A homeowner speaks

"Housing boom over as UK bank chaos grows", is the headline in the Observer. On reading said article, what it actually means is that growth in house prices is predicted to slow to a more-in-line-with-general-inflation 3% over the next year. About fucking time! You’d think they were talking about some desperate property price crash that’s about to see millions of people locked in negative equity. Instead, what’s predicted is simply a modest rise in homeowner’s projected theoretical ‘wealth’ – ‘wealth’ which is completely fictional unless you’re selling to remove yourself from the housing market. You never see it pointed out that house price rises don’t actually make people richer, because whatever they move into will also have risen accordingly, do you? ‘Oh no, smug middle class twats won’t be able to sit around dinner party tables commenting on how their house has quadrupled in price over the last six months.’ This is a long overdue – and desirable – correction of the market. I’d like to see some headlines along the lines of "Phew! Ridiculous hysteria takes a breather for wages to attempt to catch up to prices!" or "First time buyers hopefully not so shafted as they thought!"

House prices still going up, media. Just more sensibly. Please remove heads from Chelsea-residing arses now.

Oh – Uncle out of intensive care, thanks. His kidneys packed up for a while, but apparently it’s all OK now. Until the next infection. Hospitals. Bless ’em.


8 responses to “A homeowner speaks

  1. Kate September 17, 2007 at 9:40 am

    Hmmm not sure it’s that simple. Problem is, people with mortgages are going to find their lenders becoming far stricter about the rates at which they lend – and that will lead to repossessions, as well as a lack of demand at the bottom end of the market because fewer first time buyers will be getting mortgage approvals. Which will probably mean a fair bit of housing market stagnation for a while.
    I know I’m already rehearsing the arguments for when I have to re-mortgage next spring, anyway.

  2. Rachel September 17, 2007 at 9:51 am

    It’s mainly the “credit crunch” that will cause problems for remortgageing, surely? These lower house prices are the eventual result of the Bank of England’s interest rate hikes.
    Yeah, I’m having fun imagining my new mortgage rate next spring as well. Yay.

  3. Kate September 17, 2007 at 11:43 am

    Yes, it’s the credit crunch that causes lenders to become far more circumspect about lending. That was my point.
    Interest rates are going to start coming down shortly, though – it’s not the base rate that’s the problem, it’s that there will be an increasing gap between the base rate and lenders’ rates, due to their reluctance to lend.
    Having said that, 3-month LIBOR is heading back down from a peak of 6.91%, probably due to UK banks accessing the ECB’s 3-month credit line last week – something the BoE refused to do, though I guess it’s going to be under pressure from Alistair Darling to reverse that decision.

  4. Kate September 17, 2007 at 12:10 pm

    BTW – UK housing market is overvalued by 20% according to Fitch. So a 20% drop in values wouldn’t be an unreasonable expectation.

  5. Rachel September 17, 2007 at 12:36 pm

    Surely the UK housing market’s going to continue to be overvalued for long after the impending dip, we just don’t have enough property, do we? (I know, I know, I’m not exactly telling you anything you don’t know! Heh). I can’t imagine a fall would go to 20%, not round these ‘ere parts.
    Tbh, when it comes to remortgaging I’m sure people will start taking steps right now to make sure they’re in the best possible position to get the best possible deal (I couldn’t access a lot of the best deals when I got my initial mortgage cos I hadn’t been in the job long enough. There’s a lot to be said for just sitting on a job until that paperwork is finished!). Even if there’s an actual fall in prices, as opposed to a fall in price growth, people who are coming up for remortgaging shouldn’t find themselves hit by a negative difference between their mortgage and house valuation; any deal period will have been long enough to include a decent cushion of price increase from which to fall. I’m not overly worried.
    (I’m also not that sympathetic to anyone who’s overstretched themselves to get a mortgage. Lenders have been incredibly irresponsible in the amounts they’ve been lending, but one still has to look at ones finances oneself and think “that’s stupid”. I could have got a mortgage of something like £200k+. It’s not something I’d ever have done!)
    It’s like the Northern Rock thing innit? I want to run into the street shouting “Don’t panic! Don’t panic!”

  6. Kate September 17, 2007 at 12:58 pm

    The concern regarding re-mortgaging is more to do with rate rises than revaluations. My current interest rate is nearly 100 basis points below the base rate – if I was coming off that right now, I’d be looking at around a 100 basis point increase in my payments. In real terms, that’s the difference for a lot of people between hanging in there and becoming homeless. And there is a lot more sub-prime debt out there than people think – my mum was saying she’s been seeing massive numbers of sub-prime repossessions coming through her court already, and it’s heartbreaking.

  7. Kate September 17, 2007 at 12:58 pm

    *doh, shoulda typed 200 not 100 bp increase in my mortgage costs.

  8. Rachel September 17, 2007 at 1:58 pm

    Is the one time I ever get to be vaguely smug about having a variable mortgage?! I’m paying £100 a month more than I was a year ago, but at least it went up gradually. Anyway, discounted mortgages will still be out there, just not as ‘discount’ as they have been. You’ll never get hit with the full rate unless you’re, like, totally uncreditworthy. (Yeah, I know, I’m utterly heartless on this one. Which is odd, given I’m generally such a fucking bleeding heart liberal.)

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