Why interest rates will surge upwards.

setmefree2

mikelivingstone wrote: »

For those of you with large mortgages or who are thinking of large mortgages, now may not be the time to give a sigh of of relief over interest rates, instead you will be best paying down your debt as fast as possible. This is a bit of a technical discussion that was started on the house prices crash website, but I think the practical implications will be of great interest to MSE readers. See: http://www.housepricecrash.co.uk/forum/index.php?showtopic=104647 Essentially the premise is that with the US and UK Governments are borrowing too much and in the medium term this will result in $ and £ currency devaluation with nasty inflation (i.e. not of wages or houses, but essentials like food and fuel). This means that Government bond holders are effectively losing money, and so the Sovereign wealth funds and other investors will start selling US/UK Government bonds on mass, causing the price of bonds to collapse. As bond prices are what set interest rates (a collapse in bond prices pushes interest rates up), when this collapse happens 2010/11, interest rates will soar, possibly as high as 10%. This will force many families into bankruptcy and further drive down US/UK house prices. http://images.moneysavingexpert.com/images/forum_images/smilies/speechless-smiley-040.gif

Or none of the above might happen

but I do agree that paying off your mortgage is a good thing. Come and join us the MFW board.

mikelivingstone

StevieJ wrote: »

I note you were a little late on HPC/Doomer scene Trying to make up for lost time?

Well I did only joined HPC in 2007, having lurked for sometime in 2006. But really making up for time, thanks to HPC I timed by crash protection measures perfectly having STRed in August 2007 (exchange then, moved out Jan 2008).

pandamonia

Dithering_Dad wrote: »

Strange that someone who only joined last month knows that my "arguments are always flawed" :rolleyes:

Anyway, I created a thread to ask people about their desposits (to see if I relly were 'detached from reality' and I think you'll be surprised just how many people on the MSE forums (and probably in the country at large) are saving like mad to make sure that they're not mortgaging their lives away to buy a house. Most of them seem to have over the 25% deposit that you chose to pilliory me about.

Dunno what your problem is, but it'd be nice if you could keep it civil. I have never been disrespectful to you, so I'd appreciate it if you'd reciprocate. Ta.

the national average is 22k per FTB for deposit and costs of buying a first home.

so lets say 150k house they would need to have £37500 plus about 10k worth of fees and setting up costs. £47500 total.

Average UK salary of about 22k pa - also most FTB are on a lower salary than the average because they are younger.

Now explain to me how "most" have £47500 saved up when they probably get about 15k per year after tax.

i think you will also find that the majority of young buyers are more likely to be in debt than have savings of any level.

What happens is that around 24-25 years old they realise they need to own their own place rather than live with parents or rent. They then start to save rather than spend.

now explain to me how an average person can get £47500 saved up.

due to the laws of economics prices cannot be sustained unless the average person is able to buy.

people will not save up towards being able to buy the market will come down to them.

10% deposit is a reasonable request. 25% isnt.

p.s stating that your argument is flawed is civil.

Dithering_Dad

pandamonia wrote: »

the national average is 22k per FTB for deposit and costs of buying a first home.

so lets say 150k house they would need to have £37500 plus about 10k worth of fees and setting up costs. £47500 total.

Average UK salary of about 22k pa - also most FTB are on a lower salary than the average because they are younger.

Now explain to me how "most" have £47500 saved up when they probably get about 15k per year after tax.

i think you will also find that the majority of young buyers are more likely to be in debt than have savings of any level.

What happens is that around 24-25 years old they realise they need to own their own place rather than live with parents or rent. They then start to save rather than spend.

now explain to me how an average person can get £47500 saved up.

due to the laws of economics prices cannot be sustained unless the average person is able to buy.

people will not save up towards being able to buy the market will come down to them.

10% deposit is a reasonable request. 25% isnt.

p.s stating that your argument is flawed is civil.

Depends where you're buying, but oop north where I am, you can get much better than a starter home for £150k. I'd also disagree with your £10k fees. For a FTB buying a £150k house the fees would be a few hundred quid on searches and solicitors. There would be no stamp duty, no estate agents costs, etc. You'd prolly get away with about 600k, not £10k!!!

Sorry - had to dash off... back now.

If the rest of your calculations are as far off as your £10k costs, then I'd suggest that you were the one whose figures do not add up.

The trouble is that you're focussing on the fixed deal I found on google after a search of 2 mins and forgetting the whole point of my post (perhaps purposely?) I think that if FTBers believe the HPC crowd that we are in for a sustained period of high interest rates, they should buy a house now so that they can get cheap fixes. Do you agree? (if we're going to have a debate, then let's debate the real issue).

p.s. You stated that my arguments are always flawed, which is quite a different statement from saying my current argument is flawed, but I'm happy to apologise if I misjudged you.

setmefree2

Lol ;-)

Graham_Devon

Dithering_Dad wrote: »

Depends where you're buying, but oop north where I am, you can get much better than a starter home for £150k. I'd also disagree with your £10k fees. For a FTB buying a £150k house the fees would be a few hundred quid on searches and solicitors. There would be no stamp duty, no estate agents costs, etc. You'd prolly get away with about 600k, not £10k!!!

Nail hit head. It's all about where you are.

According to my area, a 3 bed semi is average of £223k. My 2 bed box was valued early last year at £157k. Fee's when I moved in to this one last year were just under £1800.

Which means a 25% deposit is £55,000. This is why I had a problem with your sums earlier as I know no one my age (28) who would qualify as an FTB who has that sort of money lying around in savings accounts. I know some, including myself who may have 10%, but 25%? No way. We have to live at the same time, and rent places at a rough cost of around £550 a month for a 2 bed, 3 bed if your lucky, then council tax, then living. It's just nigh on impossible to save such large sums.

Theres a 25% share at the moment going of a housing association scheme property. Even that, is £60,000 for the 25% share, as I looked into it myself.

It depends so much on areas, that I think it causes a lot of friction when talking about percentages, when a group of people are looking at it from their perspectives and prices in their area.

whathavewedone

Interest rates? Anyone?

And yes I know I'm partly responsible for turning this into a discussion about house prices generally...

Dithering_Dad

Graham_Devon wrote: »

Nail hit head. It's all about where you are.

According to my area, a 3 bed semi is average of £223k. My 2 bed box was valued early last year at £157k. Fee's when I moved in to this one last year were just under £1800.

Which means a 25% deposit is £55,000. This is why I had a problem with your sums earlier as I know no one my age (28) who would qualify as an FTB who has that sort of money lying around in savings accounts. I know some, including myself who may have 10%, but 25%? No way. We have to live at the same time, and rent places at a rough cost of around £550 a month for a 2 bed, 3 bed if your lucky, then council tax, then living. It's just nigh on impossible to save such large sums.

Theres a 25% share at the moment going of a housing association scheme property. Even that, is £60,000 for the 25% share, as I looked into it myself.

It depends so much on areas, that I think it causes a lot of friction when talking about percentages, when a group of people are looking at it from their perspectives and prices in their area.

Graham, your calculations are based on a valuation that was 'early last year'. How about doing your sums on what the value is now, or indeed what you think the value will be in a couple of months and remember that you're negotiating in a falling market and with depressed sellers.

whathavewedone

Setmefree I'd have thanked your post 100 times if I could

setmefree2

whathavewedone wrote: »

Setmefree I'd have thanked your post 100 times if I could

What fun