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

[Alberon]

I suppose the only way it could do the least damage is if the prices stayed the same while inflation slowly caught up. But that would take many many years and I can't see how it can be achieved.

The most likely answer to me is that everything will go massively tits up at some point and the price reset will happen then. Could be in the next few years the way things are going.

[TrenterPercenter]

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?

I'm not sure what this has to do with any of the real tangible impacts I'm talking about.  I'm not interested in these benefits I'm interested in whether it is fair for FTBs like Shoulders to get fucked over by the banks because some people are secure in their fortunately timed or longterm basis for the house they bought.

I'm looking outside of my advantage and actually thinking about what massive negative equity means to people.  I understand the value is "made up" and a house is worth a house but this is an incredibly narrow view of the actual impacts of house prices halving.

[Crenners]

My mate lives on the Gold Coast. Bought his house for about £150k and sold it after Covid hit NSW and they got locked down and everyone wanted to flee to QLD Made about £450k.

[Ferris]

Yes but they would if house prices halved....which is what we are talking about.

Why stop at halved? Why don't we suggest that house prices fall to 1% and interest rates rise to 2,000% and also every house is struck by meteor? Then we could really panic!!

I'm not saying it won't happen, I'm saying based on the dataset I have for the last 60 years it is so unlikely as to be not worth considering.

Expectations and valuation, combined with human psychology, are why house prices won't crash. They might hold steady for a decade or dip a percentage point of two, but because everyone has bought into the notion (for a generation) that house prices always go up, they pretty much always will because when a new couple go to buy a house, they have it in their mind that its about to rise in price so whatever they're being offered, it's a good deal. And the people buying the house next door think the same thing... etc.

Housing is a strange market, it's not really driven by common sense or any real market mechanisms beyond massive macro ones. The people who are in trouble are those who over-borrow and stretch themselves, then get once-in-a-generation unlucky. And even then by the time they have to sell the place it's gone back up in value.

[TrenterPercenter]

I suppose the only way it could do the least damage is if the prices stayed the same while inflation slowly caught up. But that would take many many years and I can't see how it can be achieved.

The most likely answer to me is that everything will go massively tits up at some point and the price reset will happen then. Could be in the next few years the way things are going.

Just have the banks reduce the mortgages in line with house prices.  Why are we so keen to allow banks to get away with penury?

[TrenterPercenter]

Why stop at halved? Why don't we suggest that house prices fall to 1% and interest rates rise to 2,000% and also every house is struck by meteor? Then we could really panic!!

Because I took the figures from the same data you were looking at with the natural break at 2008 and then rapid increase that you just pointed out beginning after it.  It just so happens to be half.

[Alberon]

If you're in negative equity you're essentially stuck there until you're back in positive territory and that obviously sucks.

If you can wait it out then that's not too bad, but the reason you're probably in negative equity is the economy is fucked and interest rates are rising which can make it harder to stick it out.

I don't see a way out of it and I do think we're going to see a brutal resetting in the near future.

[Alberon]

Just have the banks reduce the mortgages in line with house prices.  Why are we so keen to allow banks to get away with penury?

I agree, but what are the chances of them being held to account?

[Ferris]

I'm not sure what this has to do with any of the real tangible impacts I'm talking about.  I'm not interested in these benefits I'm interested in whether it is fair for FTBs like Shoulders to get fucked over by the banks because some people are secure in their fortunately timed or longterm basis for the house they bought.

I'm looking outside of my advantage and actually thinking about what massive negative equity means to people.  I understand the value is "made up" and a house is worth a house but this is an incredibly narrow view of the actual impacts of house prices halving.

Ok, I'm going to stop replying.

I don't think it's reasonable to suggest I'm not "looking outside my advantage" (whatever that means) and I think you've made up your mind so I'll leave you to it.

[TrenterPercenter]

I'm not saying it won't happen, I'm saying based on the dataset I have for the last 60 years it is so unlikely as to be not worth considering.

Well quite, I don't think it will happen either.  I'm not panicking about it I'm pointing out the idea that saying their house was worth 50p, something much lower than half, might not be completely considering the true impact on others.

I do get the whole I don't care about my house price vibe thing, I'm in that group, I don't think house should be investments, I just don't want people to suffer either that might have recently bought a home in market they had no choice over.

[TrenterPercenter]

Ok, I'm going to stop replying.

I don't think it's reasonable to suggest I'm not "looking outside my advantage" (whatever that means) and I think you've made up your mind so I'll leave you to it.

You are taking that completely wrong way, I am saying I am doing that hence why I'm not focusing on what you have come back at me several times with.  I understand all of this but every tangible impact on others I've mentioned has been ignored.  It's an appeal to look at things that way not that you are incapable of doing so.

But absolutely suit yourself if that is how you feel.

[TrenterPercenter]

I agree, but what are the chances of them being held to account?

None, but it just interesting that it is of no concern.   It's like people want house prices to fall and people to suffer which seems bizarre (I'm not convinced that is what people here really want I'm just wondering why this is so hard to get people talking about the realities of what this means for FTBs or people reliant on equity to exist).  It seems it is everyones interest to reduce house prices and reduce the debts created by them.

[Paul Calf]

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.

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.

If you ever needed to move to a different town because of your job, or lost your job or defaulted on your mortgage, you'd know the consequences of negative equity pretty sharpish.

[All Surrogate]

How does this end? British people are too polite for a revolution.

Well, the English once beheaded their king. Maybe Liz's bonce would fetch a few pounds - flog it to Putin.

[dozybugcarrot]

I get scared of the knock on ramifications of all this. Do we just head into apocalypse from here on? We end up fighting for scraps of food while the rich fly above us in their helicopters shorting us for sport?

A woman recently started at my work, she's very young, kind of naive and extremely religious. We were worried about her because she's clearly involved in a cult. And that's a bad thing right? Except she only pays them ten percent of her wages in exchange for a place to live for free. And ok, she isn't allowed a bed yet and doesn't get to sleep much because of all the praying, but her life is secure, she has a purpose, a home. I think she might be one of the lucky ones.

And I think anyone who has a bought home, whatever it may be worth, and no matter how trapped they are there, will probably be grateful of the fact when the world starts properly flooding and burning.

[Fr.Bigley]

My mate lives on the Gold Coast. Bought his house for about £150k and sold it after Covid hit NSW and they got locked down and everyone wanted to flee to QLD Made about £450k.

Thats nice, can he lend us a tenner?

[Fr.Bigley]

A woman recently started at my work, she's very young, kind of naive and extremely religious. We were worried about her because she's clearly involved in a cult. And that's a bad thing right? Except she only pays them ten percent of her wages in exchange for a place to live for free. And ok, she isn't allowed a bed yet and doesn't get to sleep much because of all the praying, but her life is secure, she has a purpose, a home. I think she might be one of the lucky ones.

I'm more surprised anyone has thought to employ this fucking moron. Says a lot about your firm....and unfortunately inadvertently yourself.


"What's your greatest weakness?"

"I'm easily led"

"We have a pay free February"

"That's fine"


"You're hired"

[TrenterPercenter]

If you ever needed to move to a different town because of your job, or lost your job or defaulted on your mortgage, you'd know the consequences of negative equity pretty sharpish.

Or if your house developed serious structural problems.

I'm sorry if I've upset anyone by trying to point this out, I was really just bemused at how blasè people were about the ramifications of a large amount of negative equity - I did try and point these things out several time just to be told I didn't understand that a house equals a house.

[shoulders]

I get scared of the knock on ramifications of all this. Do we just head into apocalypse from here on? We end up fighting for scraps of food while the rich fly above us in their helicopters shorting us for sport?

A woman recently started at my work, she's very young, kind of naive and extremely religious. We were worried about her because she's clearly involved in a cult. And that's a bad thing right? Except she only pays them ten percent of her wages in exchange for a place to live for free. And ok, she isn't allowed a bed yet and doesn't get to sleep much because of all the praying, but her life is secure, she has a purpose, a home. I think she might be one of the lucky ones.

And I think anyone who has a bought home, whatever it may be worth, and no matter how trapped they are there, will probably be grateful of the fact when the world starts properly flooding and burning.

Unless it's situated in a greenfield site on a flood plain. Next to a pyre full of dry tinder and Britain's 5 most hair trigger arsonists.

[Goldentony]

LOL @ HOUSE

[Paul Calf]

I get scared of the knock on ramifications of all this. Do we just head into apocalypse from here on? We end up fighting for scraps of food while the rich fly above us in their helicopters shorting us for sport?

A woman recently started at my work, she's very young, kind of naive and extremely religious. We were worried about her because she's clearly involved in a cult. And that's a bad thing right? Except she only pays them ten percent of her wages in exchange for a place to live for free. And ok, she isn't allowed a bed yet and doesn't get to sleep much because of all the praying, but her life is secure, she has a purpose, a home. I think she might be one of the lucky ones.

And I think anyone who has a bought home, whatever it may be worth, and no matter how trapped they are there, will probably be grateful of the fact when the world starts properly flooding and burning.

Presumably she has no kind of written contract though. I don't think I'd like to be dependent on the goodwill of a bunch of manipulative god-squad psychopaths.

[Blinder Data]

Can we move the mortgage chat over to the mortgage thread?

I'm the only earner in the house. I'm worried like most are, but at least my employment is almost recession-proof and I don't need to drive everyday. Mortgage is fixed till next autumn. We won't be able to save/spend on frivolous things, but I can't see us being hit too hard. My heart goes out to those who are already struggling - god knows how they're feeling.

Prof Richard Murphy on Twitter is posting some eyebrow-raising threads. I want to believe it won't get as bad as he makes out but the last few years have shown how quickly "normality" can change. Be warned, it's grim reading:

https://mobile.twitter.com/RichardJMurphy/status/1555466755094503424

Some people might have noticed that I disagreed the Bank of England's decision to increase interest rates yesterday. It was completely irresponsible, but what happens now? Let me offer some opinion on that and a comprehensive plan to get us through this mess. A thread.....

[katzenjammer]

If you ever needed to move to a different town because of your job, or lost your job or defaulted on your mortgage, you'd know the consequences of negative equity pretty sharpish.

Yes, that's why I said

Doesn't matter unless you have to sell

[katzenjammer]

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.

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.

Think I'll stop replying too. You seem to be trying to attribute a load of stuff to me that I never said and certainly don't agree with. Weirdly put it in quotes too, who are you quoting?

Never thought I'd be criticised here for saying it would be a good thing if house prices were lower so the next generation could afford somewhere to live. Bonkers

[TrenterPercenter]

Think I'll stop replying too. You seem to be trying to attribute a load of stuff to me that I never said and certainly don't agree with. Weirdly put it in quotes too, who are you quoting?

Never thought I'd be criticised here for saying it would be a good thing if house prices were lower so the next generation could afford somewhere to live. Bonkers

Getting a bit overly sensitive in here isn't it.

I'm not quoting you and I'm not suggesting you are doing anything but continually ignoring the impacts of negative equity. Which you have continually done with each post and not taken a single step back to go actually maybe there are some real and not made up consequences to negative equity.

I think it is a good thing that the next generation could afford houses, I'm sure you do too, there was probably a better and more interesting conversation here but that takes a bit more effort than this dismissive and no retreat no surrender approach to conversations.

Here are some more quotes not attributable to you but you get the gist...

"House prices are literally made up negative equity doesn't exist"
"It does and it can impact people in different ways"
"A house is a house"
"The most vulnerable people to negative equity will be young couple FTBs"
"Negative equity is a myth it is not a problem"
"It is, its means people are stuck in their houses and tied to massive debts, is it not ok to consider the impact of negativity equity on people?"
"I can't believe I've been made out to be someone that doesn't care about people"

[Jasha]

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.

The loan is only repayable at the end of the mortgage term, as long as you fulfill the contract (keep up with the monthly payments) the bank can't move to repossess, and they've learnt that unlike the early nineties sending hundreds of repossessed properties to auction lowers the yield on clawbacks leaving them still chasing former owners for the outstanding balance (hence the slew of personal bankruptcies and shit smeared over walls before handing back the keys). The lenders would rather you sit it out and wait for prices to recover. As has been pointed out this isn't always ideal for everyone but when there's no other option sometimes you just have to bite the pillow and accept having a roof over your head is the lesser of 2 evils. What should be more concerning is the projected energy price jump coming in January. If interest rates doubled from 2.5% to 5% a £200k c&r mortgage is gonna cost you around £270 more per month...ouch but doable. The bigger worry should be redundancies pay freezes and even something silly like an overtime ban or kanban on production and job security if firms pull their horns in.

[Alberon]

You've got the government going on saying there's no need to do anything now, they can wait till the new leader is in place. There's Truss saying the recession can be avoided, which is pure madness.

This is going to come to a head around Christmas and in many ways I think this will be worse than the Poll Tax protests.

[TrenterPercenter]

@Jasha Not disputing this, it is in interests for everyone to sit it out, but this keeps being looked at from the perspective of having a house and not having a massive debt.  You buy something 300k and in 3 months it's worth 150k that means something, not everyone can sit it out, the bank will of course want you too and will give you more financial rope to hang yourself with in the process.  Sure I get all of this.

I'll go back to my points though.  This sitting out and waiting is much easier said than done for some people, the realities are people lives change.  When I look at these problems I don't just take one perspective I try to think about the whole of society, probably comes will working with a lots and lots of fucked people, people that went to bed one day and woke partially paralysed the next, then they can't afford their mortgage because they can no longer work....I've worked with loads of people like this through the last financial crash.  That equity means more to people depending on circumstances.  Beyond that the main thing here also is why would you want the banks to get away with it? it's just baffling to me, I think people are silly for taking on massive mortgages when the economy looks bumpy but I don't want the banks ripping people of even more, giving someone a debt of 300k on an asset worth 150k is going to cause people a lot of pain whilst the bank is laughing, set to make more money out of that misery.  Not sure why some nod to this isn't in order.

What should be more concerning is the projected energy price jump coming in January. If interest rates doubled from 2.5% to 5% a £200k c&r mortgage is gonna cost you around £270 more per month...ouch but doable. The bigger worry should be redundancies pay freezes and even something silly like an overtime ban or kanban on production and job security if firms pull their horns in.

Agree here 100%

[Alberon]

I wouldn't want to be in the restaurant business right now. Eating out less is an easy way to save money.

[TrenterPercenter]

You've got the government going on saying there's no need to do anything now, they can wait till the new leader is in place. There's Truss saying the recession can be avoided, which is pure madness.

This is going to come to a head around Christmas and in many ways I think this will be worse than the Poll Tax protests.

This is what a lot of people want though non? The conditions for the revolution to arise? We just have to hope that people fall to left on the crisis and not the right I guess.