House prices bottomed ?

abaxas

The market has found a bottom. Only question left, is 'which one?'.

chucky

Graham_Devon wrote: »

Right, one thing I have never said to this argument, whenever Stevie uses it, Dithering Dad used to use it and now you are using it.

You'd save even more if you didnt buy now, and bought the house at a lower price with a bigger deposit.

Plus, say prices fall another 10%. That's 15k saved on the actual house price drop (speaking averages here). At £500 a month rent, thats 30 months worth of rent, plus your cash still in the bank.

This argument of buy now, you will pay less in the long run doesn't add up at all to me.

it suits me to do what i have done because i didn't and don't believe that prices will drop that 15% in my area that would be needed for me to have waited. i didn't plan it but came to a point where a good property came along the finance was right and suited me. if anything it's by luck to those savings being there for me.

look at the calculations that i did on a £200k property against that increase in rates - the saving was at least £28k on a £200k property. that would be over 15%.

i agree on the bigger deposit logic but it's down to peoples suitability - i needed somewhere to live at the time

mewbie_2

chucky wrote: »

look at the calculations that i did on a £200k property against that increase in rates - the saving was at least £28k on a £200k property. that would be over 15%.

When you say 200k property, do you really mean 200k mortgage? I think you are mistaking debt with equity - they are two very different beasts. No wonder you get so confused.

Thrugelmir

chucky wrote: »

apart from the 7.49% rates they are still better than average mortgage rates historically but not as good as the rates a few months ago.

as an example i took out a 5 year fix at 4.69% in February at 60% LTV - that would save me £28,000 (£460 a month less mortgage) in just interest payments and without re-capitilisation on a £200k property - that will net out to over 15% of the house price.

if property is to drop over 15% yes, but i can't see that happening personally - will it have been worth people not buying if they could have got those cheaper mortgage rates?

I used these as an illustratration as to where possibly rates are heading in the longer term. With minimal house price inflation capped by wages and unemployment. Buying a house could become an expensive affair over a 25 year term. Unless of course houses become cheaper in real terms.

On five years time what could your next fixed rate be?

chucky

Thrugelmir wrote: »

I used these as an illustratration as to where possibly rates are heading in the longer term. With minimal house price inflation capped by wages and unemployment. Buying a house could become an expensive affair over a 25 year term. Unless of course houses become cheaper in real terms.

historically there was always a correlation between them. it has to happen again at some point but not until BOE rates are 'normal' again.

BOE rates will be going up at some point in the future. mortgage rates are currently going up now and may come down if funding becomes cheaper again otherwise they'll be around this current figure until BOE rates catch up.

it is much more difficult to predict mortgage rates - they have different drivers to BOE rates.

Thrugelmir wrote: »

On five years time what could your next fixed rate be?

i have no idea - from current numbers it looks somewhere close to 8%. my personal objective is to clear as much mortgage debt as possible before we reach this point.

my thoughts are usually to fix at the lowest rate possible for as long as possible - 4.69% is a very good 5 year rate regardless of rates being higher in the future or not.

Thrugelmir

chucky wrote: »

historically there was always a correlation between them. it has to happen again at some point but not until BOE rates are 'normal' again.

May take a while. As the Governor of the BOE said last week the issue for the banks is and will be the lack of wholesale deposits in the market. At the moment through QE the BOE has pumped this liquidity in.

This suggests lending will remain expensive for some time yet. At least until the banks contract their overall lending books and capital debt is repaid.

Graham_Devon

My thoughts on mortage rates vs BOE rates.

At the moment they are very much above the BOE rate and rising.

I don't believe this is a temporary measure, I see it as a measure over the medium term, maybe a decade.

When we reach 5% BOE rates, I can see mortgage rates being 9-11%.

Why? Simple. When the BOE rates go up, and therefore SVR's go up, more people will become reposessed, and the bank has to sell off an asset which may not cover the outstanding mortgage, meaning the rest of us have to pay higher rates to cover their losses. The worse the situation gets, the higher the mortgage rates go etc.

We may have seen 15% BOE rates in the past, but mortgage rates were around 13% I believe. This time, we may see say 8% BOE rates, but mortgage rates at 12-15%.

Just my thoughts really, based on credit card rates all shooting up, loan rates shooting up etc. And this is based on the LIBOR rate and BOE rate falling. Lot of losse's to make up for.

If that bank charges case is succesful, thats millions of pounds more losses for the banks, so this could have effect too. The more losses they take, the higher the price we all pay.

StevieJ

Graham_Devon wrote: »

When we reach 5% BOE rates, I can see mortgage rates being 9-11%.

Yes, OK Graham :rolleyes:

chucky

Graham_Devon wrote: »

My thoughts on mortage rates vs BOE rates.

At the moment they are very much above the BOE rate and rising.

I don't believe this is a temporary measure, I see it as a measure over the medium term, maybe a decade.

When we reach 5% BOE rates, I can see mortgage rates being 9-11%.

Why? Simple. When the BOE rates go up, and therefore SVR's go up, more people will become reposessed, and the bank has to sell off an asset which may not cover the outstanding mortgage, meaning the rest of us have to pay higher rates to cover their losses. The worse the situation gets, the higher the mortgage rates go etc.

We may have seen 15% BOE rates in the past, but mortgage rates were around 13% I believe. This time, we may see say 8% BOE rates, but mortgage rates at 12-15%.

Just my thoughts really, based on credit card rates all shooting up, loan rates shooting up etc. And this is based on the LIBOR rate and BOE rate falling. Lot of losse's to make up for.

If that bank charges case is succesful, thats millions of pounds more losses for the banks, so this could have effect too. The more losses they take, the higher the price we all pay.

the bank charges case is a very small amount of loss for banks to deal with - it's more of a political time bomb than anything else. the banks will just re-charge on accounts to increase revenues.

As Mr Thrugelmir says until there is wholesale funds and liquidity in the markets (not QE) we're not in normal times. Once this takes place we won't be seeing any cheap lending; it will be expensive due to high fees or through their interest rates. currently i'm thinking they have about a 3% pread on fixed rates from comparing them to swap rates on 5 to 7 year deals. that's pretty good profit.

i don't think they'll allow BOE rates to go up until we're in a decent period of growth (many people don't believe we'll be getting any growth) but just my view.

Graham_Devon

StevieJ wrote: »

Yes, OK Graham :rolleyes:

Well feel free to give your opinion and reasons as to why not.

Fixed rates are currently 5.5% above BOE base.

If BOE base is 5.5%, why can mortgages not be 9-11%?

It's the same difference between the numbers. If you feel I'm wrong, please, do discuss and like I have done, give us your reasons why. It helps much more than a simple one liner.

As you said yourself only this morning in response to someone you disagreed with....

StevieJ wrote: »

Thanks for adding perspective to this thread.

Practice what you preach?