House Prices

[LGBirmingham]

House prices still seem to be rising? Does anyone else think this?

You’re making so many negative assumptions here.

That the mortgage term will take 35 years to pay off, when in reality most people take out the loan over a shorter term, get the chance to change it every time they remortgage and overpay at some point over the years to reduce it.
That the rate will stay at 5.5% throughout the whole 35 years or whatever (unlikely) and that the house is “crummy” (subjective, most people love their homes and don’t see them as crummy).

Picking a worst case scenario is as unrealistic as presenting a best case scenario using the example of a gorgeous house, short term mortgage and rates that remain low throughout the whole term.

I am seeing a mixed market. In my closest streets where I bought a few months ago, asking prices for the same house I bought have gone up 25k and I reckon they will get close to asking. Some other areas I am looking in for work though are going down. If something is priced correctly it is going pretty quickly.

Good post, many people made "buying" decisions (renting money for a house from a bank) based on cheap monthly payments, they wanted the house and put the actual amount borrowed and the consequences of carrying that much debt with higher rates out of their mind, now the rates have moved up and the monthly payment is suddenly not really worth it for what they "bought".

True, but it is fair to say I think that the "average" person in the "average" house (New-Build type house maybe) coming off a five or two year fix bought a house at extremely elevated prices and will now not be happy with the amount of their income required to service the debt, I think to argue otherwise is more or less pointless.

Many have never in decades of paying off had a 35 year term and starred paying it off long before 40s. Continued holding property through tough times of previous recessions, its just not true that most property is so highly geared

Exactly this. And another pp was trying to say people pay their mortgage off well before 35 years (ha!). Err yeh, BOOMERS probably did. Buyers of more recent years and today will not be in the fortunate position Boomers have been in.

Interest rates are predicted to stay high for many years due to government debt. The main hope is that they level out at an average 3-5% over the next decade. The days of 1-2% interest rate are over.

take also into account stagnant wages, slow and predicted slower economic turbulence (risks of unemployment), low birth rate that is just going to get worse, then...

it's more realistic to predict a 25-35 year mortgage term for most average people in this country who are buying now. they'll see that even at 25 years at the rates I've given above, the total paid back well THAT'S the fortune they're saying their house is worth. Borrowing £600k even at 4% interest is a lot!

People who are relying on their house as for their future retirement profit will not see much return at all in 30 years. it will only make the current younger folk the most vulnerable elderly people this country has ever seen

it's not being negative. it's being realistic with the decisions we make today that impact our future. we don't need cheaper rates. we need cheaper housing.

Yep, I think the message is out there loud and clear now though, you have to remember that even someone born in early1990s wont have experienced the higher historically normal interest rates in their working life! Until now that is, no wonder so many people made absolutely daft decisions with debt?

It's not daft to buy a house and I agree that cheaper housing is needed. I genuinely don't believe a crash is coming

No. A crash, in the way that a stock market can crash over days and weeks, will not happen. Instead I expect a slow grinding slide down over two to three years (we're a year in already). But if that slow grind down is 10%pa then you'll be looking at over 30% nominal falls by the end (and much more compared to salaries increased by inflation).

This will deliver cheaper housing to those that follow. But more can also be done to boost house building in the UK. This would help too. But don't expect any of the parties to deliver on that. They're all as useful as chocolate teapots, with little idea on how to address the big issues in society.

Recently bought property is highly geared, smart buyers are just staying away from the market now.

The "overnight" crash was in house sales and mortgage applications, and interest rates crashing upwards.

Having spent my whole life in the property industry the only thing that will solve the issue is building more homes. It is a supply and demand issue and if income affordability drove it we would be in a different position now. Social housing sell off was the worst thing to happen to housing in this country. Rental reform is meant to help but could just make things worse. Again on the supply side.

We are turning into a society of have and have not when it comes to property and just because I can't see a significant turn down in prices happening for the desired homes doesn't mean I don't agree it is massively problematic. I honestly think many will never buy now.

A lot of people said that in the early nineties "crash". But things sort themselves out. Lot's of people will be hurt but most will get through it albeit roughed up and bruised.

Anyway, we need the right homes being built - not more of the crap being put up today. We need high quality, high density homes with the latest efficiency standards. We don't need more fleecehold scams and homes needing to be snagged. Pop around to your local new build estate and show me one that meets the criteria (there are one or two but they are few and far between).

The issue is the price of credit not number of houses, so supply and price of credit = housing demand, no one pulling out of a mortgage after the Truss budget was homeless.

https://www.cnbc.com/2022/11/28/uk-property-demand-down-44percent-since-market-rocking-mini-budget-zoopla.html

How on earth can you know that? People are being made homeless daily in our rental market.

Looks like that will be spreading to the mortgage market soon as well, whatever the government said about repos previously, many people just cant service their mortgage debt at these rate levels.

That was the past. Other posters are referring to the current and likely future situations which are entirely different. Current middle aged/ young people will be far poorer in retirement than current generation of retirees. You can't simply assume that everything will remain the same; things change all the time.

It's only supply and demand if you understand that demand= both wanting a home and being able to afford the home. House prices have had rockets put under them by loose lending, cheap credit, QE, stamp duty holidays, pandemic handouts, etc.
It is the affordability side that is currently affected. Interest rates and falling real wages. Unemployment is already rising and will rise much further which will impact wages and therefore have a greater negative effect on affordability.
Agree that selling off social housing was a terrible policy and that the rental market is an utter mess which has not been tackled by any party.

"Agree that selling off social housing was a terrible policy and that the rental market is an utter mess which has not been tackled by any party."

It's enough to make you cry that the people we elect and pay are as useless as they are. All of them. Absolutely hopeless. There are major issues affecting this country like NHS, affordability of benefits and pensions, local taxation, housing, infrastructure including power generation and distribution, student financing, immigration, etc. None of them are up to the task.

Its terrifying. I am not suggesting things will stay the same I am pointing out that asserting that all home owners are facing unmanageable debt is untrue. What worries me is how generation rent will cope when they can't work to pay rent any more. The truth is that mortgages need to be paid down over decades and many have now missed that opportunity. Its really concerning for society as a whole

The average mortgage in this country is £184k. The price of the average house in the UK is £288k.

The number people with a £600k mortgage must be minuscule, and those people will be high earners in million-pound houses, not struggling FTBs.

If rates stay high or go higher people will be able to buy much cheaper basic shelter, problem solved. Homeowners don`t have any debt, they own their home outright, and of course not everyone with a mortgage will struggle (the debt repayments are not going to be very nice though) the point I am making is that FTB borrowed money is the basis of many chains, without that borrowed money many chains will collapse, but you know this already as a property industry professional?

The struggling couple in the Panorama programme I linked to had a 350k mortgage I think, and I believe their payments went from 750 pm to over 2k per month, but to be fair I think they had a tracker mortgage because they were gambling on rates dropping soon, they should have fixed and left the interest rate predictions to bond market professionals (many of whom still get it wrong) People who fixed before this all kicked off will be fine for a few years, they will just have to accept that their house is worth a lot less than they borrowed for it though.

If it was £750 per month, it must have been interest only, which suggests that size of mortgage was already unaffordable for them even with 1% interest rates. And a £350k mortgage is nothing like a £600k mortgage.

I don’t think using edge cases (couple with massive mortgage on an interest only tracker over 35 years) demonstrates that the average person is over-geared and can’t afford their mortgage repayments.