interest rates and house price direction 2010/11

myk3

hi all,

I am wanting to buy a house (first time) within the next 12 months or and i have a 15% deposit. with this 15% i can get a fix rate for 3 years or so for around 5.7% or so.

shopping around i see that those with a 25% deposit can have a considerably cheaper interest rate ~3.8-4%.

I believe i can have a 25% mortgage within a 10 months to a year and this would be the ideal move i would like to do rather than buy now.

my only worry is A. Interest rates start to move up and by the time i have the 25% the rate i get with a 25% will be the same if not more with the 15% i have in today’s climate and/or the prices of property rise.

what i would like to have is views on peoples opinions where

a. when interest rates will start to move up?
b. the direction of the house prices?

I do understand and read that there is a good chance we are seeing a dead cat bounce since Aprils rises and the price will start to fall again start of 2010.

Im sure there are many others in my situation on here and i would just like to hear your plans or just opinions with the direction of house prices and interest rates.

thanks!

michael

jcj

I can see interest rates rising sometime after the new year as a result of the VAT increase.

Hard to say what house prices will do over the next 10 months but personally I don't think we'll see many more increases.

pingu2209

You will take a risk either way. No one knows what will happen. In 12 months time interest rates may be higher - not massively - but possibly enough that a 25% deposit will offer you the same interest rates as a 15% now. In 12 months house prices are likely to be about the same they are now.

My view, as you have asked for it, is to keep looking at houses and if one comes up that you really really like, meets your needs now and for the next 5 or so years minimum, right location etc. AND is at a price you feel is fair, then go for it.

Life is short.

franklee

We are due a general election next year. Once that's out the way, whoever wins, I think the gloves will come off as the new government will be wanting to get the economic pain out of the way before the following election. So I'd expect things to limp along as they are till after the election and after that the bad news will be unleashed which could easily knock this rally stone dead and IMO at least reverse the summer's gains.

Interest rates should depend on inflation, which could go either way. On the one hand the low pound means, as we import so much, inflation. They will do all they can to hide this but if it takes off expect to see interest rates rise just as fast as they fell. OTOH if things are really bad then we could, in spite of the above, get deflation in which case expect interest rates to remain as they are. Either of these mean a troubled economy, which in turn should eventually mean falling house prices if wages stagnate and there is more unemployment and lenders stop irresponsible lending. Unemployment usually keeps rising even after we've technically come out of recession and obviously there will be massive tax rises to pay for all the bailouts.

So pick your poison:

Inflation/recovery -> interest rate rises -> house price falls.

Deflation/unemployment/falling wages/cautious lending -> interest rates remain low -> house price falls due to less buyers able to raise large enough deposits and mortgages.

So my plan is to sit it out see how things look next autumn or so.

IMO YMMV.

Running_Horse

Who knows? Not many would have predicted the current low rates.

Why not ask on the house price forum?

They don't know either, but pretend they do.

hearts

Interest Rates will be low for a good while. Get the 25% together.

mbga9pgf

It wont be interest rates andhouse prices; its going to be Election, emergency budget and house prices that are going to cause the next shifts in prices.

theartfullodger

Last time Conservatives came in interest rates hit 17% quite soon & stayed about 10% for a surprisingly long time.. (I remember, it 'urt!).

So, budget for "worst case" financial situation..

Cheers!

Lodger

mbga9pgf

Thinking more about public sector job losses, pay freezes, end to bank bailouts (possible bank failure?) VAT going up to 20%, fuel duty going up, High rate tax going up, all whilst we try and scrabble through an ongoing recession. Going to make the early 80's feel like a party.

All labours fault of course, they cant seem to learn that if you spend more money than you have got for too long you bankrupt the country.... It doesnt matter one jot if you have poor public services, you can only have what you can afford, that is all you are entitled to as a nation. and once again, the Conservatives are going to dish out the bitter social medicine to prevent our nation from becoming an international basket case. Without North Sea Oil.

[Deleted User]

myk3 wrote: »

hi all,

I am wanting to buy a house (first time) within the next 12 months or and i have a 15% deposit. with this 15% i can get a fix rate for 3 years or so for around 5.7% or so.

shopping around i see that those with a 25% deposit can have a considerably cheaper interest rate ~3.8-4%.

I believe i can have a 25% mortgage within a 10 months to a year and this would be the ideal move i would like to do rather than buy now.

my only worry is A. Interest rates start to move up and by the time i have the 25% the rate i get with a 25% will be the same if not more with the 15% i have in today’s climate and/or the prices of property rise.

what i would like to have is views on peoples opinions where

a. when interest rates will start to move up?
b. the direction of the house prices?

I do understand and read that there is a good chance we are seeing a dead cat bounce since Aprils rises and the price will start to fall again start of 2010.

Im sure there are many others in my situation on here and i would just like to hear your plans or just opinions with the direction of house prices and interest rates.

thanks!

michael

My advise would be to buy the house you want when it comes up and not worry about it too much. In the big scheme of things this is just a blip and regardless of what you do it'll seem a lot of worry about nothing further down the line. You can't predict what will happen and the harder you try to get it right the more upsetting it will be if you get it wrong. Make your decision and then make a point of not going through the "what if" scenario.

It's always sensible not to get yourself into a situation where the slightest blip puts you in dire straights. But other than that don't worry about it.

bristol_pilot

Whilst in theory I agree with the above post by franklee, I note that we already have Deflation/unemployment/falling wages but this has not led to cautious lending. A quick check on the Halifax website today and I see that they would be willing to lend me five times my income the monthly repayments for which I could afford now but if base rates went to 1.5% or 2% after a few years I would struggle to repay. If base rate goes to 5% the repayments would be more than my take-home pay.

I would say - buy a house, but don't get a mortgage for more than 2.5 times income. Max.