Today is a big number day. The Council of Mortgage lenders will announce the latest home repossession data. The number will be bad, and could possibly reach the levels seen in the mid-1990s. Whatever number the CML publishes today, 2008 will be worse than 2007. Around 1.4 million UK homedebtors are coming off those teaser rates this year. From here on out, repossessions are going to soar.
The bubble is over because the repossessions numbers tell us so.
6 comments:
coming off the teaser rate might not be a killer for that many people. just scanning Moneysupermarket, it looks like their are plenty of mortgages available around 5.50% or so, even up to 95% LTV.
i guess the lowest someone would have managed to get a mortgage in the last few years will have been around 4% or so, so even going from that to 5.50% is ~35% or so, which should be manageable for anyone who budgeted properly when buying (i know i know, plenty people would have stretched).
as i've mentioned before, we are different from the US because we can't just walk away from property, since the banks will chase you for all your other assets (recourse lending versus the US non-recourse lending). so i expect the US to have a worse housing crash than the UK for a few years.
It may not leave as much blood on the floor as the US, but we should remember the last housing crisis of 90-92, when prices in London dropped some 25%. The magnitude of this bubble is at least x2, so there is every reason to believe and hope that prices could come down 50% in the next 2-3 years. There is just one problem attached to this scenario: interest rates in the early 90s went as high as 15%...It's altogether possible that people will just hold on this time round, because, as you mention, TB, the Brits cannot utilize "jingle mail" the way the Yanks do. However, our debt problem is colossal, and I read today that repossessions are soaring--not as high as 90s. Yet. Let us prey for the crash. Sorry, pray.
I have no sympathy for those people who have paid "the full asking price" (or more !) and find that their 2 bedroom cottage in Cheshire is no longer worth the £300K they paid for it but £150K - say by 2009 ?
It is those type of people that have helped drive up prices in the first place... poetic justice I say !
I am writing from Ashland, Oregon, USA. Ashland is a great place. It has the Oregon Shakespeare. The plays put on here often win Tony awards. It is also very expensive, relative to the area. There are so many houses for sale here and repos as well. In our neighborhood, there are foreclosures galore. There also are tons of rentals as well. We rent, as we couldn't afford the expensive homes. But maybe in the next 5 years or so, we will be able to purchase some property, when the prices come back to reality. This place is a cultural gem in a very rural valley, on the California border. We are about 80 miles from Crater Lake National Park
The previous message brought to you by the Ashland, Oregon Chamber of Commerce.
I'd rather hear from the Ashland partisans than another UK realtor telling us that prices have stabilized! I think Oregon sounds wonderful after living in Ladbroke Grove for the past year.
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