Are house prices going to go down in 2012?

[Deadsouls]

Hello,

As the title says, anyone know anything about these things. We live in West London, where prices on 3 bed houses have gone up by about £50,000 in 1 year, so prices seem high.

We think we are going to buy, a little out of our ideal area, because we can't afford our area. But it seems so crazy that prices are going up and up and up....so the dilemma we are in is that soon if prices do keep going up we won't be able to make the jump from flat to house (that is in the rough area we are in near DCs school).

OR are we buying at a peak and are prices going to go down...do we wait? Clueless about these matters, who can I ask, estate agent??

I think it depends on so many things and whether your jobs are secure with regular salary rises etc. Whether or not you want to compromise on other areas like holidays and eating it etc and whether you have school fees to pay or other regular large expenses.

It was traditionally considered that 3.5x (single highest) salary is prudent, or 2x joint salary. By which measures, house prices are still approximately 30 - 40% overvalued...Banks seem to be returning to these values now they can no longer hedge mortgage risk by selling mortgage derivatives on the markets. With rising living costs (thanks to QE devaluing the pound) I wouldn't consider exceeding these margins personally. Ours is just under 2x single salary because I'm going to be a SAHM.

It's ok to think I don't care about negative equity - we plan to live in this house forever. But not ok to think that if you are relying on a mortgage. Lots of MNers seem to be getting margin calls from their mortgaging bank at remortgaging time because they don't have sufficient equity anymore due to falling prices. You might find your forever home and then when you come to remortgage in 2 or 5 years find that the 'computer says no' as your LTV ratio has slipped - and the bank will either whack up your interest rate, move you from IO to repayment or tell you to go elsewhere... I couldn't be doing with that stress personally.

The new mortgage guide lines are a lot tighter and anyone wanting to stretch themselves will not be able to after next year and indeed some banks/bs are implementing them now, There will be no interest only unless 50% deposit and this will apply to people coming off deals as well as new borrowers. Regular outgoings are also going to be checked now whereas they were just accepted on app forms for about the last 12 years as gospel. Easy credit is finally going to be tight

Yellow wellies that happened to a friend of mine recently. Between getting an offer on her bungalow and finding a flat to downsize to the bank reduced what they would lend to her by 75k plus said it had to be repayment. My parents have an IO BTL in London which when the low rate ends later this year is going to be v difficult to get another as they don't have enough equity.

And thank god too! The UK's debt 'smack addicts' might finally learn that debt is not wealth. And if they can't make financial decisions for themselves (lets face it prices wouldn't have bubbled to the daft extent they did if folks had learnt not to overstretch themselves) I'm glad there are some rules to prevent folks from being total muppets when it comes to making the biggest financial decision of their lives!

That last comment 'and thank god too' was in response to your first post Noddy!!! Not in response to your parents remortgage...

My parents rode the credit wave and in some ways are now seeing it falter which they never expected. A lot of people on short term fixes adn interest only are going to be in for a shock when they approach their banks next for a review or a new mortgage. They may not even lend you what you already have and the base rate will be the only choice. Also many banks are basing their mortgages on LIBOR and the bank of england 0.5 % is slowly becoming irrelevant as banks fight to rebuild their books with savers as QE ends!Bring it on

sooner or later bank base rates will rise
currently mortgages are being charged at 8 times base ....

I had my first mortgage when rates hit 15% - luckily that is highly unlikely but around 2% would be better for savers

also
25 year endowments from the late 1980's start crystallising in the next few months - when the shortfall becomes REAL, then there will be more distressed sellers and that will push prices down

THIS
www.housepricecrash.co.uk/indices-land-registry-national-monthly.php
is the most reliable data set I know of on the issue.....

Not to mention those who cashed in their endowments to buy 2nd homes! It is about to come home to roost

This graph is a good one too ....
www.housepricecrash.co.uk/graphs-mortgage-approvals.php

noddy
my first endowment ends in 4 months
it was a "low cost" - I'll have paid in £12,144
the "sum assured" was £10582 and it was to cover a £30,000 mortgage - when we bought it we were told it would generate £47,000 (I still have the papers)
I am expecting a cheque for £24,419

luckily my spreadsheets have allowed me to take appropriate action over the years ....

I think between 6 and 8 % is realistic. I still have friends who think it will never happen but it already is.

Talkin some people are a lot more exposed at least yours nearly covers it and it sounds like you have been smart along the way.

So, oh wise ones, do you think it's a good time to fix a mortgage or a bad time? We came off our fixed period a few months ago and are currently on an RBS, Interest Only, SVR. I'm not sure whether to fix again now (and if we do, how long for), or whether to wait until later in the year and change banks (need to wait as currently working pt, will be working ft later in the year) or whether just to stick with the SVR.

Only read 1st page so far

London dropped last time

However it will be stagnation IMHO unless the gov stop propping the Market up to make us all feel rich

Thomas medical unemployment is real and actual Could well be their jobs are not as secure as you/they think

One of the reasons the number of places at med school has increased so much is to create an aver supply to control wage inflation

Off to read the other pages now

agree with mossy bring it on

Give others a chance

FWIW I see no reason why mortgage interest on a rental property is tax deductible
We need money there's some

On the question of income vs mortgage payments - what's a sensible level? It depends is the obvious answer with a major factor being your income level.

If your net monthly pay is £1000 and the mortgage takes up half of that, you're left with £500 for all other outgoings. If net monthly income is £5000 then you're left with £2500.
Obviously these examples are extremes but the point is valid.

Regarding the risk of future mortgage interest rate rises, despite recent increases I still see long-term fixes as incredibly good value. Chelsea are doing a 5yr 3.49% or 7yr 3.99% fixed (think 70% LTV). 3.99% for 7 years is still very cheap lending.

We're looking at places currently and aiming for a 10yr mortgage with a 7yr fix. With the capital proportion repaid over the first 7 years, the risks associated with interest rate rises are minimal.

If you are IO you need to have a hefty deposit and a repayment plan in place to get a decent deal atm. Otherwise perhaps stay as you are until your wages catch up.I am always amazed at those who say London unaffected. The stamp duty over 2m had an instant effect. Stagnation is a def possibility perhaps a 5-10% fall over the rest of this year once mortgages become harder secure and then prices stuck indefinitely. Any true economist writing today admits that they can see no end to the current financial mess in their lifetimes. A lot of people do feel rich knowing they have an asset behind them and that is what has kept people spending but I think the tories will be prepared to sacrifice the housing market eventually because in reality it won't affect them and theirs All the hair brained shared ownership/govt deposit guarantees schemes in the world cannot stop it now

Goodness Bodley is defensive. The 12 offers were because property was held by a trust and it was a propert with huge potential. Of course I meant sold within days and completed in two months. Why is that so hard to believe? We also had a chain. I don't work for an agent and I live in Hertfordshire. I would love prices to tumble as I want to buy up next time.
Our mortgage is half price of rent nearby and in ten years we will have a house to live in and renters won't. Op needs to consider lots of views - I would think property developers would prefer us all to rent and not buy so is there a selfish agenda here by some posters?

But not everyones mortgage is half! If you have a 100% mortgage and it is half that is different to having a 10%! I have developed many houses but never let any of them!

Actually Newgirl, I'd bloody love it if prices rose. I'm not planning on buying any new properties - three are complication enough for me. To say nothing of the fact that my biggest investment is my own home. A 10% increase in property prices would exceed my entire gross income for 18 months - I'd be ecstatic to see the kind of market you describe. The W London market is statistically the most buoyant in the country so I'm excited to see which postcode is stretching the credulity of other slightly more circumspect posters.

By the same token, I have to suggest the OP takes the housepricecrash website with a rather large dose of salts.

Southwest very interesting what you say about medical employment. I was aghast when my friend told me her application had been turned down.

I remember the days when RBS used to give junior doctors and newly qualified lawyers x6 mortgages.

If I thought for a minute prices would keep rising I would do a few more! As it stands I think making big gains is over so I would prefer a swift fall so that people can afford to buy again. It makes no odds to me I am currently looking for a home but no way I would pay the prices atm

then RBS were arses

when mortgage rates hovered between 8 and 12 percent
(on repayment mortgages - making the repayment around 7 times the equivalent IO tracker today)
if the little dears got a bonus or a promotion THEN they moved and put down a bigger deposit

bigger multiples was just a NASTY trick to higher commission for the sales teams and debt misery for many people for many years

WHY do you think base rates have stayed SO artificially low for so long ?
because the BofE know that if they put the rate to 2% (where it NEEDS to be for savers pensioners and investors) then hundreds of thousands of houses would come onto the market at once, popping the "bubble" of UK affluence for ever