Hey Doomsayers, over here! House prices likely to fall by a quarter in two years...and the rest imo

[WideWebWitch]

prices could go down by 25% and the rest imo.

And for anyone who hasn't seen it before, propertysnake showing some 40%+ reductions

why would rates increase?

I think eventually interest rates will have to rise.the historical average is about 8% and the kind of levels we have seen recently are unprecedented and now inflation is through teh roof.Banks are already raising rates to recoup losses and provide a buffer.

Inflation is rising pretty dramatically also LIBOR rates (which financial institutions pay on loans to each other) have increased a lot because of the credit crunch. Both of which makes rises in interest rates a certainty in my book!

I think the public are led to believe that when the BofE adjust rates it is automatically passed the customer when in fact it is interbank lending which determines this.I think we may see a panicky small cut next month and then back up by xmas

i thought rates were falling

why then has US cut its rates so low

we were not in eu historically

Noddy - I just cannot see them taking the risk on a cut right now - the inflationary pressures are just too high - but perhaps you are right - perhaps they will be panicked into it!

the US market is very, very different to the UK housing market, although the BBC would like for you to believe otherwise.

their sub-prime market was on the backs of people with poor credit, not generally people borrowing 6-10x their income.

they also don't offer nearly the number of variable and mixed interest rate mortgages that are on offer here.

the majority of mortgages are fixed rate over 25 years.

there is also NOT the huge percentage of BTL that there is here. the bulk of rental property is in teh form of apartment complexes owned by large corporations, who contact the management to a property management company.

He more or less said so the other day but the long term forecast is definitely for rises.the BofE said iirc that they could see inflation hitting 3%(and the rest!) in the next 6 weeks and so there priority is to get it back to 2 so would expect quite sharp rises towards the end of 2008 and into 2009.

Selfshly, if prices drop we should still be able to afford somewhere with a 20% deposit and at 3 x income or less. But I know we're lucky. And we will be competing against people who sold to rent and have cash.

Capital Economics have always, always made the biggest shock predictions of house price falls. DH and I bought our first flat in 2004 and then they were predicting 20% falls in the following year.

The cynic in me might dare to suggest they do it to get their name in the media...

would house price dflation not offset wheat and oil prices

But why would you buy as soon as prices drop to affordability for you WWW? Wouldn't you be tempted to see how much lower they go? (am thinking back to early 90s crash when my flat purchased at £76,000 went as low as £50,000). If you jump on the property bandwagon as soon as you can afford it you could still find yourself in negative equity. Or perhaps that's not an issue?

'would house price dflation not offset wheat and oil prices'

no, because those are determined by worldwide markets, not the UK housing market.

no but with regard to inflation in uk

I plan to buy this year for various reasons one of which is the appalling rentals where I am.But i am looking for a home and won't be getting a mortgage so I am looking for a reasonable drop but not a miracle!I am aware anything I buy this year will be down next and if I was getting a mortgage I wouldn't dream of buying now

UK inflation has no real bearing on teh worldwide price of wheat and oil.

the worldwide price of wheat, for example, is far more dependent on weather factors.

eekamoose, we have been in our current rented house for 2 years and are staying another year but after that, next year, I would really like to buy somewhere we're going to stay for a long time. So as long as I think it's a fair price and as long as we can afford it, I'd be happy to buy. I won't buy as soon as they drop to affordability, I'll buy when I think it's near the bottom but hey, even the experts can't predict when that'll be so I'll have to guess

I remember the last crash, my mum lost money on a flat in central Bath, unthinkable before that crash.

oil prices have been heavily influenced by underestimated demand in many developing nations.

on the supply side, low oil prices - for the crude and 'light' products such as gas and diesel - in the past decade has lead to underinvestment in oil production and this has affected prices as well.

on the whole it's a volatile market, but any effect the UK housing market may have on it would be beyond negligible.

Wickedwaterwitch after taking a lot of advise we sold last year still at top price (ish) and are now renting .. waiting to see how the prices drop and see if we can afford the bigger house we actually need but just couldn't quite afford.
Although IMO and I could be really wrong here.. those who may end up with NE will stay put until the market recovers, if they can keep affording their payments.
But I also wonder how it might affect social housing, with it looking as if a higher proportion of people may jolly well need it.

Because the last property crash was relatively recent, and since then house prices have gone stratospheric, this will affect current owners/buyers' behaviour.

Every second person I meet is saying, "Oh, I can't wait to buy a bigger property/dream property/holiday home when the prices drop." Now, if so many people are saying this, and also don't forget there are an awful lot of older people now with substantial savings, hoping for a seaside cottage or to buy their children something then prices won't drop by much because the competition will still be there.

And unless interest rates soar, sellers will sit tight in the maybe right/maybe wrong knowledge that their property is a long-term investment.

Fircone I do agree and we do have a plan B ( just to build what we want on land bought for the purpose) .. But Still hoping to find the house I want just that bit cheaper and leave plan B for the kiddies if the need it.

Yes, people are waiting for bargains because, at the moment, we all feel relatively comfortable - no huge rises in unemployment etc yet. BUT, when interest rates start creeping up again (and they will) and those people who want to buy a bigger and better houses find they can't offload their current ones because it is harder/more expensive to get a mortgage then the crunch will really start to set in. The fact is that many people have lived for several years beyond their means and that lenders are starting to call in their debts and will become increasingly aggressive about it. There is going to be a glut of ex-BTLs on the market next month when CGT is lowered and I think that that will really signal the beginning of the end.

Can't get over the way that everyone thinks that the downturn effects all other people except them - have a neighbour who has put on her house at #825+k even though she knows the house two doors away has only just sold at a rumoured #720k (much nicer house as well, imo - better extended and no kids to scuff it up).

Those who can afford it will sit tight but I already know two people who have had to sell in a hurry (and a discount) because they came to the end of their discounted deals and couldn't keep going on the new ones. It doesn't take much - going from FT to PT work or a divorce - and many people will be stranded.

I have noticed that 3 of my friends are on dodgy ground financially. One has a fixed rate that has come to an end which apparently she can't afford to pay with her credit card payments at the level they are. Her mortgage broker has told her to wait until May before getting a new deal as there is a part of the mortgage fixed until July. She has said that unless they can get a cheaper fixed deal closer to the previous one (4.5%) then they will have to move. I suggested that if this would be even a remote possibility then she should put the house on the market sooner rather than later. "I don't want to think about it now, will deal with it in a few months" was the reply.

Second one has a DH who is a builder. He spent a couple of months not taking on work so he could do their house. Then after Christmas money run out and he needed to look for work. There wasn't any. He has something now but the guy hasn't paid him and when I last heard she had had to borrow from her brother so they can eat.

Final one is my lovely friend who has the most *** of an H possible. He hit some financial difficulties and decided he needed to sell the house and that he was leaving her. She was so in shock that she didn't tell anyone for months that he'd left her so by the time her friends became involved, he got her to buy a house in her name with an interest only mortgage of £1250 a month and to lease a car she can't afford to run. He has now threatened to stop paying the mortgage and bills. She does have a business she has just started which hopefully will bail her out and hopefully will get a proper divorce settlement so with a large bit of luck and some very hard work will be OK, but I am extremely worried about her.

I guess any/all of them might be forced to sell up in the next few months and will have to take what they can get to clear the mortgage and I guess it is people like these who are forced to sell who are a true reflection of what is happening to house prices rather than those people who would like to move but don't have to.

We're in the process of re-mortgaging our rented property and are being clobbered for 2.5k arrangement fee vs £549 last time round 3 years ago. And we have to get the freehold converted to leasehold (it is 2 flats)as the broker has said he can't get a decent deal if we don't. We bought it to live in 8 years ago and have always managed to get a mortgage without too many problems. So interesting to see how much things have changed. We are going to hopefully take an additional 20k out and were going to do an extension but have decided that we need to be sensible and it off the mortgage from our house and the rest of the money saved for the extension is going to into ISAs as the multiples on our residential mortgage are higher than I feel comfortable with in the current climate.

All anecdotal I know but have found it very interesting (and sad for my friends) how much things have changed in less than the space of a year. Everyone else I know seem fine, it is those people who were completely confident that house price inflation would continue indefinitely and had a tendency to live off the equity from their house who are now the first to be hit. The mortgage broker said last week when we discussed it all that he has some clients who he has been telling for years that they can not live off their house equity but they refused to listen to him.

Ah, here you all are. I can't keep up with all this negative sentiment.