Want to buy a broom cupboard in London, how to borrow the £££

[EmbeddedBob]

And this is whats wrong with house prices being so out of kilter; people forget the value of money and the work required to service the debt. Whats worse than considering such a high loan, is that the government is willing to back it with tax payers money.

It might keep going and your risk might pay off. It might stall at the same time as unemployment rises significantly leaving you with an albatross. I suppose you could take out insurance. Another option is a long term fixed rate. You could take the view if it goes south, throw the keys through the banks letterbox and move abroad.

Im starting to look for a house at the moment and have set the maximum loan to that which can be paid off by a single permi salary (not that I can stand the thought of being a permi). My cousin is in your camp and has just taken out a 700k loan on a 1m property... utter madness IMO. But, it doesnt look like theres any political will to resolve house prices. The lack of growth anywhere is leading to foreign investment in UK housing stock and debt is cheap (at the moment).

[BrilloPad]

And this is whats wrong with house prices being so out of kilter; people forget the value of money and the work required to service the debt. Whats worse than considering such a high loan, is that the government is willing to back it with tax payers money.

But if enough people are in trouble then the government will cut interest rates. The Ponzi scheme must continue.

[alphadog]

But if enough people are in trouble then the government will cut interest rates. The Ponzi scheme must continue.

Interest rates are already effectively at zero. More likely they will have to take it to the next level by printing money via the BoE to spend/distribute directly into the economy thereby getting the inflation rate moving upwards (and whittling away the debt load). But then again, that's gonna pi$$ off the retiring baby boomers (ie, the politicians themselves), so maybe that would be too difficult.

[BrilloPad]

Interest rates are already effectively at zero. More likely they will have to take it to the next level by printing money via the BoE to spend/distribute directly into the economy thereby getting the inflation rate moving upwards (and whittling away the debt load). But then again, that's gonna pi$$ off the retiring baby boomers (ie, the politicians themselves), so maybe that would be too difficult.

You can force banks to lend. That would push mortgage rates down further. Nothing must stop the boom!

[d000hg]

Why WOULD someone lend you nearly £1m? That's a big loan when you have nothing to put up as collateral.

[d000hg]

I'm in a slightly similar situation, the government scheme "Help to buy" will help you buy a property up to £600k but only for a new build.

Are you allowed to do this for a new-build £600k property, and then immediately sell it and buy an existing £600k property you actually like?

[BrilloPad]

Why WOULD someone lend you nearly £1m? That's a big loan when you have nothing to put up as collateral.

There is a house that will be worth £2m in 10 years time.

London property doubles every 10 years. Even in the 1989/early 90s crash, UK property down 20%, London was flat.

You just cannot lose!

[jamesbrown]

There is a house that will be worth £2m in 10 years time.

London property doubles every 10 years. Even in the 1989/early 90s crash, UK property down 20%, London was flat.

You just cannot lose!

Perhaps a little off-topic but, as an asset class, London property, along with property in other major cities throughout the world, has been driven rapidly upwards by cheap money. It's a strong and indisputable link that is obscured by local pressures on housing (i.e. that local pressures really matter at these levels). I think you underestimate the desire of the Fed to act in the coming months, and for other central banks to follow thereafter. The longer they hold off, the greater the calls internally to lower the threshold for acting, because a ZIRP and diminishing returns from QE has left all central banks in a very precarious position to offset a renewed financial crisis. Also, the Fed acts with the US in mind, and is only concerned with external impacts insofar as they return to the US. This isn't rocket science. When ZIRP ends, and it will end soon, there will be a unwinding in asset prices. If this happens amid a renewed financial crises it will be ugly, because central banks will have no tools left to convince market participants that they can do everything necessary.

It wasn't that long ago that London property was perfectly affordable (i.e. the mid 90s). As always, any unwinding will primarily impact those that were late to the party and need to move in the short/medium-term, because there is certainly a limit to how far prices can decline (this is where local pressure do become important) and, long-term, London property still looks like a good bet.

[BrilloPad]

Perhaps a little off-topic but, as an asset class, London property, along with property in other major cities throughout the world, has been driven rapidly upwards by cheap money. It's a strong and indisputable link that is obscured by local pressures on housing (i.e. that local pressures really matter at these levels). I think you underestimate the desire of the Fed to act in the coming months, and for other central banks to follow thereafter. The longer they hold off, the greater the calls internally to lower the threshold for acting, because a ZIRP and diminishing returns from QE has left all central banks in a very precarious position to offset a renewed financial crisis. Also, the Fed acts with the US in mind, and is only concerned with external impacts insofar as they return to the US. This isn't rocket science. When ZIRP ends, and it will end soon, there will be a unwinding in asset prices. If this happens amid a renewed financial crises it will be ugly, because central banks will have no tools left to convince market participants that they can do everything necessary.

It wasn't that long ago that London property was perfectly affordable (i.e. the mid 90s). As always, any unwinding will primarily impact those that were late to the party and need to move in the short/medium-term, because there is certainly a limit to how far prices can decline (this is where local pressure do become important) and, long-term, London property still looks like a good bet.

The world's reserve currency is no longer USD. It is London property. Asset prices can never go down. No more bust. Its all boom.

[jamesbrown]

The world's reserve currency is no longer USD. It is London property. Asset prices can never go down. No more bust. Its all boom.

I'll remind you of that in 1-5 years