Why interest rates will surge upwards.

whathavewedone

Pandemonia am I correct in thinking you believe that the average house should fall to a level that is affordable to first time buyers earning less than the national average wage, with no deposit at all or with a deposit that is outweighed or equalled by debt? Surely such people should not even be considering buying a house?

Interest rates, interest rates..

pandamonia

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!!!

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.

£1000 mortgage fee
£500 legal fees
Valuation fees 100-200
Searches 100?
New appliances £1000-2000
Furniture £1000?
Moving costs of what ever you already have, Bed Tv, etc
as of september 1% stamp duty.

if you live up north then i can see why you think 25% is ok. houses are cheap as chips up there.

from the midlands down they get very pricey.

25% just isnt feasable.

pandamonia

whathavewedone wrote: »

Pandemonia am I correct in thinking you believe that the average house should fall to a level that is affordable to first time buyers earning less than the national average wage, with no deposit at all or with a deposit that is outweighed or equalled by debt? Surely such people should not even be considering buying a house?

Interest rates, interest rates..

No i think that FTB starter homes should be affordable for FTB's

i think you should need 10% deposit and get a reasonable mortgage.

and you shouldnt need to borrow more than 3.5x salary for them.

whathavewedone

I disagree that a FTB has to spend 2k on new appliances and 1k on furniture. For a start appliances are often included in the sale, secondly you can get reliable 2nd hand appliances for far less than that and possibly even free on gumtree so long as you are prepared to pick them up. Ditto furniture. One of my neighbours has a house full of hand me downs. She and her oh are 30 and have 3 kids. Portable tv. You don't have to go out and buy everything brand new from Ikea.

Ever heard of ebay?

House prices are not going down to a level that enables FTBS to move in with all mod cons, brand spanking new furniture with enough left over to service credit card debts, car loans, new clothes every month and a great social life.

It has ALWAYS been the case that owning a house has meant making sacrifices. Do you think back in the 1950s, 1960s and 1970s people moved into their first house with everything perfect matching and brand new?? Do you think they went out for dinner once a week and holidayed abroad at least twice a year.

Part of the reason that we're in this mess is because people have wanted it all now and because of cheap credit they've been able to get it. If anything we need to get back to the mindset of saving for the things we want and sometimes having to go without. The answer doesn't lie in simply making housing so cheap that we all have fortunes to spend on c rap every month.

Dithering_Dad

whathavewedone wrote: »

I disagree that a FTB has to spend 2k on new appliances and 1k on furniture. For a start appliances are often included in the sale, secondly you can get reliable 2nd hand appliances for far less than that and possibly even free on gumtree so long as you are prepared to pick them up. Ditto furniture. One of my neighbours has a house full of hand me downs. She and her oh are 30 and have 3 kids. Portable tv. You don't have to go out and buy everything brand new from Ikea.

Ever heard of ebay?

House prices are not going down to a level that enables FTBS to move in with all mod cons, brand spanking new furniture with enough left over to service credit card debts, car loans, new clothes every month and a great social life.

It has ALWAYS been the case that owning a house has meant making sacrifices. Do you think back in the 1950s, 1960s and 1970s people moved into their first house with everything perfect matching and brand new?? Do you think they went out for dinner once a week and holidayed abroad at least twice a year.

Part of the reason that we're in this mess is because people have wanted it all now and because of cheap credit they've been able to get it. If anything we need to get back to the mindset of saving for the things we want and sometimes having to go without. The answer doesn't lie in simply making housing so cheap that we all have fortunes to spend on c rap every month.

Was about to say the same. When I got my FTB, I went to second hand shops and begged and borrowed from friends and relatives. I dare say I would have gone on freeserve and such sites now.

whathavewedone

Exactly. We're old enough to have built up some nice furniture but I still have a fair bit of stuff that used to belong to my parents. As a FTB what do you really need to begin with? A bed, a clothes rail and something to sit on. That's pretty much it. You can eat dinner on your lap. You don't even "need" a washing machine. There is something called a launderette apparently. Or at least there was when I was 24 (and renting).

And I still get loads of stuff from ebay

JayneG

Hello everyone,

As a recent (6 months ago) accidental STR, I've been reading this thread with interest. I just wanted to comment on a couple of points that seem to come up quite often and never fail to amuse me!

Average house price
When we talk about the average house price coming down to, let’s say £80k, it seems to upset a number of people. The concept of an 'average 1930s semi' costing £80k is unthinkable to some. However, when did a 1930s semi become the 'average' house? It's all down to region, condition, area, etc so it's difficult to specify what an average house is. The fact is, it will be those houses that are now currently valued at the current average price (c. £160) that come down to the new average price. Whilst this may include some 1930s semis, it will also include some 1 bed flats, some terraces, some 4 bed detached, etc - wholly dependent on the variables above. So no-one is suggesting that a 1930s semi currently valued at £250k will drop to £80k, but it will come down relatively. Similarly, the average house price in say, London, will remain above £80k, whilst the average house price in, say, the NE will go lower than £80k.

FTBs starting at the bottom
Contrary to many homeowners on here, I don’t believe that every FTB should start at the bottom and work their way up the ladder – indeed the ladder has gone for now at least. The only reason that FTBs typically start off with a 1 bed flat, or similar is because they have bought at a time in their lives when they are earning less than they are likely to in future. If an FTB is earning a good salary, then they should be able to get on the ‘ladder’ at whichever property type a person in their situation can typically afford. A professional FTB couple should be able to live on a street with other professional couples with comparable household earnings. It’s true that someone who got on the ladder 10 years earlier will have built up a certain amount of equity, to use as a deposit on a new house and therefore reduce the mortgage requirement but on the other hand, the FTB couple has a longer period of time to spread the cost of the home over (unless the homeowners choose to extend the length of their mortgage of course) so it’s all relative. The only reason this has become impossible in some areas is because of the uncontrolled HPI.

Anyway, just my twopenneth worth…;)

chucky

pandamonia wrote: »

£1000 mortgage fee
£500 legal fees
Valuation fees 100-200
Searches 100?
New appliances £1000-2000
Furniture £1000?
Moving costs of what ever you already have, Bed Tv, etc
as of september 1% stamp duty.

if you live up north then i can see why you think 25% is ok. houses are cheap as chips up there.

from the midlands down they get very pricey.

25% just isnt feasable.

it's going to be a 1 bedroom flat for you then...
that's not a bad thing but maybe you need to reset your expectations

StevieJ

chucky wrote: »

it's going to be a 1 bedroom flat for you then...
that's not a bad thing but maybe you need to reset your expectations

No a 1 bedroom flat without the bedroom, what do they call them?

LydiaJ

Dithering_Dad wrote: »

If interest rates do go into double figures, mortages will be prohibitively expensive and people will have to wait even more years before they buy. Meanwhile inflation is wiping out their house deposits faster than house prices are falling.

While I follow quite a lot of the rest of what you are saying, I don't get this sentence.

When we say that inflation wipes out savings, we mean that the savings become worth less in real terms because things cost more to buy. So if you have savings, and there's high inflation of food & fuel etc, then those savings become less valuable in that they are no longer able to buy as much food, fuel & general stuff as before.

But inflation of food & fuel prices won't devalue savings that are for a house deposit. Only HPI can devalue house deposit savings. So if house prices are falling at all, then money you've saved and earmarked for house deposit is still gaining value in real terms, whatever the rest of inflation is doing, because your £x is getting worth more and more of a house as the house prices come down. And that's even before you take into account the interest that you would be earning on your saved deposit - presumably at a decent rate in the high-interest-rate scenario under discussion.

Or am I missing something?

PS I don't claim to know what house prices or interest rates or inflation or anything else is going to do.