Pass the Gin!

Virtually all plans are on hold for the foreseeable future. The recession is turning into a full blown crisis. To give you a clue as to how it has affected score of people, repossessions are at an 18 year high and lays off and redundancies are the talk of most pubs for those who can still afford to go in them. I find it hard to fathom how events in the US have affected us here, but they have and the sub prime market has hit the prime market or in other words, the shit has hit the fan.

I had planned to sell my house next march and had 3 buyers lined up for it. One by one they have contacted me to inform me that although they can get a mortgage they cannot get a mortgage for the price of the house. Let me explain for those of you in other parts of the world who may not understand how our economy in the UK works. Many years ago mortgage companies would only lend a certain value of the house you wanted to buy. That way if you ever defaulted on the payments they were sure of getting all of their money back. During the 90’s and the noughties that percentage went way over 100% of the value. So it was possible to borrow more money than the property was worth. The banks figured that with property prices constantly going up they could not lose.

Fast forward to the credit crunch and no one will lend any money or if they do the percentage available is falling fast. For instance a few months ago it was possible to obtain a 90% mortgage, then it fell to 80% then to 75% and now news is that the banks will only lend a maximum of 70% of the value of a property. So if you house is worth 100K sterling then some one has to come up with 30K sterling as a deposit. Consequently no one is buying and no one is selling. House prices are falling rapidly and some by as much as 30% in the last 12 months but people cannot save the deposit. If a house is being sold for example, say 40K then some one still has to find just over 12k for the deposit. ( for the benefit of my American readers 100k sterling equates to 200k dollars and just a few months ago that would not have bought a garden shed!)

Very few people are prepared to take that kind of hit or financial loss and few people can save up 12k. Something I never thought I would see in my lifetime is rents falling. There are so many new unsold properties out there that developers are now trying to recoup some money by renting them out and the market is flooded, renters have so much choice. In the meantime people like me who banked, perhaps unwisely, upon being able to sell my hose at a fair market price to fund an alternative lifestyle have no option but to sit put until things pick up if they ever do in my lifetime.

Good luck can sometimes be put down to a matter of mere timing and right now mine stinks, pass the gin!