Spring bounce in mortgage lending

Dan:_4

Cannon_Fodder wrote: »

I thought it was accepted that low interest rates are helping people to afford their mortgages? And that some degree of inflation is lurking around and will need to be controlled...

Therefore higher interest rates will inevitably happen, its just a case of when, leading to *SOME* houses coming on the market before they get repossessed, or repossessions themselves...increasing supply, priced to get a quick sale, etc etc...

I thought this scenario was an accepted possibility. To have an EA admit it during a spring bounce was the remarkable bit.


Although, not every house needs to be forced to come on the market - for some the closer rungs of the ladder are good, hence the spring bounce numbers/interest

Accepted by who?? You mean some of over bearish folk on here?

Why would these people not be able to afford their mortgage payments if the base rate went back to 6%?

The idea of raising interest rates to cause another house price crash seems to be the last hope for some on here. Sure rates will rise at some point, and his will help to prevent HPI, but is highly unlikely to make prices fall another 20%.

You have had your crash - don't get greedy and end up priced out for another decade.

Thrugelmir

Really2 wrote: »

i dont think any increase in base or any higher inflation is currently foreseen in the next 12-18 months. (where has "inflation lurking round the corner" been the widely accepted )

Even then rates will still be below what they were 9 months ago.

It could be 5 years+ before we see a base rate of 5%

Even the BOE have admitted that QE could reiginite inflation. The MPC have said that there response would be to sell assets bought under QE and hike interest rates.

Further QE in the short term could reduce the period that a low BOE base rate is required.

The issue at the moment is that no one knows how effective QE will be. Though the change when it comes will be decisive.

chucky

Cannon_Fodder wrote: »

Just spoke to our letting agent, who is also an estate agent, and was surprised at the honesty, that "prices will be forced down, once the low interest rate cushion is removed".

He also expressed the view that the current market is quiet..."people are not coming to the market to take the hit of a 30% reduction, while they can afford the mortgage".

a very honest estate agent. compared to other guys on here it seems to be that you may live in an area that probably has more price drops to be factored in for whatever reason: unemployment, job stability, confidence in local employers.

Really2

Thrugelmir wrote: »

Even the BOE have admitted that QE could reiginite inflation. The MPC have said that there response would be to sell assets bought under QE and hike interest rates.

Further QE in the short term could reduce the period that a low BOE base rate is required.

The issue at the moment is that no one knows how effective QE will be. Though the change when it comes will be decisive.

The BOE have also said they do not expect to raise the base rate for "some time"

That "some time" is widely accepted to be untill at least spring next year (more likely 2nd quarter).

QE was used to stop deflation, that does not mean they are thinking they are going to casue hyper inflation, inflation could be 0.1% a year.

Do people on here really think base rate will be over 5% next year.:eek:

Cannon_Fodder

Really2 wrote: »

i dont think any increase in base or any higher inflation is currently foreseen in the next 12-18 months. (where has "inflation lurking round the corner" been the widely accepted )

Even then rates will still be below what they were 9 months ago.

It could be 5 years+ before we see a base rate of 5%

For someone who wants us to refer to 300 year old interest rates when considering the average, a 12-18 month view of the future situation seems a bit short-sighted...

I agree it may well be the next election before rates rise, but not much after...but its not impossible for it to be beforehand, either.

Inflation - seen the petrol price at the pumps this month? Just as food inflation is easing, the delivery costs are going up again.

As the recession eases, do you think things like cars will remain so heavily discounted?

Doesn't Mr Darling's recovery plan require growth? Is that not inflationary?

Inflation doesn't wait until prices are back at pre-recession levels, before being +ve.

Rates could be 5%+ by next autumn, too. Pure guesswork. I'd lean more towards 24-36 months than 5 years.

Repossessions were on the rise BEFORE the rates dropped, mortgages were already unaffordable for some. Of course a base of 3% will mean a mortgage of 5%+, on some deals, so for *some* it will become unaffordable.

"W" recovery, "W" house prices, looking likely. The second half of the latter quite elongated.

Really2

Cannon_Fodder wrote: »

For someone who wants us to refer to 300 year old interest rates when considering the average, a 12-18 month view of the future situation seems a bit short-sighted...

I agree it may well be the next election before rates rise, but not much after...but its not impossible for it to be beforehand, either.

Inflation - seen the petrol price at the pumps this month? Just as food inflation is easing, the delivery costs are going up again.

As the recession eases, do you think things like cars will remain so heavily discounted?

Doesn't Mr Darling recovery plan require growth? Is that not inflationary?

Inflation doesn't wait until prices are back at pre-recession levels, before being +ve.

Rates could be 5%+ by next autumn, too. Pure guesswork. I'd lean more towards 24-36 months than 5 years.

Repossessions were on the rise BEFORE the rates dropped, mortgages were already unaffordable for some. Of course a base of 3% will mean a mortgage of 5%+, on some deals, so for *some* it will become unaffordable.

"W" recovery, "W" house prices, looking likely. The second half of the latter quite elongated.

:rolleyes:

I am not going to predict rates for the next 300 years am I.

I though petrol was cheaper than this time last year?
Inflation is YOY not MOM.

So you think inflation will kick in after the recession. So surely the wage inflation will stop the defaults just like the 70's and people mortgage will actualy be lower in real terms.

I am using a bit of logic here and what is accepted to be true in the near to medium term.

High inflation is guess work and not round the corner like you make out you know.

Cannon_Fodder

Dan: wrote: »

Accepted by who?? You mean some of over bearish folk on here?

Why would these people not be able to afford their mortgage payments if the base rate went back to 6%?

The idea of raising interest rates to cause another house price crash seems to be the last hope for some on here. Sure rates will rise at some point, and his will help to prevent HPI, but is highly unlikely to make prices fall another 20%.

You have had your crash - don't get greedy and end up priced out for another decade.

"Accepted by"? - See thrugelmirs comments on "QE might reignite inflation"...

Would 6% not be affordable, you ask? - it may be ok for some.

Try reading the Mortgages & Endowment board. You'll find people on Interest Only, with a 50% equity purchase, and they cannot afford rates TODAY...why they should struggle with rates at 6%, I cannot fathom.


Thanks for the concern, but I've never been priced out. Sold at peak.

Cheers.

chucky

Thrugelmir wrote: »

Even the BOE have admitted that QE could reiginite inflation. The MPC have said that there response would be to sell assets bought under QE and hike interest rates.

Further QE in the short term could reduce the period that a low BOE base rate is required.

The issue at the moment is that no one knows how effective QE will be. Though the change when it comes will be decisive.

i've not seen an argument to convince me that QE will cause inflation IMO.

i know putting extra money in the money supply does cause inflation but QE replaced one type of debt with another asset is just increasing the velocity of the money supply not causing inflation.

Conrad

Dan: wrote: »

The idea of raising interest rates to cause another house price crash seems to be the last hope for some on here.

Your point it central in understanding the uber pessimist. These people will always think doom is around the corner. Some will conquer thier instinctive processing, and learn to take a more rational view, but the rest will tell us we are off to hell in said cart until the day they die.

Really2

Cannon_Fodder wrote: »

"Accepted by"? - See thrugelmirs comments on "QE might reignite inflation"...

Would 6% not be affordable, you ask? - it may be ok for some.

Try reading the Mortgages & Endowment board. You'll find people on Interest Only, with a 50% equity purchase, and they cannot afford rates TODAY...why they should struggle with rates at 6%, I cannot fathom.


Thanks for the concern, but I've never been priced out. Sold at peak.

Cheers.

I did this post on inflation the other day. Perhaps this may bring a bit of reality to things rather than some kind of wish of high inflation and and high IR's to cause defaults.
all the bears go on about history of crashes. OK look at the 70's proper high inlation.

Really2 wrote: »

So if they go up that means infaltion will be up (which means HPI in reality). Which in turn means wages go up.

So now the new mantra is a V shaped recovery. lol.

If the bears are now turning in to bulls about the recovery surley it would be time to buy as inflation would erode your debt (like the 70s)

But personal I would say don't get your hopes up unless you think this is all over.

High inflation before a recession (or caused recession) is nasty but only for the few who lose everything most will get a job at a higher wage than the one they lost or just see fast wage inflation. Inflation after a recssion will be growth surely afterall negative inflation is deflation.