Low interest rates will support house prices until 2014

Graham_Devon

Cleaver wrote: »

Aside from the scenario of someone losing a job (which I know will be slightly more prevalent over the next few years, but can happen at any time if you're unlucky), is the above scenario such a nightmare for average people? You adjust your spending accordingly, tighten your belt in hard times and most sensible people will save a bit of money during the good times.

They are less likely to be able to remortgage to get a better deal.

I myself when speaking to my mortgage advisor was told "it will be ok, as when that fix ends, you can get another one cheaper than the SVR".

Many people were told the same I would assume.

Just my two pence. But the proof, I guess, is in the pudding in another 12-36 months.

HAMISH_MCTAVISH

Cleaver wrote: »

Edit: I've just done a bit of Googling and seen that 50,000 houses or so were repossessed in 2008. Another google says that there are 16.5 million mortgages out there.

There are only 11 million mortgaged properties in the UK.

HammerSmashedFace

11 million mortgages in the UK, the majority now made up of trackers and SVR's, which of course are vulnerable to rate rises. If Cleavers 'google' was correct that 50k got repo'd in 2008, those are terrible statisitics considering unemployment was low back then and IR's were way less than half what they were in the 90's, proof alone I suspect that house prices are way way too expensive.

It just seems so obvious to me that if LTV and salary multiple caps were implemented along with 80% capital gains tax on BTL, this kind of cycle could be ended as house prices would then be pegged to wage inflation, drastically reducing the misery of repo's and FTB'rs etc.

Of course some people would have to lose out in the very short term for the benefit of future generations and because it's mostly the lawmakers that this effects (MP's, regulators etc..) who have leveraged up over the last decade, it will never happen and misery will continue.

the_ash_and_the_oak

HammerSmashedFace wrote: »

11 million mortgages in the UK, the majority now made up of trackers and SVR's, which of course are vulnerable to rate rises.

tbf some of these will only have 5% left to pay, or 20% or 55% or whatever - these aren't vulnerable to rate rises imo

HammerSmashedFace wrote: »

IR's were way less than half what they were in the 90's, proof alone I suspect that house prices are way way too expensive.

imo it isn't the rate itself which is defining, its the context of the rate. so..

i) paying 10% on a loan taken out at 14% 3 years earlier

Feel free to replace these figures, I just want to unpack this idea about interest rates in the 80s/90s a bit more. why would the above be a problem?

CLAPTON

50,000 may seem a high number but 50,000 repossessions out of 11 million mortgages is less that half of one percent which seems to me a very low figure indeed.

HammerSmashedFace

I think you misunderstood, they will all be vulnerable to rate rises even if they only have 5% left to pay, of course those households are not likely to be vulnerable to financial trouble, but it only takes around 1% of the entire amount of them along with those who already are in financial strife for prices to start to head down quickly again.

abaxas

As with all articles like this...

They assume we keep the ability to decide interest rates. Somehow people have got it into their head that we are special and are not at the whim of other more powerful countries (or group of countries).

If they financially attack (and they will) what choice do we have?

Really2

Graham_Devon wrote: »

They are less likely to be able to remortgage to get a better deal.

I myself when speaking to my mortgage advisor was told "it will be ok, as when that fix ends, you can get another one cheaper than the SVR".

Take him to court Graham they are not allowed to give advice like that. They can show you products but can not recommend what you should do or what you should do in the future.
Mortgage advisors offer advice on mortgages not on the route you should take and the future.

I would be surprised you were given such advice as you could now sue the company and no doubt the guy would get sacked.
(I have never met on mortgage advisor who has advised to take a mortgage or what there future options would be, it is quiet literally more than their job is worth)

Jonbvn

HammerSmashedFace wrote: »

It just seems so obvious to me that if LTV and salary multiple caps were implemented along with 80% capital gains tax on BTL

I'm a bit perplexed how BTL has any bearing on this issue?

HAMISH_MCTAVISH

HammerSmashedFace wrote: »

11 million mortgages in the UK, the majority now made up of trackers and SVR's, which of course are vulnerable to rate rises. If Cleavers 'google' was correct that 50k got repo'd in 2008, those are terrible statisitics considering unemployment was low back then and IR's were way less than half what they were in the 90's, proof alone I suspect that house prices are way way too expensive.

Reposessions for this year were previously estimated to be 75,000. This has now been reduced to 48,000 expected this year. In the last recession, it peaked at over 90,000 per year.

The key issue is not base rates, but rather the impact higher base rates have on mortgage payments as a percentage of household disposable income.

In the early 90's,, rates peaked at 15%, and mortgage payments as a percentage of disposable income were up at around 70%.

Today mortgage payments are only 30% of disposable income, and were only 40% when base rates were at 5.5%.

It just seems so obvious to me that if LTV and salary multiple caps were implemented along with 80% capital gains tax on BTL, this kind of cycle could be ended as house prices would then be pegged to wage inflation, drastically reducing the misery of repo's and FTB'rs etc.

Obvious, but wrong.... LTV and LTI caps would only slow HPI temporarily, and further lock out FTB's and lower income families, creating a two tier society of those who own property and those who do not.

It would also reduce housebuilders profits, leading to less developments becoming viable, and less houses being built.

With population growing as fast as ours is, the shortage of housing would push prices up regardless, just concentrating that ownership in the hands of an increasingly wealthy percentage of society.

Of course some people would have to lose out in the very short term for the benefit of future generations and because it's mostly the lawmakers that this effects (MP's, regulators etc..) who have leveraged up over the last decade, it will never happen and misery will continue.

You are right it will never happen, but because it is a thoroughly bad idea, not because of some secret vested interests conspiracy theory.