Housing market collapse on the way

[Whathastheworldbecome]

I see Nationwide and Lloyd’s have tightened restrictions on the “bank of mum and dad.”
There seems to be a degree of speculation that they are tightening the shoe strings as they know a collapse is on its way.

Does this sound likely?

I had my late parents' house valued the other week and the Estate Agent said the market was "mad" at the moment - houses were selling like hot cakes. He said it was because interest rates were low and because of the change in stamp duty regulations, but when these things change I suppose it will slow down.

I think the housing market will be impacted by the double whammy of Covid + hard Brexit. Whether that amounts to anything more than a plateau, particularly in London, remains to be seen.

Right now though there’s a definite Lockdown bubble effect + stamp duty fever - with properties selling superfast.

Which ‘other assets’ are in ‘free fall’ exactly?

My parents also had some shares etc which have plummeted in value since March.

No, it’s actually the banks opening up the market again. A lot of 95/90% mortgages were stopped during lockdown, and now some banks such as Nationwide have re-started them with these deposit restrictions in place. So it is actually positive for the housing market! Some people just want a crash to happen. The banks and government are doing everything to make sure that doesn’t happen.

Scare mongering, OP. Fully gifted deposits are acceptable for lending up to 85% according to a Nationwide spokesman on the BBC news website the other day. So let's say for the sake of argument, this is Cloud Cuckoo Land and a first time buyer is buying a £100k property. Buyer gets an £85k mortgage, Bank of Mum and Dad gifts the other £15k.

Or in real life on a £200k property (still can't believe these are the prices first time buyers are expected to pay), buyer gets £170k mortgage, parents can put in £30k (or more if they wish). If it had been a 90% mortgage, then buyer is allowed a £180k mortgage and parents only have to put in £20k, so there is more risk on the lender of the buyer defaulting on their mortgage as it's bit higher.

I doubt this would cause a property crash (unfortunately). I'm not sure it's a great idea really. It just means richer parents have more to gift, creating an ever widening gap between the haves and have nots. Those with rich parents or a substantial inheritance from a grandparent, say, will be the ones buying the houses. Every other poor bugger will be stuck.

www.bbc.co.uk/news/newsbeat-53666535

This from bbc news a few days ago. Doesn’t mention Lloyd’s so maybe Lloyd’s have introduced this very recently too ?

@fdgdfgdfgdfg

I bought my old house in 2008 two months before the crash.

I'm just about to buy again. So I reckon you've got about 2 months.

Snap! 😂 @fdgdfgdfgdfg here and I are your economic barometers.

I think there may well be a market lull towards the end of this year / beginning of next whilst general uncertainty puts some people off upsizing or making big moves, but a crash requires there to be a drastic fall in demand for housing across the board. People may lose their jobs but they still need housing. Banks don’t want to make any more repossessions than they absolutely have to; and as much as the MN mantra is that the evil Tories hate ordinary people and want them dead, there’s no government which would see hundreds of thousands or millions of people losing their homes and sleeping on the streets. I should imagine we’ll see government financial support to banks to shore up customers with mortgage arrears and the reintroduction of mortgage interest benefit long before we see a property price crash.

Well the houses around me are selling within days of going up, so people obviously aren't twitchy about a crash here!

Lots of people are very twitchy about a crash which is exactly why the housing market is experiencing a last ditch boom imo.

People wanting to sell are selling now whilst they’re able to get a decent price.
People wanting to buy are buying now whilst they still have the chance of getting a mortgage. There’s weeks of on-hold time being caught up on and plenty of supply and demand.

In a few month time when banks pull most mortgages above 60 or 70% LTV, when brexit hits, the Corona second wave hits, end of furlough and redundancies hit...the market will crash hard.

I think it’ll crash when interest rates go up. Could be years from now. But when they do go up there will be an almighty crash which will be sad as it will mostly affect young people who have bought at massively inflated prices and part-buys etc.

no chance. Until the UK, and the south east in particular builds around 500,000 homes a year for at least a decade, then there will be a housing shortage and hence a long-term upwards trend in house prices. We are a small densely populated country with too few houses. Long term trend will always show an upswing

I think there may be a dip - when furlough ends and people start losing their jobs, and then default on their mortgages.
I don't imagine there'd be a crash though, the house market is buoyant where I am but I've noticed it seems to be either homes for first time buyers or luxury 5 bedroom plus homes. Very few properties in the middle are coming onto the market.

If there is a slump in house prices there are plenty of people waiting to jump in. There is a pent up demand for houses. The housing market is resilient. If there was the speculated 25% dip in values then the economy would be screwed. The market would stagnate. I think the banks approach is too slow down overheating as we have a recession.

It was on specific mortgages on which the lending ceiling has been raised - which in itself is a measure of confidence in the market. So, you’ve misread the intent or only read the head,ones, OP

headlines

It is possible to get a fixed rate at 1.9% for 5 years.

@Whathastheworldbecome

I see Nationwide and Lloyd’s have tightened restrictions on the “bank of mum and dad.” There seems to be a degree of speculation that they are tightening the shoe strings as they know a collapse is on its way.

Does this sound likely?

You need to provide a source - 'bank of mum and dad' does not indicate what type of mortgage they are restricting . Nationwide , for example has a family deposit mortgage whereby money is borrowed against part of the equity in a family member's home against deposit. Clearly not the same as gifting a deposit if Mum and Dad has spare cash .

It's just scaremongering otherwise.

@Friendsoftheearth

The property prices have gone up here. No crash on the way as far as I can see. A boom in country houses and locations looks most likely given many more can WFH

The same thing’s happened here. Houses are being sold as soon as they reach the market.

I work in the industry and we've hardly seen a change in demand, so it seems unlikely.

I don't think banks being prudent on the size of deposit required signifies anything other than smart business acumen on behalf of banks.
There will always be peaks and troughs but the fact is, there are only finite supplies of housing stock. Economics 101.
London might see a bigger dip post covid and post Brexit but those that aren't forced sellers simply won't sell. I'm in London and plan on selling next year but if we're in a dip then I won't. Again, supply and demand.
The fact is, we can all speculate but with interest rates as low they are, it's unlikely that we'll see a total house price crash.

Houses are selling like hot cakes round here, probably thanks to the stamp duty relaxation. A large family home in our village (which I coveted but could never afford) went on the market last Wednesday and the sold sign went up yesterday.

They are not allowing desposits (or at least a large portion of) to come from mum and dad as it doesn’t show a long term ability to be able to afford the mortgage because it hasn’t been saved for.

How will they know where the money has come from? Also, affording the mortgage is easy (especially if you’ve been renting, rent is generally more expensive) it’s getting the lump sum that is harder.

The market is wild at the moment where we are. Houses selling in a day or so.

There is ALWAYS some talk of a housing crash. I’ve owned houses for over 30 years.

All of the ones l have lived in have. have carried going up and up. Where I live now is just silly
prices. I’m in the north but they fetch London
prices.

First house £39950 in 1988. Now we’ll worth over £400k
2nd house ( much smaller than first ) £49950 in 1996. Now worth £250k
3rd house 2003. £160k . Now worth £ 500k.

And l move again, and this one has continued to go up.

Unfortunately they can stagnate/negative equity in certain areas.

But people on here are always saying ‘small house on the best road’ and this is true.

It's supply and demand.
10 houses in the village here up for sale -all of them hefty price tags -none sold yet.

Bellainthewychelm thank you for correcting the misinformation! They're cracking down on allowing 100% mortgages with a gifted chunk of savings alongside.

Agree that being gifted a deposit has no bearing on your affordability of monthly payments. And also that equity from house price rises is equally unearned.