Originally posted by DimPrawn
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Previously on "Public could not give a tulip about house price falls"
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Originally posted by DimPrawn View PostNo, but the bank lent to you in good faith at a market valuation. If house values fall, the bank has lent you more than the value of the asset the loan is secured on.
The small print of modern mortgages have a clause that says they can demand the difference at any time in writing.
Example. You borrow £500K for a damp ex-council flat in Hackney over the kebab shop. Next year, it is valued at £400K. The bank can send you a letter saying "Please send £100K in the next 7 days or get out, the house is now ours".
HTH
Going back to the original story… I don't spend twice as much in Sainsbury's just because my house has doubled in value so why would I spend less if it went back down again?
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Originally posted by DimPrawn View PostNo, but the bank lent to you in good faith
Originally posted by DimPrawn View Post
The small print of modern mortgages have a clause that says they can demand the difference at any time in writing.
Example. You borrow £500K for a damp ex-council flat in Hackney over the kebab shop. Next year, it is valued at £400K. The bank can send you a letter saying "Please send £100K in the next 7 days or get out, the house is now ours".
HTH
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Originally posted by gingerjedi View PostEh? Is it illegal to live in negative equity then? Shirley the only time the value of your house matters is when you are buying, selling or securing something against it, the rest of the time you just live there and the value is irrelevant.
The small print of modern mortgages have a clause that says they can demand the difference at any time in writing.
Example. You borrow £500K for a damp ex-council flat in Hackney over the kebab shop. Next year, it is valued at £400K. The bank can send you a letter saying "Please send £100K in the next 7 days or get out, the house is now ours".
HTH
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Originally posted by AtW View Post3) not sure whether it actually works like this, but it seems logical for lenders to consider people who have got negative equity (and thus not enough money for bank to recover if they default) as higher risk and thus increase rates
HTH
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If you have negative equity you can't (without taking big hit that most people won't handle):
1) move house and therefore get job elsewhere (or commute way too far using expensive fuel)
2) remorgage house and get new "introductory" rate - so you have to pay current rates that will raise
3) not sure whether it actually works like this, but it seems logical for lenders to consider people who have got negative equity (and thus not enough money for bank to recover if they default) as higher risk and thus increase rates
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Originally posted by BlasterBates View PostHowever if Mr "Man in the street" (or Mrs "Woman") was aware of the small print in the mortgage agreement that he has to stump up 10's of thousands of pounds to make up the capital shortfall in the case of a house price drop, he may have answered differently.
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However if Mr "Man in the street" (or Mrs "Woman") was aware of the small print in the mortgage agreement that he has to stump up 10's of thousands of pounds to make up the capital shortfall in the case of a house price drop, he may have answered differently.
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Originally posted by DimPrawn View Post
Boomed! Doomed! it makes no difference. Just keep borrowing and spending.
This will keep me in business, and the economy afloat - hurrah!
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Public could not give a tulip about house price falls
http://news.bbc.co.uk/1/hi/business/7072382.stm
The majority of the British public say a major decline in house prices will not change their spending patterns, a BBC survey has suggested.
Of more than 1,000 people asked, 88% said that a price fall of 10% or more would make no difference to spending on everyday items such as groceries.
The findings appear to question whether a downturn in the housing market would actually damage the UK economy.
Boomed! Doomed! it makes no difference. Just keep borrowing and spending.
Amen.Tags: None
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