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March 29, 2024, 08:15:11 AM

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Cost Of Living Crisis (COLC) - How fucked are ye?

Started by shoulders, August 04, 2022, 07:11:31 PM

Previous topic - Next topic

Jerzy Bondov

Quote from: confettiinmyhair on August 05, 2022, 01:12:07 PMDo you do comping as well?
No fuck that, with the best will in the world, that's for unemployed middle aged women

Alberon

I really wouldn't care if my house dropped in price by half (a general drop, not because they built a nuclear reactor next door or something). It wouldn't mean anything to me.

My house has doubled in value since I bought it over a decade ago and the fact of the matter is I could not buy it now if I was in the same position today as then. Frankly, I couldn't buy it now if I was in my current position.

I'm not going to try to get at any of that equity though, the next decade is going to be difficult so.

katzenjammer

Quote from: Alberon on August 05, 2022, 02:33:21 PMI really wouldn't care if my house dropped in price by half (a general drop, not because they built a nuclear reactor next door or something). It wouldn't mean anything to me.


Me too. It would mean my next place would also be half price, tax would be less, and my children might one day be able to buy somewhere. The only people house price increases benefit are old people downsizing and the dead. Oh and btl landlords and property funds. Funny that

Twit 2

Quote from: Ferris on August 05, 2022, 02:12:33 AMAs someone who recently ditched a career to have another go at uni, is that an option? just pick something you might be halfway interested in, do an MA nights/weekends (or even fulltime) and see where that gets you? you could do one of them professional job-guaranteed type ones

You could even go back to the old gig and say "yeah id like to give it another try" for a year or two, save like mad, then peace back out.

I don't know your situation obviously and i'm a clueless twat at the best of times (i'm half-drunk on the day i forgot i have to write an exam and am furiously typing some old shite so i dont lose my scholarship lmao), but using uni as a crutch to reorient my life in a direction that is more positive has done wonders for me.

Happy to chat by PM if that's helpful, or you can tell me to fuck off like the presumptious twat I might be coming across as.

Thanks, all valid suggestions but not really something I want to explore. I'll be happy to get something that's above shit pay but not so far above as to make the job really stressful. Not too fussy. Just gotta get off my arse, pull myself together and get on with it. Main barrier is mental health.

TrenterPercenter

Quote from: Alberon on August 05, 2022, 02:33:21 PMI really wouldn't care if my house dropped in price by half (a general drop, not because they built a nuclear reactor next door or something). It wouldn't mean anything to me.

Whilst I agree the problem here is the debt to value ratio.  If you bought your house 10 years ago for 150k and it is now worth 300k that kindof works but if you bought your house for 300k and it dropped to 150K you would be screwed as you would be 150k in negative equity and still have to service 300k mortgage.

We purposely didn't buy a massive house borrowing everything that we could so we can insulate ourselves against this but lots of people just take the maximum.  It seems fair these people take the brunt but life is not as simple as this, lots of people who circumstances have change through no fault of their own, people who didn't now what they were getting themselves into etc...

katzenjammer

Quote from: TrenterPercenter on August 05, 2022, 03:23:52 PMbut if you bought your house for 300k and it dropped to 150K you would be screwed as you would be 150k in negative equity and still have to service 300k mortgage.

Doesn't matter unless you have to sell

Alberon

That's true, but it also doesn't bother me as I don't have a mortgage. When we bought we purposefully didn't extend ourselves to the limit because, well, in case something like this happened.

House prices really need to drop, but doing so would also hurt a great number of people so I don't know what the answer is.

Perhaps, and I know this is an outlandish idea, but what if, for instance, the local council owned a lot of houses and flats and rented them out at reasonable prices to those who needed them?

TrenterPercenter

Quote from: katzenjammer on August 05, 2022, 03:27:50 PMDoesn't matter unless you have to sell

If interest rate rises your 300k mortgage is going to cost you much more than your 150k mortgage.

talking purely about equity then borrowing twice as much as something is worth to pay for it has consequences, you have no equity, in fact you have negative equity, you are effectively bankrupt only you still have a massive mortgage to service.  It's also this line of thinking that propels people to just buy the biggest house so they can and stay in it - which pushes up prices.

TrenterPercenter

Quote from: Alberon on August 05, 2022, 03:33:38 PMThat's true, but it also doesn't bother me as I don't have a mortgage. When we bought we purposefully didn't extend ourselves to the limit because, well, in case something like this happened.

Exactly, so we did the same but a halving of house prices would punish us for doing so, it's when the crash occurs in relation to your purchase that matters.

There is also a problem here on what house prices dropping would mean? So that more people could buy houses? From the people that are being evicted? Then start inflating them again.

Pink Gregory

Quote from: Alberon on August 05, 2022, 03:33:38 PMPerhaps, and I know this is an outlandish idea, but what if, for instance, the local council owned a lot of houses and flats and rented them out at reasonable prices to those who needed them?

and what if, what if they owned enough housing and related infrastructure that you wouldn't even have to means test it, and you could just apply to rent a perfectly good house at a reasonable rate, that goes back into maintenance and essential services.

Fun counterfactuals...

katzenjammer

Quote from: TrenterPercenter on August 05, 2022, 03:36:10 PMIf interest rate rises your 300k mortgage is going to cost you much more than your 150k mortgage.

But you never had a 150k mortgage in your example, only ever a 300k one. Of course you have to pay more if interest rates go up, but you'd have to do that regardless of the housing market. The point is you don't make a loss until you actually sell. If you don't sell, the loss is just in your head. A paper loss.

Quotetalking purely about equity then borrowing twice as much as something is worth to pay for it has consequences, you have no equity, in fact you have negative equity, you are effectively bankrupt only you still have a massive mortgage to service.  It's also this line of thinking that propels people to just buy the biggest house so they can and stay in it - which pushes up prices.

But you didn't borrow twice as much as it was worth, the banks won't let you do that for a start, you borrowed what it was worth at the time. Nobody ever knows what's going to happen to the property market, might go up, might go down. As long as you can afford to pay your mortgage you have somewhere to live and it doesn't really matter. As far as I know the banks aren't able to come knocking for the difference. Again, being 'bankrupt' is just in your head. I agree it's not a place most people want to be but unless housing stops being a market it's an unavoidable risk of buying your own home.

katzenjammer

Quote from: TrenterPercenter on August 05, 2022, 03:43:56 PMThere is also a problem here on what house prices dropping would mean? So that more people could buy houses? From the people that are being evicted? Then start inflating them again.

Hopefully the additional supply would come from people that own more than one property first.

TrenterPercenter

#72
Quote from: katzenjammer on August 05, 2022, 03:57:02 PMBut you never had a 150k mortgage in your example

?? yes there was (sorry perhaps I wasn't specific about buying the house for 150K via a mortgage).

QuoteBut you didn't borrow twice as much as it was worth, the banks won't let you do that for a start, you borrowed what it was worth at the time. Nobody ever knows what's going to happen to the property market, might go up, might go down.

Agree with the latter point but the former isn't correct your debt remains the same, it isn't recalculated on current house prices.  Borrowing 300k to buy something that is now worth half has massive implications you are not considering what has happened here;

Boomer couple buy house when ridiculously cheap about 20k eventually want to retire to Spain therefore sell inflated asset to young couple with a child for 300K.  Market bottoms out house prices halve Boomer couple and bank walk away laughing with young couples money, young couple have 300k debt and negative equity of 150k.

That isn't ethical, the people that "win" in this situation are the good guys.  Throwing these people under the bus for future generations to being the Boomer couples gains again isn't the great leveller over the longterm.

QuoteAgain, being 'bankrupt' is just in your head

Sorry you are losing me here, as it is seems quite glib, being bankrupt isn't in your head your mortgage is secured debt in that security it is tied to you, you have negative equity you would be insolvent because you would have -150k equity.  This isn't in your head, you could declare yourself bankrupt and lose your house but other wise you are servicing a massive debt with no way of borrowing without some hefty costs.  The idea with negative equity is you have to wait it out until house prices rise again which means you are tied to your house you are stuck despite what might happen in your relationship or circumstances.  Saying this is all in your head is just very dismissive of the problem.

EDIT: just checking you unsecured loans are not (necessarily) impacted by loss of equity so you are not completely insolvent however you would not be able o remortgage so would go onto banks variable rate which could mean you are unable to pay your mortgage + will be paying excessively more for it.   It's still utterly shit impactful beyond just imagining it being a problem.

TrenterPercenter

Quote from: katzenjammer on August 05, 2022, 03:59:18 PMHopefully the additional supply would come from people that own more than one property first.

I think I'm thinking about this a bit more than you are willing to.  Rich people, renting houses to poorer people will increase rents to cover the interest payments on the properties they own.

Quote from: kenneth trousers on August 05, 2022, 09:52:42 AMThe last two new starters that I've had with me at work (freight train driver) are graduates in their late 20s who have previously bounced from one depressing office job to the next.
Their relief to have escaped that life is palpable.

Sound like a cool job - how much do you get paid?

greencalx

Five years ago we took out a 10-year fixed rate deal on our mortgage, which meant we were maybe paying over the odds until a few months ago. The main motivation at the time was to reduce uncertainty around our outgoings, since my wife had just gone freelance with the income unpredictability that entails. That meant we maybe paid a bit of a premium until now, with trackers being a bit lower than our fixed rate; but I expect that will now get cancelled out by the current sharp rises. I don't take any particular pleasure out of any net savings - things are going to get very difficult for a lot of people shortly, and this will probably ricochet around the whole economy.

Now that my wife has regular employment again I'm feeling a bit more relaxed about the sharply rising energy bills, but given our northerly location and the pisspoor insulation, our energy usage is about 50% higher than the UK average, so it's going to bite. (As mentioned on another thread, the idiosyncratic design of the building makes insulation really really difficult: much of the loft space is barely accessible, for example. I suspect the solution will be internal insulation boards, which will be a lot of upheaval, but I think we probably need to bite the bullet to get the place a bit more comfortable in the winter).

katzenjammer

Quote from: TrenterPercenter on August 05, 2022, 04:19:48 PMI think I'm thinking about this a bit more than you are willing to.

Oh wow!

QuoteRich people, renting houses to poorer people will increase rents to cover the interest payments on the properties they own.

Landlords can only raise rents as much as the market will bear, their margins will be squeezed by higher inflation for repairs and other overheads, and as prices drop they'll stampede for the exit hoping to cut their losses or lock in gains, further pushing prices down, as when any other asset bubble bursts. Also they don't have the same protections in place as owner occupiers when things get tight. But I'm sure you've thought about all this.

Ferris

Quote from: katzenjammer on August 05, 2022, 03:57:02 PMBut you never had a 150k mortgage in your example, only ever a 300k one. Of course you have to pay more if interest rates go up, but you'd have to do that regardless of the housing market. The point is you don't make a loss until you actually sell. If you don't sell, the loss is just in your head. A paper loss.

But you didn't borrow twice as much as it was worth, the banks won't let you do that for a start, you borrowed what it was worth at the time. Nobody ever knows what's going to happen to the property market, might go up, might go down. As long as you can afford to pay your mortgage you have somewhere to live and it doesn't really matter. As far as I know the banks aren't able to come knocking for the difference. Again, being 'bankrupt' is just in your head. I agree it's not a place most people want to be but unless housing stops being a market it's an unavoidable risk of buying your own home.

Completely agree with this. Your house's "value" is entirely hypothetical unless you try to sell it. If an estate agent told me it was worth 10 million quid or 50p I wouldn't care other than intellectual curiousity.

Pranet

I realised something about how this will affect me today. I rent from a housing association, which is good for someone like me who will never earn enough to buy a house and also probably wouldn't be able to get his head around getting a mortgage etc even if somehow I did. Much better than private renting.

HAs can raise their rent every April by the CPI the previous September +1%, and they do.

So next April looking at rent rise of 12-13%.

Quote from: Ferris on August 05, 2022, 04:53:49 PMCompletely agree with this. Your house's "value" is entirely hypothetical unless you try to sell it. If an estate agent told me it was worth 10 million quid or 50p I wouldn't care other than intellectual curiousity.

The value really only becomes a problem if interest rates or other circumstances force you to sell, which is presumably what most people will be shitting themselves about. Can't cover a £300k mortgage if your house is now worth £200k.

That said, I'm not too fearful as the government will do what it can to shore up the housing market, simply because so many MPs and their lobbyists are heavily invested in property.

Emma Raducanu

Pointless anecdote but our next door neighbours have put their house up for sale and I was shocked that the price is £90,000 more than what they paid for it 6 years ago. And they've accepted an offer. House prices confuse, amuse and terrify me.

TrenterPercenter

Quote from: katzenjammer on August 05, 2022, 04:49:45 PMOh wow!

Sorry but you are not.

A couple that go into serious negative equity are tied to their home.  Your utopian simplistic assessment says "just stay there" when a whole range of things might happen which makes this untenable for example a breakdown of the relationship but unable to sell the house and no equity to buy the other one out of.  It also completely ignores as I just pointed out the market has worked for some and punished others through no fault of their own.  The dismissal here seems to be "it's a market" people knew this, when it is a captive market homes are a necessity, "well rent then" ok and just have the very rich people ever buying homes and renting out to poor people, I mean how dare working class people ever try and own their own home right?

This yaboo sucks attitude to the "market" is a very rightwing view imo, I don't want people hocked to banks for 100ks for something that isn't worth it we wouldn't excuse this for other purposes.  We could look at this more progressively and say mortgages should be recalculated based on house prices rather than wilfully letting rich Boomers fuck over latter generations.  This isn't going to come up if you just want house prices to fall for I'm alright jack reasons or part of house price crash lobby.

QuoteLandlords can only raise rents as much as the market will bear, their margins will be squeezed by higher inflation for repairs and other overheads, and as prices drop they'll stampede for the exit hoping to cut their losses or lock in gains, further pushing prices down, as when any other asset bubble bursts. Also they don't have the same protections in place as owner occupiers when things get tight.

Again just a "the market is always king and corrects itself attitude".  No one is building anymore houses here some BTL, the less well off ones perhaps will cut their loses but most will transfer the costs to tenants as they are already doing with inflation of course they will take it to max they can do that the market can take.

Anyway it just all sounds your eyes like some stocks and shares game, whilst this is true I'm more interested in the actual meaningful damage to individuals.


Ferris

Quote from: Huxleys Babkins on August 05, 2022, 05:14:53 PMThe value really only becomes a problem if interest rates or other circumstances force you to sell, which is presumably what most people will be shitting themselves about. Can't cover a £300k mortgage if your house is now worth £200k.

That said, I'm not too fearful as the government will do what it can to shore up the housing market, simply because so many MPs and their lobbyists are heavily invested in property.

Just for fun, I pulled all the data the UK land registry has on house prices since 1968, the most the house price index has ever dropped was 15 points in 2008 (and that's after it doubled from 2002). It's up over 80% from that 2008 peak.

Negative equity mortgages basically don't happen, and even if you got massively unlucky and bought right at the start of a recession for some mad reason, by the time you're forced to sell the place the value is back over what you paid for it.

The UK housing market is bonkers. I'd like to say it's due a massive correction but it's ingrained in the culture to BUY A HOUSE PROPERTY IS AN INVESTMENT so it probably never will.

Alberon

It's got to break at some point. It's the only thing that virtually only ever increases in value. It can't be sustainable.

TrenterPercenter

Quote from: Ferris on August 05, 2022, 04:53:49 PMCompletely agree with this. Your house's "value" is entirely hypothetical unless you try to sell it. If an estate agent told me it was worth 10 million quid or 50p I wouldn't care other than intellectual curiousity.

This is just plain wrong for lots of reasons...

As Huxley has just pointed out interest rates make your mortgage unserviceable but you can't sell because your house is worth 100ks less.  You can't remortgage because the same bank that has just fucked you will not be willing to do this so you will have to pay even more for your mortgage due to going the usually completely wild variable rate.  You can't move house and if you try and get out of the debt via bankrupty you severely impair your chances of getting another mortgage.  Before you had equity you could convert this into cash something lots of asset rich cash poor people do to survive.  You can ride it out and live in the house forever paying a now much bigger mortgage.

I'm perfectly fine living my house in negative equity I can both absorb these things and have been in my place long enough to offset the impacts here but I'm quite surprised at how glib people are being about first time buyers being screwed over here.


People seemed to think this was bad when it happened to Greece but apparently now it's arsed cigs

TrenterPercenter

Quote from: Ferris on August 05, 2022, 05:49:15 PMNegative equity mortgages basically don't happen, and even if you got massively unlucky and bought right at the start of a recession for some mad reason, by the time you're forced to sell the place the value is back over what you paid for it.

Yes but they would if house prices halved....which is what we are talking about.  Average house price is circa 300k in 2008 it was around 150k - that is why I used those figures because I was looking at the same graph.

It is ridiculous that is not in question - it's how do you deflate the market with the least damage to people.  Recalculating mortgages would a step towards doing this but keeps failing to be mentioned which mean really its just advocated lots of people being ripped off by the banks and trapped into debt servitude.

When they did it to Greece people seemed to have a problem with this.

Ferris

Trenter I think you're putting the cart before the horse a bit in terms of value. A house is "worth" whatever benefit you get from it, right now.

To figure out if it's a good deal, you balance what it's worth to you (having a place to keep your guitars and grow turnips, feeling secure), against whatever your mortgage payment is every month (which might fluctuate). Other things impact that assessment like the price of similar houses, your potential rent if you stay in your apartment, and your expectations (and that's important because everyone's expectations in the UK re: property are fucked, but the group delusion makes the whole thing work as it does now).

If you consider that monthly price fair for what you're getting (and you did, because you bought it) then the number an estate agent writes on some paper and pushes through your letterbox a year or two after the fact is irrelevant. "Your house has gone up/down 10%!" well so what? It's the same house, I get the same benefit out of it (guitars/turnips) that I always did and I considered the mortgage fair at the time so why would that change because some hypothetical numbers have changed? I'm not selling it so who cares?

Why would you have a much bigger mortgage if the value of your house fell? Surely that would only be the case if interest rates rose? The two don't necessarily go hand in hand do they?

shoulders

Quote from: Emma Raducanu on August 05, 2022, 05:34:13 PMPointless anecdote but our next door neighbours have put their house up for sale and I was shocked that the price is £90,000 more than what they paid for it 6 years ago. And they've accepted an offer. House prices confuse, amuse and terrify me.

Felt like a proper mug when I discovered what I paid for our property versus what the previous owner paid in 2015, but had to accept that was probably standard for pretty much all properties in the area that aren't falling down.

No wonder she accepted the offer, she was moving in with her boyfriend and had made a fortune by buying and doing fuck all for a few years except live in it. No drastic home improvements or remedial work, no new double glazing. Buy house, do fuck all, wait, bam.

How come the mortgage discussion bled onto this topic anyway...

TrenterPercenter

Quote from: Alberon on August 05, 2022, 05:56:49 PMIt's got to break at some point. It's the only thing that virtually only ever increases in value. It can't be sustainable.

100% but how it happens and what we do about it are key.  The idea that this will lead to exclusively good things or none of the impacts I'm talking about are real seems pretty glib.