Why interest rates will surge upwards.

stevetodd

StevieJ wrote: »

Are those the same silly lenders who have reaked havoc on the world economy?

I have to admit that I too have made the odd judgement error in my professional capacity in the past. However in my professional capacity (as a chartered quantity surveyor) my professional opinion would still represent at the very least a valid alternative scenerio to a non specialist person's opinion. This is all I am saying, that their opinion represents another valid alternative to interest rates shooting up to around 10%, this is by no means a certainty

Pobby

stevetodd wrote: »

I have to admit that I too have made the odd judgement error in my professional capacity in the past. However in my professional capacity (as a chartered quantity surveyor) my professional opinion would still represent at the very least a valid alternative scenerio to a non specialist person's opinion. This is all I am saying, that their opinion represents another valid alternative to interest rates shooting up to around 10%, this is by no means a certainty

Agreed. It`s not certain that IRs will go to 10%. However, it wasn`t that long ago, beginning of the 90`s, that my £58k mortgage attracted a monthly payment of around £700 based on interest only servicing and £117 to the endowment.

stevetodd

Pobby wrote: »

Agreed. It`s not certain that IRs will go to 10%. However, it wasn`t that long ago, beginning of the 90`s, that my £58k mortgage attracted a monthly payment of around £700 based on interest only servicing and £117 to the endowment.

Yes I rememer my rate being over 12%, and just before we pulled out of the ERM it was going to shoot up above that

whathavewedone

I'm not denying that a lot of people earn under 20k a year but that is a low wage - otherwise the government wouldn't have introduced working tax credits for people on less than 16k per year. You're telling me that people who earn 17, 18 or 19k don't struggle to make ends meet if only one person is working and they have chidren to support? How you think these people would have the spare cash to save a deposit? What if child tax credits get stopped?

There are a lot of people on benefits too. Does that mean they should all be able to buy a house too?

Wasn't selling the dream that anyone could own a house part of what caused all this mayhem in the first place?

I'm sorry but I just can't see the "average" 1930s 3 bed semi coming down to 60k. Where are the people that earn 50-60k going to live, 10 bedroom mansions? Where will the footballers live?

Graham_Devon

whathavewedone wrote: »

I'm not denying that a lot of people earn under 20k a year but that is a low wage - otherwise the government wouldn't have introduced working tax credits for people on less than 16k per year.

There are a lot of people on benefits too. Does that mean they should all be able to buy a house too?

Wasn't selling the dream that anyone could own a house part of what caused all this mayhem in the first place?

I'm sorry but I just can't see the "average" 1930s 3 bed semi coming down to 60k. Where are the people that earn 50-60k going to live, 10 bedroom mansions? Where will the footballers live?

Why would people who earn 50-60k live in 10 bed mansions exactly?

They would live in the exact same type of houses as they do now. As would footballers. I don't follow that logic?

But give it 10 years for the prices to set through, and it means people won't have mass debts strangling them like they do now, which has partly caused the issues we have now.

Don't know why you can't see the average 3 bed semi coming down to 60-80k. 80k being more sensible....I did state from the start 60-80, not the lowest 60. However, I do believe we could reach 60 as I personally think were not going through a recession, but more a depression. If things are meddled with, by the government, then we may not see these price falls. However, if left to run its course naturally, I believe 60k isnt THAT wild based on where we are now and how much homeowners have to lose (and start becoming debt ridden via neg equity on a larger scale than we have ever seen before).

The below are the average prices after a boom in history.

1977 average house price £60,000
1982 average house price £65,000.
1996 average house price £73,000.

We were all adamant that the house price bubble wasn't going to burst. Now it has, were adamant they can't fall JUST as much as we have seen in the last 2 booms.

Looking at the two above year figures. It was an 8 grand increase from the bottom of the market after a boom, to the next bottom of the market after a boom, after a period of 15 years.

Which leads us nicely into:
2010 average house price £81,000 - £85,000

14 year cycle, taking the last 2 cycles and how it worked then.

We all like to look back and think it will never happen again, however, history shows us it does happen time and time again. People were adamant the house price boom would never end. Now its ended, they seem adamant house prices can't come down as much as they always have.

Why? Dunno. Guess they don't want to face reality that the equity they been sitting on comfortably may be swept from under their feet.

The US is already past the 50% fall in prices. What makes us think in the UK we are somewhat protected from such things?

whathavewedone

Look, I'm 38 years old and well aware of economic cycles thank you. I have lived through more than one recession already.

I think house prices are going to fall further, I just don't believe the average house is going to end up costing the same as it did in 1977.

The reason I said what I said about people earning more money is simply that if 60-80k buys you a 3 bed semi then why should 150-180k only buy you a 4 bed semi/detached (the type of house that 50-60k earners might currently live in)?

So yeah, you would be able to afford a massive house on a pretty standard 30-40 year old middle class salary. Why would you live in a 4 bedroom house if you could afford a 7 bedroom one at just 3 times one salary with a teeny deposit?

Who would buy flats in this world you see us entering? Ah, the unemployed will be able to buy them I suppose. They'll only cost 3 x their annual benefits.

As for the US they do have an oversupply of property which is going to exacerbate their HPC.

Graham_Devon

whathavewedone wrote: »

Look, I'm 38 years old and well aware of economic cycles thank you. I have lived through more than one recession already.

I think house prices are going to fall further, I just don't believe the average house is going to end up costing the same as it did in 1977.

The reason I said what I said about people earning more money is simply that if 60-80k buys you a 3 bed semi then why should 150-180k only buy you a 4 bed semi/detached (the type of house that 50-60k earners might currently live in)?

So yeah, you would be able to afford a massive house on a pretty standard 30-40 year old middle class salary. Why would you live in a 4 bedroom house if you could afford a 7 bedroom one at just 3 times one salary with a teeny deposit?

Who would buy flats in this world you see us entering? Ah, the unemployed will be able to buy them I suppose. They'll only cost 3 x their annual benefits.

You keep changing the goalposts wildly. I never said 1977 house prices at all, ever.

And I still don't have a clue what you are going on about with the house size thing.

I think I get what you are trying to say...but go to Australia, New Zealand, and you will see people actually enjoying themselves with their money as they have some left at the end of the month. That is why people emigrate to live there.

Just because house prices a lower, it doesnt mean that we will all be still trying to stick a debt noose round our necks to buy something we can't really afford. The house size thing will be exactly the same as now.

You wouldnt be able to afford massive houses. People haven't been able to even afford houses at the moment without 100-125% mortgages. People would be simply able to afford houses with a small deposit and get on with life instead of working solely to pay your taxes and have a few tiles over your head.

Generali

Graham_Devon wrote: »

1977 average house price £60,000
1982 average house price £65,000.
1996 average house price £73,000.
...
14 year cycle, taking the last 2 cycles and how it worked then.

You appear to have 2 cycles. One of 5 years, the other of 14 years. From this you work out the cycle must be 14 years long. What logic then shows that the length of the cycle is 14 years please?* Is this something you guys teased out on HPC? I love to know the reasoning.

I agree with the bit about Aus and NZ valuing quality of life. I don't know much about NZ history but it's certainly been a big battle in Aussie history since Federation. How to maintain and improve living standards while retaining the freedom of the individual...?





*I'm highly sceptical about cycles except the hardtail one I have with 18 gears.

whathavewedone

I'm not moving any goalposts.

You mentioned a figure of 60-80k on the basis that the average house goes back to 3 x average salary which you consider to be around 20k.

You stated that the average house cost 60k in 1977.

So you ARE saying that you think it possible that at the end of this HPC the average house might cost what it did in 1977 and that the maximum price they will go for will be a mere 20k above that.

Compare the UK with NZ and Australia all you like, in case you haven't noticed they have a bit more land to build on than we have, that's why we will never have a housing market like theirs.

As for what you say about "people" not being able to afford to buy during HPI without 100 and 125% mortgages, I think you should amend that to read "some people". I don't know anyone who did that and those that did shouldn't have bought at all. Just because house prices were rising and 100% and 125% mortgages were available didn't mean that saving for a deposit was impossible. Quite the contrary given the fact that during that period most people had job security.

I managed to buy a flat in 2003 for 2.5 x my salary. Oh managed to buy too. As a result of HPI we were able to put a 25% deposit down on a 4 bedroom house with a mortgage manageable on one salary. It's simply nonsense to infer that everyone had to have 100 per cent mortgages.

Have you got a 100% mortgage?

Graham_Devon

Generali wrote: »

You appear to have 2 cycles. One of 5 years, the other of 14 years. From this you work out the cycle must be 14 years long. What logic then shows that the length of the cycle is 14 years please?* Is this something you guys teased out on HPC? I love to know the reasoning.

I agree with the bit about Aus and NZ valuing quality of life. I don't know much about NZ history but it's certainly been a big battle in Aussie history since Federation. How to maintain and improve living standards while retaining the freedom of the individual...?





*I'm highly sceptical about cycles except the hardtail one I have with 18 gears.

I'm not a HPC user.

But I do love the way anyone on MSE who disagrees calls your either a daily mail reader or indeed here on these parts, a HPC user.

The cycle was literally taken from 1982 - 1986 - 2010.

All 14 years apart. It was a really simple analogy. Would probably be 2012-13 before we hit those prices I'm mentioning, if at all we do. It's just something, as a homeowner (already been accused of being a renter so clearing that one up), I personally can see happening.