Britain faces crisis as negative equity to reach 2 million

Britain faces crisis as negative equity to reach 2 million

www.timesonline.co.uk

Collapsing house prices are plunging 60,000 homeowners a month into negative equity, which means the country is on course for a worse crisis than the 1990s crash.

Many more homeowners will now be afraid that the bank may suddenly repossess their property. Repossessions have soared to 19,000 in the first half of the year, up 40% on the previous six months. That figure is expected to rise to 26,000 in the second half of 2008.

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Where is the logic in the banks who reposses homes only to lose more money on them. As the banks have now tightened the purse string on mortgages surely it would be better to keep the family in the home and not toss them out as ultimately this makes the situation worse for the banks. Getting some money out of the owner is better than leaving house standing empty for years.

Thwe average mortgage is 25 years so alot can happen over that time so why the panic now. Is there somthing else going on and not only thaty why is the Goverment not stepping in to stop this as people have to be re housed somewhere. Why is it the Goverment can find billions to bale out the banks but yet have no money for the little people.

www.timesonline.co.uk
(visit the link for the full news article)

reply to post by magicmushroom


You have a good point, why throw them out when they'll lose money on the house? Northern Rock have been particulary bad at this lately. Maybe the banks assetts are insured or something?

The thing is, these people need to live somewhere, if the rental market gets flooded with all these people needing re-housing rent will inevitably increase - its almost the same cost for a mortgage as rent.

Seems like a viscious circle.

Sounds like the UK is living a parallel nightmare to the states. I just read where the brits will have an additional MILLION people JOBLESS by X-Mas of this year. The same genius policies creating the same serf / pauper civilizations.

Originally posted by magicmushroom

Thwe average mortgage is 25 years so alot can happen over that time so why the panic now. Is there somthing else going on and not only thaty why is the Goverment not stepping in to stop this as people have to be re housed somewhere. Why is it the Goverment can find billions to bale out the banks but yet have no money for the little people.

www.timesonline.co.uk
(visit the link for the full news article)

With or without negative equity there is no reason for anyone to have their house repossessed or to become homeless because of that, though in most cases the solution does require the mortgage holder to increase debt or take a reduced value for their home for a cash sale.

Behind the rather unstable domestic mortgage market is a flourishing buy to let market which has slowed down in the past 12 months but is so far ticking along very nicely. In response to the negative equity problem and the growth of personal debt several companies have sprung up in the past few years which buy your house, quick sale, cash purchase, generally at 85% of the FMV, then, if you so choose, rent it back to you. As most buy to let mortgage products are based on 85% equity the purchase of your house costs them practically nothing but fees.

It is widely accepted that those who own their own homes are less likely to riot. The greater the value of individuals property the more likely that person is to support the status quo. The current repossessions, the cash purchases and negative equity, serve to reinforce social division between the 'classes'. Though the middle and professional classes are getting screwed by tax and high prices, they are less aware or less prepared to stand up because they are benefiting from the misfortune of those less educated or with less secure incomes.

By allowing the hoarding of property, the lenders are creating a landlord class which serves the Powers that Be by preserving and at the same time minimising the risk of dissension. The landlord class need to think that they could change the system but not want to change it. This is how status quo is preserved. For some people, however put upon they know they are by their leaders, they will support them so long as those leaders provide someone for them to look down on and possibly exploit. The current housing market provides just that opportunity. Fortunes are to be made but only at the expense of others.

The bail outs received by these banks from our government could have served to wipe out all mortgage debt, as you say to spread it around to the little people. Instead the banks are nationalised and the cost of doing this added to the national debt and therefore, as the national debt is secured on future tax revenues, ensuring that we, the little people, will be paying that debt off for years to come.

Ain't life grand?

reply to post by KilgoreTrout


Geez, this sounds like the mideval ages and ruthless kingdoms being played out all over again. History does seem to repeat itself, over and over again, just with different pathways to achieve the same end results. One thing that has remained consistent in mankind's time on earth is the diabolically limitless fixation of a few individuals to aquire all of the power and wealth at the expense of everyone outside of their circle...

reply to post by DimensionalDetective


Absolutely. The current economic 'crisis' merely serves as a reshuffle to ensure that the top remains static and the myth of social mobility is maintained. The main premise of the system though, as you state is the belief that it is okay to profit at the expense of others. Greed. This not only encourages corruption and criminality, but also conflict and resentment. As long as we are fighting amongst ourselves, we are not looking up at 'them' or for the source of the problem.

I cannot understand all the calls for a homeowner bailout and the blame being heaped upon the banks with no thought given to the homeowners responsibility in our current situation.

How many many of you would change your minds if the situation were slightly different? For example:
If you owned a home outright and YOU sold it to someone at what was at that time a far market price and YOU held the deed until they paid YOU for the house. What if YOU used that mortgage as collateral for a loan from a bank and then invested that money in something else paying a better interest rate? If property values dropped would YOU lower the principal on that mortgage and then pony up the additional capital for YOUR loan so that YOUR investments would not have to be sold? I doubt it.

I've got another idea; How about an SUV owners bailout. I mean with the price of gas nowadays the used market for SUVs has dropped like a rock and it is almost impossible to sell a perfectly good Lincoln Navigator or a Hummer for anything close to what you paid for it right? Why don't we pay those people as well for their stupid decisions?

Just my thoughts. Sorry if they are not well put I just woke up.

So, let me get this straight.

There are 2 parts to this,
negative equity and repossessions.

No-one should really fear negative equity too much - unless they are in imminent danger of losing their job, or got greedy and took out big mortgages with the intent of looking for a quick return within a few years as they assumed the housing boom would continue - these are the people who took mortgages out for 6 - 10 times their salary.
Madness.

Which brings us to repo's.
The taxpayers are shelling out billions to bail out the banks, and those very same banks are now repossessing the homes of those who have bailed them out.
In effect, they are repossessing the homes of their own shareholders.

Welcome one and all to the UK of "Prudence" Brown.

Although in fairness, I read somewhere that the government had ordered the banks which had been bailed out to use repo only as a very last resort.

Yes looks like the US will have company,the US going under will have a domino effect,why I don't think buying foreign currency will help matters any,pretty soon all cash will be worth the paper it's written on,guess small consolation we won't be the only broke country

reply to post by KilgoreTrout


RESPECT . And a masterfull command of the english language too .
may I have the honour of listing you as a friend ?

reply to post by reconpilot


I liked his account too. It's bang on reality here in the UK. I wish this country was more like Germany and had maintained a larger manufacturing base, then the finance sector would not hurt as much as its sure too. Those politicians have been forcing kids down the new age route, studying joke things and made industry severely unfashionable. All this time Germany encourages youth into engineering. What are we going to be left with here in the UK if finance and the joke property market business (builders and B&Q) fails?

For years I was telling friends and family that the property market here was being artificially inflated. A lot of the time I was ignored or given the old roll of the eyes it was brushed off as another of my conspiratorial ramblings.
The TV was airing one property programme after another which, after some time, moved on from simple makeovers to investment buying and eventually property development for the ordinary guy on the street. You just couldn't lose according to all the hype - invest now and make a killing!

The TV programmes no longer had a theme of "homes", but were more interested in how much a property would be worth in 2-4 years time and how many thousands of £'s profit could be made. It was all a scam as far as I was concerned that was geared to lining the pockets of the industry and financial big boys rather than the buyers. It was always going to produce a collapse at some point. Now we are seeing the results.
More and more money was being loaned out and people actively encouraged to buy bigger and better each time in a seemingly never ending cycle of property price rises, driven by the artificially created demand.

So, I now hear people with their "dream" houses bleating about negative equity and falling values and I can't help feeling the old "I told you so" smugness creeping in. Despite encouragement to buy into the scam, I stuck with my rented flat and have no worries about negative equity or repossession.

It's not really a credit crisis that we are facing but a repayment crisis. From the mortgage payers to the banks and lending institutes. The whole pyramid scheme is failing and, as usual, only those at the top of the scheme are smiling.

[edit on 25-10-2008 by Britguy]

reply to post by Britguy

Exactly as I saw it too Britguy. The rolled eyes too lol! The responses were along the lines of 'there's no sign of it ending' and the like, along with Labour conning everyone that the economy was sound, boom and bust being consigned to the history books.
Truth is the only thing keeping the economy going was the property 'boom.' All those new out of town stores like B&Q built on the bulldozed factories of only a few years ago taking on the redundant workers. Tradesmen everywhere, builders, plumbers, sparkys enjoying this property 'boom.' The whole economy kept afloat by the massive inflation in property prices. Now finance down and property with it. This is going to be really bad. Now all we need is an Israeli attack on Iran and oil comes to a halt through the Persian Gulf. That would finish us off.
Those property programmes were on non stop, there's just too many to name, then they repeat them all day long. Sarah Beanie is like on the TV non stop! It's a conspiracy for real.

~negative equity~ should not mean a thing to a family that has decided to buy a house to live in.

decreasing house values only has meaning to those who are selling, trading or rolling-over a property.
but if you've decided to buy a mortgage on a property, and you've had it in your mind to keep the home for a decade or so.... you would be welcoming the decrease in the property value.

why?.... because the property taxes get reduced to reflect the real-time value of the property.

If suddenly, after 2-3 years, the resale value goes down, then you made a mistake in the piece of property bought, or a mistake in the type of property bought, with a 3-5 year resale window as a important factor.
in either case, -> let the buyer beware






edit:
~~~~~~ what happened to the 4 other paragraphs typed??? ~~~~~


[edit on 25-10-2008 by St Udio]

Originally posted by ufoorbhunter
reply to post by reconpilot

 

I liked his account too. It's bang on reality here in the UK. I wish this country was more like Germany and had maintained a larger manufacturing base, then the finance sector would not hurt as much as its sure too. Those politicians have been forcing kids down the new age route, studying joke things and made industry severely unfashionable. All this time Germany encourages youth into engineering. What are we going to be left with here in the UK if finance and the joke property market business (builders and B&Q) fails?

I was interested recently to hear Boris Johnson's speech (I think at the Tory party conference, though I can't quite recall), where he stated that Gordon Brown should not be allowed to penalise the banks for the current economic crisis. Boris's reasoning being that the financial sector was our only remaining major export. Despite my general distaste of the man, it was refresshing to have someone come out and say it. Brutal honesty is a rare thing in socio-economic circles.

We have no industry, as you state. We are, thanks to the US continuing to resist authorising stem cell research, on line to becoming world leaders in the biotechnology market, but this provides little in the way of solace to those currently looking for work. To meet the demands for scientific personnel to meet the needs of the growing biotech sector there will no doubt be more economic immigration further inflating our already unsustainably high population.

At present most of the major house builders are at a standstill. Developments up and down the country have ground to a halt due to the stagnation of the market. Not as straight forward as it seems though, there are still plenty willing and able to buy. What these developers rely upon is selling off plan. Due to a number of poor developments and a relaxation of standards, few investment buyers are willing to buy in this way. Without the upfront purchases, the developers cannot raise the funds necessary for the build. They asked for this situation by being greedy. However, the worker/employee does suffer for their employers greed so there is nothing to be gained from saying we told them so.

Importantly, we still, in order to meet current demands and future growth, need to provide some 20,000 homes nationally in the next few years. If the private market does not meet this demand then the public sector will have to. At this moment in time, for the first time in a long time, there is real opportunity for the smaller investor and house builders to get ahead.

Gordon Brown, to his credit, has reduced the Capital Gains threshold, which was previously set at such a level as to make it prohibitive to small building firms to build houses and sell them on. Additionally the price of self-build land, which had become hideously inflated (it should represent one third of the eventual value of the property, so a £150,000 plot should translate to a £450,000 house - seldom works out that way), has dropped sufficiently to make self-build a very viable option (also VAT free if you live in the house for a year after completion). Agricultural land in comparison is increasing steadily in value, which tells us any number of things about our future economic prospects.

Yeah I heard that from Boris, he certainly tells it like it is. Banks and builders, that's the UK economy of today. Both in dire straits combined with a world wide recession/credit crunch.

No one has mentioned another part of the UK homes problem.

...It's called 'Charging Order'

an obscure legal loophole, being used by banks & lenders, to actually sell a home right out from under the home buyer.

most credit cards, loans, car financing, store cards, etc.
all have a small print clause that allows the lender/financial firm
to secure a 'charging order' through the courts, for selling someone's house to pay off the outstanding loan or debt...
this is completely different from the mortgage loan on the house....

Just another case of the powerful elites abusing the public when they are in the midst of a upside-down property valuation & the mortgage payment is a negative equity black-hole. In 2-3 months of nonpayment of these other credit card bills, the vulture capitalists are spreading their wings over the prey.... adding to the home seizure and foreclosure crisis that is increasing monthly


basis: business.timesonline.co.uk...

reply to post by Britguy


I'm with you on that one...in fact there were so many 'property-flip' programmes on tv that there was little else used as 'tv filler'.

Although I saw the warning signs well in advance when the debt-consolidation adverts began to appear in place of the mortgage-finance ads that helped inflate the finance-bubble around last summer and knew this now-breaking storm was on the horizon

Northern Rock funnily enough have also re-possesed more homes than any other bank in the UK... This bank has also now been nationalised, so in effect the governement is taking it's own peoples homes away (and giving them to immigrants for free).