How Far Will House Prices Fall? [Volume 6]

How Far Will House Prices Fall? [Volume 6]

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MX-6

5,983 posts

212 months

Monday 1st March 2021
quotequote all
NickCQ said:
richardxjr said:
equity release ... future mis-selling scandal bound to happen?
There will certainly be a lot of disappointed inheritors who didn't realise granny's house was financed at >100% LTV when you include rolled-up interest.
I've wondered whether a more widespread use of equity release would impact house prices negatively somewhat, given that inheritance must be priced into property to some extent. If more released equity is used for consumer spending and not property. Previous older generations, my grandparents for example, were used to being very frugal and not spending anything but people now seem to maybe have different lifestyle expectations.

I've a family member who has a large house in the country, I found out via the family gossip that he still has a large interest only mortgage on it despite being retired, with no intention to pay it off. I'm not sure how typical this is but I wouldn't be surprised if this sort of thing is more common these days given the higher house prices.

anonymous-user

53 months

Monday 1st March 2021
quotequote all
NickCQ said:
richardxjr said:
equity release ... future mis-selling scandal bound to happen?
There will certainly be a lot of disappointed inheritors who didn't realise granny's house was financed at >100% LTV when you include rolled-up interest.
This is going to be the new PPI scandal in a few years. I can imagine it now, Daily Mail story with a picture of a woman with the "Sad compo face". Complaining about the nasty equity release company trying to take "granny's house" away from her, and having to deal with the stress after just burying her.

How Granny "didn't know what she was signing" even though she spunked the money up the wall on cruises, holidays in Gambia and a new Honda Jazz.

kingston12

5,473 posts

156 months

Monday 1st March 2021
quotequote all
Joey Deacon said:
I predict that once these government backed 95% mortgages are available the market is going to go mental. We will just be out of lockdown, the weather will be better, people will have saved money over the last 12 months and suddenly they have the £20K required for the deposit.

I was looking for a property in 2014 and the process was

1)Every house is an open house inspection.
2)You get there and there are 20 other couples all looking around the house.
3)Everyone is looking at everyone else and thinking "fk, if we don't buy a house soon we will never get one"
4)The estate agent stands in the middle of the room and announces "We have just had a full asking price offer from someone who has not even viewed the property. It is now going to sealed bids"
5)At the end of the viewing everybody leaves and walks to the next house as a group.
6)You get talking to an agent and he informs you of a house that is not yet on the market as yet but he might be able to arrange a viewing that afternoon.
7)You view the house and offer full asking as you leave
8)You get a call saying that there were three full asking price offers over the weekend on that house so it is going to sealed bids.

I can see prices rising 10% next year once this comes in.
I remember it well. Given that you're local to me, we might have even been looking at the same houses during that period.

The worst one I remember was going to look at a virtually derelict auction property in Kingston. They'd arranged an hour's viewing window once a week leading up to the auction. The house is down a quiet side road that I know quite well. When I got there, the road was gridlocked with traffic, cars double parked everywhere and a queue of around 100 people outside the house.

I decided not to bid as the structural work required would have made it too expensive for me. A lot of the people viewing were clearly in the trade and it went for way above the guide price.

I agree with your estimate of double digit inflation coming back with this latest announcement.

richardxjr

7,561 posts

209 months

Monday 1st March 2021
quotequote all
Joey Deacon said:
NickCQ said:
richardxjr said:
equity release ... future mis-selling scandal bound to happen?
There will certainly be a lot of disappointed inheritors who didn't realise granny's house was financed at >100% LTV when you include rolled-up interest.
This is going to be the new PPI scandal in a few years. I can imagine it now, Daily Mail story with a picture of a woman with the "Sad compo face". Complaining about the nasty equity release company trying to take "granny's house" away from her, and having to deal with the stress after just burying her.

How Granny "didn't know what she was signing" even though she spunked the money up the wall on cruises and a new Honda Jazz.
It's got the potential to become the new norm as a replacement for pensions in the next generation. I bet the latest iphone and PCP'd Audi lot aren't paying more than they have to into pensions. I see high compound interest and the big lenders doing it now. Handy way for 'the banks' to get hold of all that lolly tied up in houses. It's the ultimate 'buy now pay later' product isn't it?

NickCQ

5,392 posts

95 months

Monday 1st March 2021
quotequote all
richardxjr said:
Handy way for 'the banks' to get hold of all that lolly tied up in houses.
You won't find banks offering equity release products as they were effectively banned by the regulator after a previous scandal. It's all insurance companies (Aviva, Just) / pension consolidators (Rothesay, PIC etc) these days as they are better placed to handle the implicit longevity risk and non-negative equity guarantees.

anonymous-user

53 months

Monday 1st March 2021
quotequote all
NickCQ said:
You won't find banks offering equity release products as they were effectively banned by the regulator after a previous scandal. It's all insurance companies (Aviva, Just) / pension consolidators (Rothesay, PIC etc) these days as they are better placed to handle the implicit longevity risk and non-negative equity guarantees.
This was my favourite one, and that good advice will only cost you 1.99% of the sum released.




Not going to be much left when Granny dies with an interest rate of 4.48% compounded.

"In the Spring 2020 Market Report, the Equity Release Council stated that average interest rates for Equity Release were 4.48%."

kingston12

5,473 posts

156 months

Monday 1st March 2021
quotequote all
richardxjr said:
It's got the potential to become the new norm as a replacement for pensions in the next generation. I bet the latest iphone and PCP'd Audi lot aren't paying more than they have to into pensions. I see high compound interest and the big lenders doing it now. Handy way for 'the banks' to get hold of all that lolly tied up in houses. It's the ultimate 'buy now pay later' product isn't it?
Definitely.

I was just thinking the other day about how we don't hear the phrase 'Pension Timebomb' any more. That used to be everywhere, and I remember it every time I open one of my pension statements.

As you say, very few people will put in any more than the absolute minimum contribution and that can be just a few percent in a lot of cases. Then the returns on standard corporate pensions is very poor as well - it's all very well getting compound interest, but it still doesn't add up to much when the returns are consistently low.

Equity release is the easiest solution to this, especially for those with no children to pass wealth on to.

richardxjr

7,561 posts

209 months

Monday 1st March 2021
quotequote all
Anyone else seeing 'for sale with tenant in place' increasingly? Or it might just be a local btl-er thinning portfolio I guess.



NickCQ

5,392 posts

95 months

Monday 1st March 2021
quotequote all
Joey Deacon said:
This was my favourite one, and that good advice will only cost you 1.99% of the sum released.
That is meant to be the protection against mis-selling, I think you can't get "execution-only" equity release, you have to be advised.

ooid

4,049 posts

99 months

Monday 1st March 2021
quotequote all
richardxjr said:
Anyone else seeing 'for sale with tenant in place' increasingly? Or it might just be a local btl-er thinning portfolio I guess.
More than common especially for commercial buildings sale. You need to declare and show all tenants in place, and their lease renewals/break dates or any arrears, etc to make a cash-flow model and investment value. Same with student accommodation and residential for investment purpose sales.

Sheepshanks

32,530 posts

118 months

Monday 1st March 2021
quotequote all
Joey Deacon said:
This is going to be the new PPI scandal in a few years. I can imagine it now, Daily Mail story with a picture of a woman with the "Sad compo face". Complaining about the nasty equity release company trying to take "granny's house" away from her, and having to deal with the stress after just burying her.

How Granny "didn't know what she was signing" even though she spunked the money up the wall on cruises, holidays in Gambia and a new Honda Jazz.
MY FIL, who always lived life large, did equity release without telling anyone. I don't know the details of the deal, but he basically gave up 50% of the equity for an advance of 25% of the equity.

Shortly after he did it, MIL died. Their house had a large garden which was very much hers and he didn't want to stay there. We (the family) eded up having to give him money to buy another house!

kingston12

5,473 posts

156 months

Monday 1st March 2021
quotequote all
Sheepshanks said:
MY FIL, who always lived life large, did equity release without telling anyone. I don't know the details of the deal, but he basically gave up 50% of the equity for an advance of 25% of the equity.

Shortly after he did it, MIL died. Their house had a large garden which was very much hers and he didn't want to stay there. We (the family) eded up having to give him money to buy another house!
Ouch! That's one of the real downsides of equity release. It allows people to stay in their (typically large) homes that are probably great when they're 65 and married but not so great at 85 and widowed.

At least if they have to move into a care home and the money has run out then the state will pay to a basic level, but if they just need to downsize its much more difficult.

Pit Pony

8,266 posts

120 months

Monday 1st March 2021
quotequote all
richardxjr said:
Anyone else seeing 'for sale with tenant in place' increasingly? Or it might just be a local btl-er thinning portfolio I guess.
Well they can't evict them at the moment.

The advise I was given was don't buy a buy to let with a tenant. Because why would you sell a house that's making money?
But taxation changes are probably the reason. If the interest Is no longer tax deductible and you are in the 40,%^ tax bracket, then that's potentially not making it worth the hassle.
£8000 rent, £2000 interest
Old tax system, £6000 profit, £2400 tax. Net income £3600
New tax system £3200 tax net income £2800.

House prices are perceived to be in a bubble. So if you think that values are currently at a high and you have £100k equity but this time a year ago it was £70k equity, you might decide to put them all.up for sale and see what happens. With a five properties, you might end up with £400k Today instead of £15k a year for the next 25 years.






Leicester Loyal

4,517 posts

121 months

Monday 1st March 2021
quotequote all
ooid said:
Are you renting now? If so, even in the worst case scenario you won't be paying any rent, and that's a big + (unless you are not over-stretching your budget).

beer
Living at home rent free thankfully, otherwise I'd be buying anything to get onto the market tbh. I want to take my time and wait but fear the prices are just gonna keep going up and up.

Flooble

5,565 posts

99 months

Monday 1st March 2021
quotequote all
I am concerned about the latest 95% mortgage wheeze.

I totally get that it's hard to save a deposit while renting. However, previously deposits acted as something of a filter to prevent the fiscally irresponsible from buying. While the new government support will help people who are flattened by rent, it will also open the door to those without any financial nous.

I'm not sure if banks will still do the "stress test" checks, I suspect there will be political pressure to wave them through.

So we'll have another zoom in prices (especially if people who have no grasp on value are bidding - someone who only thinks in terms of "want it now" and "weekly cost" is going to be vulnerable to wildly overpaying). But in a couple of years' time, are we likely to start seeing lots of "compo face" stories with people who should never have had a mortgage in the first place sinking under a mountain of debt.

Friends kids have been shocked after buying their first place to find that now it's their problem if the boiler breaks or the bath leaks. Budget for repairs? Not even thought about it.

okgo

37,859 posts

197 months

Tuesday 2nd March 2021
quotequote all
To be fair, 5% isn't back of the sofa money for most people either. Especially in the South, also it wasn't that long ago that you could readily get 5% deals without any gov help etc.

In 2013 I was on track to get a 5% deal via Sarnie actually, then at the final hurdle it failed because my partner of the time had missed a payment on a store card or some such council behaviour. Annoyingly then had to find another 10k which took a little while!

turbobloke

103,742 posts

259 months

Tuesday 2nd March 2021
quotequote all
If I heard it correctly a radio news item just claimed we've hit a new record for the average uk house price.

z4RRSchris

11,221 posts

178 months

Tuesday 2nd March 2021
quotequote all
okgo said:
To be fair, 5% isn't back of the sofa money for most people either. Especially in the South, also it wasn't that long ago that you could readily get 5% deals without any gov help etc.

In 2013 I was on track to get a 5% deal via Sarnie actually, then at the final hurdle it failed because my partner of the time had missed a payment on a store card or some such council behaviour. Annoyingly then had to find another 10k which took a little while!
its not crazy money though, £25k on a £500k house. between two that's achievable in a year or two of saving (or Corona money saving). not like dropping 100/200k

I can see the market going pretty stupid.

MX-6

5,983 posts

212 months

Tuesday 2nd March 2021
quotequote all
turbobloke said:
If I heard it correctly a radio news item just claimed we've hit a new record for the average uk house price.
Yep they are up again, Nationwide reporting a 0.7% month on month rise last month.
https://www.bbc.co.uk/news/business-56250728

okgo

37,859 posts

197 months

Tuesday 2nd March 2021
quotequote all
z4RRSchris said:
its not crazy money though, £25k on a £500k house. between two that's achievable in a year or two of saving (or Corona money saving). not like dropping 100/200k

I can see the market going pretty stupid.
No of course. But if you can save 25k then probably you can save 50k. Saving 100k or 200k for most people is never going to happen.