The real price of a mortgage: 6.49%

the_ash_and_the_oak

StevieJ wrote: »

You wrote 'I'd rather borrow (hypothetically) when rates were 10% than 6.49% (given the damage that I think 10% would do to prices)'

So I take it you would rather take out a mortgage when house prices are going to collapse Have I understood your point correctly, or did you mean that the 10% related to a high inflation rate and high HPI?

not really tbh - more that the higher the interest rate the smaller the amount that would be extended to buyers at that time. At 10% it would be a moot point - in common with other borrowers I wouldn't be able to borrow enough to support prices. imo 10% rates would bring prices down quite significantly - it would be at that lower level (with higher interest) that I would be looking to borrow (if I were in the market to do so)

Thrugelmir

purch wrote: »

Hang on, I've mislaid by book on the Devonian School of Economics......

I'll be back.

Easy to find as its in the introduction on page 1........

Chapter 1 on Fractional Reserve Banking is far more interesting.... :rolleyes:

Thrugelmir

StevieJ wrote: »

Key word 'historically':eek:

When did the basis change? I must have been asleep........ :think:

StevieJ

Thrugelmir wrote: »

When did the basis change? I must have been asleep........ :think:

When the workforce woke up and realised how little effective union representation they now have :eek:
Not to mention globalization.

StevieJ

the_ash_and_the_oak wrote: »

not really tbh - more that the higher the interest rate the smaller the amount that would be extended to buyers at that time. At 10% it would be a moot point - in common with other borrowers I wouldn't be able to borrow enough to support prices. imo 10% rates would bring prices down quite significantly - it would be at that lower level (with higher interest) that I would be looking to borrow (if I were in the market to do so)

But why would we have 10% interest rates they would be in response to what?

Thrugelmir

StevieJ wrote: »

When the workforce woke up and realised how little effective union representation they now have :eek:
Not to mention globalization.

Not good for house prices then. :rolleyes:

StevieJ

Thrugelmir wrote: »

Not good for house prices then. :rolleyes:

But good for interest rates and inflation and low interest rates improve affordability:p

sabretoothtigger

StevieJ wrote: »

But why would we have 10% interest rates they would be in response to what?

In response to basic supply and demand. We cant assume the UK will always get the cash it wants when it needs it.
We may have to provide the incentives of a higher rate of return to those who lend to us.

We havent hit the credit limit yet but its not impossible and its a chain reaction effect. Examples would be Iceland and Pakistan where they had to literally raise interest in their currency.
I suppose the alternatives are default and a failure in foreign trade and the non acceptance of the currency abroad where as gold would be taken still
Also printing money can pay bills but that feeds the flames and the free market discounts real worth

I might be wrong on the facts and connections so I'll post up some links

http://en.wikipedia.org/wiki/Currency_crisis

http://www.cnbc.com/id/32837500

Thrugelmir

StevieJ wrote: »

But good for interest rates and inflation and low interest rates improve affordability:p

Conditions that will effect a continued wealth transfer and increase inequality.

The availability of funding will drive prices longer term not the ability to afford and borrow.

Thrugelmir

sabretoothtigger wrote: »

In response to basic supply and demand. We cant assume the UK will always get the cash it wants when it needs it.

Its not just a question of cash. Its the creation of money supply and credit through the way that the banks are allowed currently allowed to operate. The tightening of regulations on the amount of capital that banks are required to hold shouldn't be underestimated.