MN in-house property gurus or just your wise self

[Letstalkrealpropertyshallwe]

I have name changed.
I find the diverse views here can be helpful- so I thought to ask.

I am an LL although bought both homes to live in and then received advice to keep the first one and take out some equity and receive rent (as opposed to selling) to prop-up the second. So far so good and I am in it for the long haul. [I will start another thread asking if I am mad to be pumping $$$ of my salary in this venture.]

However, I believe we are headed for the downturn in house prices which could last 7 to 10 years or longer. [You are welcome to comment just on this already.] I recalled from around 2012 prices started picking up and between 2012 and 2014/ 2016 things were really expensive again. And then Brexit happened and prices especially where I live started coming down.

What I need views on is what that will mean in terms of mortgage rates- I do recall lenders do engage in competitive lending practices as to who can afford to offer lower rates to attract good borrowers after say 5 or 6 years of constrained activities in their lending which means they too aren't making much money anyway and they get fatigued.

It looks like we will not enter into a recession unless Putin pulls another surprise on us on 'gas'/ 'wheat' access etc. Or will that cause inflation? [ You can comment just on this as well.]

I am kind of wanting to be prepared as much as I can but I only lived through recession with my flat and although it was hard as I had just taken on a fixed rate and saw friends paying £400pm for their mortgages while mine was still £800+, I just made more cuts elsewhere and survived and I am glad I stuck with it.

At least ( confirmed last night) I will have access to emergency funds so I am now 100% clear I will not need to sell the smaller one a falling market (in 1 or 2 years as I had feared) as that's the one that could attract lower CGT.

But I am interested in lenders' mortgage rates and lending behaviours during a downturn but no recession ( as I have not experienced this before); rent behaviour too in that scenario, although I am very lucky all my properties were on really low rent as have good tenants so have enough room to increase. They are all EPC C too and don't need work done. Only the larger one with bigger mortgage has huge service charges but I am part of the management so I have a say which is helpful.

Please, let's speculate away and add anything or any angle which you believe might be relevant to me ( I just don't need comments of LL increased costs, tax, EPC, sec 21 etc as I have enough views on that- thanks.)

If relevant - as I am desperate for views related to my situation, thanks- my large property was bought early 2019 as a forever home or at least sell in 15/20 years. [Have now about done the first 5 years.]. The smaller one was bought in 2005 and it is cheap and cheerful to run. I would like to keep them both as it doesn't make much financial sense to sell the smaller one. Smaller is good with rent but capital value goes up and down just like that by £50K with any slight change in the economy- proper weird.

Thank you very much in advance.

I definitely think we are headed for a downturn. Rental costs increase during a downturn as people are wary of buying and ending up in negative equity. House prices fall but at the same time banks veer away from lending so mainly benefits cash buyers. My mother in law sold her London flat for 30k loss in the 1990s recession (and upgraded to a bigger house for her family which she is still living in today) and says that would not be possible without the downturn. But only possible as flat had been paid up and i think had some help from family.

Interest rates will tend to be slashed during recession so it could be mortgage rates would fall, but then at the same time, lenders become very very cautious (and this could apply even to people who remortgage though they say now they wouldn't apply affordability criteria if sticking to same lender).

Like this- (after months of ripping off consumers with inflated supermarket prices.)

'Waitrose launches its first EVER lunchtime meal deal with a sandwich, sushi or salad, snack and drink for £5 - but how does it compare to YOUR favourite combo deal?Waitrose's first ever lunchtime meal deal will be launched in the UK on August 30. It puts it in direct competition with other supermarkets such as Tesco and Coop'.

if there is a downturn, we could easily veer into recession territory.

I experienced downturn in london house prices in 2019 when I bought (in flats that fell 50k from 2015 prices), lending was still quite buoyant and interest rates were low.. No recession, it was due to brexit. I don't think it would be the same thing now though.

What I need views on is what that will mean in terms of mortgage rates
I'm not much help because I haven't had a mortgage for a while. Having said that, I have seen people post about variable-rate mortgages and fixed-rate mortgages but not capped-rate mortgages. Are they still a thing?

Thank you.

Yes, BOE interest rates comments are also invited here.

What you have written makes sense. So,
Downturn= pp don't buy houses (with some exceptions obv) except cash buyers; then those pp need to rent. That's clear as I also saw that in a recession.

Does it then mean that whenever there is a downturn in property prices, that's the only behaviour to be expected? So it is similar to a recession but without BOE lowering interest rates? [And with lenders' rate remaining as high as they are now?] Thanks

My worry with variable rates - my large mortgage is up for renewal early next year- is if the property prices go down and then my LTV gets affected as on a large mortgage, that would mean a few zero point something percentage increase is a couple hundreds. That's residential with permission to let.

Current LTV is 69% so bank ( I will not change lenders) said that puts me in 75%. I worry for a drop to affect that and put me in 80% LTV which will be just too expensive. Otherwise I would take variable as bank said I don't attract a charge if I wanted to fix anytime. I do have an expensive early repayment charge though when on fixed- so still deciding on that as I wanted 10 years at 4.85% but it is now 5.15%. So might do a variable at 5 years if I can afford it, but I really fear LTV being affected and my lender (very reputable) is ruthless with LTV as in real life, my current LTV is around 59-60%.

Sorry to hear about your downturn in 2019. I bought at a reduced price and completed within 3 weeks as I had everything in place and owner wanted to sell ( I would not have afforded it end of 2018 and had found another place that fell through, so by the time I returned to the market, my place was now affordable to me and got an extra discount. Owner was busy with a huge development at his new house and wanted his money.)

if there is a downturn, we could easily veer into recession territory.

What will that mean then with the BOE clearly not going to print more money (QE) as it will have just got the inflation where it wanted it to be? Or am I wrong to think that will be the BOE's attitude/ behaviour seeing they part caused this anyway? It is just confusing. Does the BOE always lower interest rates in a recession ( including one of their own making?)

I have learnt that services ( especially financial services as in jobs) and house prices are the bedrock of the UK economy. So what will that mean to the economy if we enter this BOE inflicted recession as clearly they will not be reversing their hikes just because we are in a recession? No? Thanks

Lol meant i bought at downturn in 2019! I think it will still fall more though so i may sell at loss (but hopefully buy a slightly bigger flat at a lower price so would neutralize it).

You could be right, they may not reduce interest rates.

So then house prices will fall, mortgage rates will be high, economy will be stagnant. Lots of people would rent as makes no sense to buy.

Even the estate agent who came to value my flat yesterday admitted rental is cheaper than mortgage. Total sea change lol (her mortgage increased form £1000-2800).

Great- we are nearly getting closer to my amateurish understanding of this to be as such, as well. Thanks.

I just want to sit tight.

The economy is very like to contract over the next 1 or 2 years.

Consider the increased amounts people are paying in rents and mortgages. Those amounts can no longer be spent elsewhere in the economy. Think about where people will make cuts in discretionary spending (services, hospitality, luxury goods, unaffordable cars, etc). Those are the areas to be first impacted. Companies will close and jobs will be lost.

Secondly, many businesses will be unable to service their debts at higher interest rates. That, combined with the impact of reduced spending, will force many companies to contract or close. Although many will suffer, it is good news for the most efficient and productive companies. They will be able to pick up some business from those that close.

Thank you.

The economy is very like to contract over the next 1 or 2 years.
Consider the increased amounts people are paying in rents and mortgages.

That is it then. Economy contracts ( I have worked this out re property being a bedrock to this economy) for 1 to 2 years- you say- and rents and mortgages will remain high which means lenders' mortgage rates will remain high as well as BOE's interest rate?

So, what then follows is a process of stagnation in the economy ( as another poster said) (but for how many years before the recovery starts but is not being felt simultaneously through out the whole economy - I saw this imbalance in recovery (some sectors sooner some took longer ( sometimes way too long) to get back up) after the recession).

Then normalisation of the slow recovery for a few years ( how many) and then full recovery. During each stage, what will happen to lenders' mortgage rates and lending appetite as well as BOE's interest rate movements please, as a speculation only?

Thank you.

Well, if you don't mind giving yourself nightmares, google David Hunter Contrarian.

Truth is - no one knows.

Thanks. will do o Friday as need to work tomorrow after focusing on this 'important' thread today.

I know none knows BUT 1) If I had gone for a smaller place and therefore cheaper in price but expensive in constant fixing of things I. 2019, I would have afforded 10 years then as that's what I wanted but took 5 years so I could afford it and expected to pay it off sooner to be fair but Covid and deaths happened. I knew interest rates would only go one way.

Again, in 2021 I rang my broker but he said to wait for the 5 yr fixed to finish, although, I realise the penalty would have been high then anyway. Again, I knew interest rates would only go one way. But ,maybe I was better off on a tracker although that would only make sense if I knew I could fix it in 3 years after buying and not the following months had interest rate started to raise sooner.

However, (i like everyone) did not think it would go up like a rocket to the scape station lol

I am one of those grateful for low rates as I afforded my dream home. I also know now I can still get the coveted 10 yr fix now and I can afford it better than when my LTV was 85%, 5 yrs ago. Swings and round about. I just need to be prepared and 'hold my nerve' for long enough like I did during the recession.

space station even