Saturday, 10 May 2008

Property in the UK 9: My First Steps to Losing My House

I suppose it was inevitable. I had expected house prices to begin falling this year, but I had not expected oil prices to rise. I had expected Iraq to stabilise and for more oil to be coming from there, I did not realise that Chinese consumption was going to step up so suddenly, forcing prices higher and higher and in turn both petrol and oil prices. Anyway, consequently with petrol having risen by 30p per litre in the past year and food costs for me by about 20% in the same period, I suddenly found this month that all my salary had been spent by the first week in May. Myself and the woman in the house sat down to see where we could all cut back. Her online business has collapsed as other people not only in the UK (she sells in Europe, USA and to expatriates in China) have stopped buying anything they see as frivolous. This means she will have to go out to work (something she loathes, she feels people despise her and patronise her when she is an employee which is why she always tries to be self-employed). She pointed out I was spending £32 (€40; US$62) per month on coffee at work. I have also stopped doing the lottery at £8 per month and cancelled both house contents and life insurance saving about another £80 (€100; US$156) per month. We also had a cleaner at £64 per month which we are laying off, so altogether we reckon we can save £183 per month which is enough to cover my petrol bill or about three-quarters of the monthly groceries. This means we do not have to sell the house we have been in for just under five months.

We have a fixed rate mortgage for five years, but got it when the interest rates were at their peak. House prices have slid constantly since then and we think we over-paid for this house anyway so if we sell we will have lost probably at least £20,000 (€25,200; US$39,200) on what we paid for it. Also British people dislike quirky decor in their houses so the Victorian style interiors that came with it (and of course we cannot afford to change now) will make it as hard for us to sell as it was for our predecessors here. Also the market is being flooded by people trying to dump houses that like us they can no longer afford to pay for. In addition, many people who bought buy-to-let properties are now dumping these even though they do not live in them. Repossessions by banks of houses on which people are no longer able to pay their mortgage have risen by 17% so far this year and the estimated figure is 45,000 in 2008 compared to 27,000 in 2007. We are not back to the level of the 1990s, the peak was over 80,000 reposessions in 1991, but there seems nothing to stop this climb. In addition, the mass year-on-year repossessions of the early 1990s put cheap property on to the market whereas since the early 2000s bank policies have changed and they keep repossessed property and set a high price and wait until the market rises back up to it so that they get more money back than auctioning off at a low price as they did in the 1990s.

For now, 'tightening our belts' should mean we do not get into danger over the mortgage. It does mean all luxuries have gone, no more meals out, no holidays (those we had, I realise now were foolish), no more DVDs or electrical goods. It is hard to explain to the 6-year old in our house why these things have stopp. My fear is that costs will rise further and that in the future having taken up all the slack in our finances there will be nothing left to economise on. We only need the car to go wrong or one of us to need dental treatment for it to soak up all the meagre savings we have left and us like an increasing number of house owners to begin the path to losing the house and all the money we put into it.

With hindsight we could have done things differently: bought a cheaper house, moved to a cheaper town (certainly one closer to where I work), continued renting, but of course our options were limited with two landlords in a row mistreating us, forcing us to move on as quickly as we could into what have turned out to be bad houses for us. My prediction is that by May 2009 I will have lost this house and with it all the money I saved and invested through the 2000s in that flat in London (where I was also shafted). In the UK of today you do not only have to be clever with money (which I am clearly not) but you have to be very, very lucky. I earn 50% per year more than the national average salary, so I am not losing my house just yet, but my contract expires in August 2009 and with people already being made redundant by my company it is clear I have no future there as they always simply do not renew the contracts of fixed-term staff like me. I have lived through the very nasty unemployment of the 1980s and the house fiasco of 1990-3 during which so many people suffered terribly and yet I managed to escape by being flexible and not investing in anything. As you get older though humans naturally crave stability, but in the UK though we are encouraged very hard to buy houses, doing that just makes you vulnerable to the economic turmoil that seems to buffet us so regularly and then the people who urged you to buy a house are totally unsympathetic when you are kicked out. The bulk of us are simply hard workers, not successful gamblers and yet we are forced by British society and its economy to constantly gamble with our future.

As I told the 6-year old, not getting some things he wants now may help his mother hang on to this house, but I think more likely is the outcome I threatened him with that in a few months he will no longer have a bedroom of his own, not have a garden and many of the electrical goods now in the house will have gone. That is his future and most likely the one of many hundreds of thousands of British families, just because greedy American bankers could not be content with the mortgage market they had.

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