Get ready for rates to rocket

mewbie_2

julieq wrote: »

Not many people bought with 120% mortgages at the peak.

True. But I bet there's quite a few who started with a 90 - 100% mortgage who now have a 120% one. _party_

lostinrates

confused31 wrote: »

I agree with that, people who have scraped by with low trackers and variable rates will be in a right mess.

Ive notice a lot of properties have been took of the market as people have managed to make payments on their mortgages, even though they have lost incomes, but when they do go up, there will be a glut of cheap properties, as all these people will start to try and sell again.

I very may well have the wrong person, so please forgive me, but do I recall you decided not to remain on the market because you didn't really need to? With the view you hold do you plan to put your property back on the market in the forseeable future or are you sticking longterm now? Its interesting to try and understand if and how perople's perceptions have changed.

confused31_2

We did have our house up for sale i had it revalued the other week and it was valued at 155000 pounds, that was by the bank for a remortgage, we had it on the market for 140,000 and no interest.

We wont be selling our current property for a bit now as we are in a new 5 year fixed deal, however if a house comes up we like now we may by another one. I dont think we will be looking for another house for at least 6 months, but i can see houses coming down sharply as soon as rates go up.

I

penguine

Heyman wrote: »

I don't think my response would have been half as derisory if you hadn't entitled the thread 'Get ready for rates to rocket'

That was the title of the article. Did you even bother to follow the link and read it? Or was that too much trouble?

julieq

mewbie wrote: »

True. But I bet there's quite a few who started with a 90 - 100% mortgage who now have a 120% one. _party_

And who cares about that? In 10 years it's likely to be a much lower percentage, especially if there's the sort of inflation that would require substantial interest rate rises to control. A spot valuation that requires a loss to be taken mid crash is not going to cause a rush for the exits, people will sit and wait unless in trouble in which case the growing rental sector offers an option for breathing space.

And regarding the word "rocket", interest rates can quadruple and they're at 2%. They can go up 8 fold and they're at 4% which is well below the levels from last year which caused no-one any serious trouble, and even that would take 7 months at 0.5% a month which is hardly credible unless there's a sigificant recovery and risk of overheating. The title of the article is journalistic hyperbole.

I'm not saying that people won't hit trouble, nor that prices won't continue to drop for a while. But the doomsday scenarios are nonsense. Spot prices in any market are only of relevance if you take the price, in the case of a house the asset also provides the benefit that you can live in it, and the chances are any homeowner is going to be paying less for that than the cost of rental of an equivalent house for some considerable time to come, even if at the end their asset is worth less than it cost to buy. Capital growth is not the whole story.

The worst case for renters is of course that on retirement they may have to find rental income for life. That'll take a very large chunk of pension out completely.

mewbie_2

julieq wrote: »

And who cares about that?

Well apparently you do because you first mentioned the 120% mortgages. I was just saying there would be many more 120% mortgages now, due to the million people in negative equity. And of course the original 120% mortgagees may well be 150% ones now._party_

I think your 8-fold thing may be incorrect. The fold bit means double.
0. .5%
1. 1%
2. 2%
3. 4%
4. 8%
5. 16%
I've stopped there because you get the point. Funnily enough, entirely by coincidence - lol, I've stopped at where they were not so very long ago.

Don't you think it's funny how rates can swing so wildly from 6.5% to 0.25% and then where I wonder? If they can plummet then I expect they can rocket _party_

Do you remember when they were at 15%? Wouldn't that be a surprise? I think we probably called it rocketing then.

Lotus-eater

I don't know where interest rates are going to go. But if you think back a year or so, how many would have had our interest rates at the lows they are now? No one if I recall correctly.
It's like many things, no one can accurately predict them. Oh one genius gets it almost right, then mostly next time gets it completely wrong.

We could have very high rates, or we could have very low rates for a long time. G Brown will have to keep low rates, otherwise the credit tower he has built will come crashing down. After the election when it looks like the other side will win, they can blame everything on labour, raise rates (or let the BOE raise them :rolleyes: ....coincidence) and gradually let the whole lot sort itself out.

The one thing that still sticks out, is the amount of debt still out there, no one can not agree with that, I agree with some of the above, that some people have squandered the free money given away with low rates and some have saved it. My general impression is of more of the former and less of the latter. Especially as the general impression seems to be we are through the worst of it and it's all back to normal.

julieq

8 fold = 8 x or least it did when I did maths.

Interest rates were 15% for a short period when there was high inflation, a massively overheating economy, and we were attempting to peg sterling into the ERM.

It's ridiculous to suggest that I "care" about 120% mortgages. That's the centre of the bearish thesis, not mine.

I specifically argued that negative equity is only an issue if you take the price, and even if interest rates "rocket" to 2 or 4 or 6% it'll not be a major reason for anyone to take the price. If they're up at 16% then great, we'll be in double figure inflation and the debt will inflate away fast in an overheating economy.

ad9898_3

What caused the bubble in the first place was cheap credit, the answer........... to try an restore cheap credit, this will work in the short term, however the BoE/government have now played all their cards, IR's can only go one way from now on and QE can only last a certain amount of time.

The government are having to sell huge amounts of debt into the markets, if they fail at some point, rates will be forced up either by the government themselves, in attempt to sell it's debt, or the IMF.

korkenzieher

Julie, Beating a monkey around the head with a typewriter will not get him to produce Shakespeare any more quickly.

You are, however, spot on with the comments, IMHO, FWIW. I have never quite understood the argument that the housing market collapses if people sell up. Where are the sellers going to live? They rent! Which means property just switches from the owner-occupier to the rental sector and you are then bound by what the landlord needs to make the deal work (ie, reward for the risk he takes on, aka profit), rather than what you (the former owner-occupier) needed.