This is bizarre. An interest rate cut is expected soon and houses are not selling...

Gangstabird

Is it just me or does is anyone else wondering why the housing market has stalled with such low interest rates.

When my flat was repo'ed in the early 90s interest rates were double figures. It just seems strange that borrowing is so cheap now and places are just not selling. Not saying it's right either, but when you think about it, this is a good time to buy if you can get the right price if you know what I mean. I will not be back for a whhile as RL beckons. Just a thought.

steadysaver

Probably not selling for several reasons

- Owners of more desirable houses are not dropping prices to buyers "expectations"
- Banks require bigger deposit (or A deposit in the case of NR now):rolleyes:
- The media, more house price drops predicted, so why buy now when you can wait and save more
- A recession is looming, would you want to take on a mortgage if you have a chance of losing your job/drop in income

beingjdc

Prices prices prices.

So interest rates in 1992 were 11%. Average house cost £53k. Interest payment per month: £485

Interest rates in 2007 were 6%. Average house cost £200k. Interest payment per month: £1000.

While prices have come down a bit, interest rates for mortgages haven't fallen, and with prices falling, a prospective buyer has to factor in their capital loss as well as their interest payments.

skap7309

Mortgage lending is still severly restricted and will be for some considerable time. It is widely (and sensibly) predicted lending will not return to the sorts of levels they have been to prevent another situation like we are in at the moment.
Also it is begining to dawn on people just how over-priced properties are and they are holding back for further drops which will happen for a long while yet.

easy

I think EVERYTHING will sxtop for a while now, mainly because the media are talking the situation down so much, everyone is going to hang on to what they have, not take out any more borrowing (no matter how low interest rates are now, there is is an expectation that medium term they will have to rise), and sit tight.

Also agree that anyone looking at houses now feels prices are on the decline, so why buy now, I'll wait 6 months/a year, it'll be cheaper then.

I feel very sorry for people who need to sell now, maybe to re-locate for work or whatever, it must be very hard.

Gorgeous_George

Deposits, deposits, deposits. People need time to save a deposit.

Sentiment, sentiment, sentiment. Prices are expected to continue falling. Who wants to buy today when they could save £££s by waiting until tomorrow?

... and prices. Lending multiples are not high enough to match the high prices, especially in the South.

GG

stevetodd

Gangstabird wrote: »

Is it just me or does is anyone else wondering why the housing market has stalled with such low interest rates.

When my flat was repo'ed in the early 90s interest rates were double figures. It just seems strange that borrowing is so cheap now and places are just not selling. Not saying it's right either, but when you think about it, this is a good time to buy if you can get the right price if you know what I mean. I will not be back for a whhile as RL beckons. Just a thought.

My labrador fully agrees with you, fortunately for me I don't let him have a his own credit card.

Good time to buy? isn't 12-18 months time even better?

North_Sea_Bubble

Banks have rediscovered RISK

baileysbattlebus

beingjdc wrote: »

Prices prices prices.

So interest rates in 1992 were 11%. Average house cost £53k. Interest payment per month: £485

Interest rates in 2007 were 6%. Average house cost £200k. Interest payment per month: £1000.

While prices have come down a bit, interest rates for mortgages haven't fallen, and with prices falling, a prospective buyer has to factor in their capital loss as well as their interest payments.

Salaries are vastly different now, you can't equate this time and the last time on mortgage payments and house prices - you need to look at affordablility

According to the Halifax:
At the peak of the last housing bubble average UK house prices were 5 x income
At the peak this time average UK house price was 6 x income

Last peak mortgage payments Uk average = 36.5% of salary
This peak mortgage payments UK averagae = 24.5% of salary

Where we live in the south east it was 7.54 x salary and 41% of income on the mortgage
This time it was 7.59 x salary and 24.5% of income

In reality it wasn't so different, the difference now is people have more of their salaries left after paying the mortgage.
Property was as far out of reach then for some buyers as it is now.

And people will say "oh but inflation was high", yes it was, but the gap between inflation and salary rises was bigger than it is today.

This is for Q2 2008
"With the median pay rise standing at 3.2%, and retail prices index inflation rising to 4.6%, pay rises are running at 1.4 percentage points below RPI inflation. Pay rises have not stood this far below inflation since October 1990 (when the IRS median pay settlement stood at 9.1% against inflation at 10.9%)"

Gorgeous_George

baileysbattlebus wrote: »

Salaries are vastly different now, you can't equate this time and the last time on mortgage payments and house prices - you need to look at affordablility

That's so true. In years gone by, more of your take home pay was yours.

Nowadays, more tax is paid in taxes other than income tax than ever before. This means that lending multiples should be lower.

Maybe the lower interest rates are worth noting but remember, in the mid-80s we had MIRAS which meant that the 15% interest rate only felt like 10% for basic rate taxpayers with loans under £30K. Not too far from NR's SVR.

GG

epz_2

simple, most people think prices will keep falling and there is a greater likely hood of job losses which is affecting confidence.

what people dont seem to have grasped is house prices have fallen this far, this fast BEFORE any major job losses in the real world.