration, house price armageddon has been predicted in the past, but some level of market correction seems likely.
I would have thought that this is a good time to buy if you are a cash buyer.
The one thing about property is that we all know that our little overcrowded island has too many people and not enough houses so prices will only be going one way in the longer term.
I paid £2750 for my first house in 1970, that same house fetched £260k about five years ago. What will it be worth in say twenty years from now?
Yep, a smart move investing cash into a depreciating asset.
You will be recommending setting fire to you cash next to save on gas bills.
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Oh, it is only +£870 pcm if mortgages rates reached there predicted 8% next summer.
And if you were lucky enough to snag one of those 1% fixed rate mortgages in summer/winter 2020 you will see a doubling of your mortgage payments.
Carnage indeed.
That made me laugh out loud.
Did prices rise at a similar pace between say 2005 to 2008 as they have done 2019 to 2022?
You may not know/care but I may do a bit of digging to see. The last few years have been mental for prices.
Almost 10x the rate of inflation, which is nice
What will it be worth in 2 years and 5 years time, compared to 20 years time? No-one knows
Between 2005 and the 2008 peak the average house price rose about 25% from memory. Affordability is the issue here, too many with debt beyond their true means because of low interest rates.
They will survive if they have taken 5 or 10 year fixed rate mortgages at sub 3% mortgage rates, which were offered in late spring.
If they are on 2 year fixed, discount, trackers or variable rates then they are toast.
It is likely in the next couple of years a good chunk of that equity they put into the BTL property will be toast as well.
Not many BTLers go into property for the measly margins on rent; they are all looking for the cash cow of capital appreciation.
When the tide turns and not only are they well under water on rent covering the mortgage, but house price falls are chunking away at their equity, the recent entrants over the last few years will be deserting BTL like rats from a sinking ship.
Either deserting, or more likely going bankrupt if they have a large highly leveraged portfolio.
What a difference 3 months make.
I got 3.09% on aBTL interest only mortgage fixed for 5 years that will complete this week fingers crossed.
I'm banking on rates and house prices settling in 5 years. If rates are high or higher then, the property may not make financial sense to keep hold of.
Best of luck you.
I personally wouldn’t bank on anything, as nobody knows what will happen in 5 years.
I assume you have been undertaking a range of scenario planning to stress test your finances and make sure you are comfortable if the worst scenario happens. Hope for the best, plan for the worst.
Who knows what will happen, and you have a low enough mortgage rate which the rent will cover, but don’t underestimate the mindfcuk if there is some equity destruction.
I will be honest with you. With all the uncertainty going on at the moment, I would run a mile.
The plan to mitigate the rise in interest rates by lengthening the borrowing period. You will see more people sign up to 30 and forty year mortgages.
40 year mortgages, help to buy, mortgage guarantee scheme, shared ownership etc.
All designed to keep the Ponzi scheme afloat. But the longer you keep artificially supporting the market, the harder any downturn will be.
The free money heroin has come to an end. It is not time to prescribe the methadone of 40 year mortgages (which don’t help affordability that much). A bit of cold turkey is what is coming and needed in my opinion.
Yup choppy, challenging times ahead.
Madness to start in on the 30- 40 year mortgages imho, but heck it illustrates how warped the market has become in Blighty.
Good luck to all.
Not just the U.K. Read the same articles about most developed countries on the world now;
New Zealand
https://amp.theguardian.com/world/20...falls-below-1m
Australia
https://www.aljazeera.com/amp/econom...40-years-in-au
USA
https://www.bloomberg.com/news/artic...cant-pullbacks
Canada
https://www.bloomberg.com/news/artic...een-falling-25
And I could carry on.
Difference is that all the above tightened monetary policy a little earlier and stronger than the U.K.
Expect what is happening in US, Oz, NZ, Canada etc etc. to happen in the U.K. in about 3 months time
Anybody know what proportion of the rental market is made up of highly leveraged BTL landlords?
Do the BTL landlords tend to be well heeled compared to their tenants?
Who is going to take the hit landlords or tenants?
Christ that article on the NZ house prices says the average house price has dropped below 1M dollars-thats £500,000
They've got a bigger ponzi scheme than us!
I looked into BTLs extensively. There will be exceptions but as far as I saw the overwhelming strategy (and advice) is minimum deposit, interest only then remortgage asap to use capital for next purchase.
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