Get ready for the storm

Charterhouse

IveSeenTheLight wrote: »

I do accept, there are a number of people on trackers, however this will be a lowering number as products revert to SVR.

I myself have two SVR mortgages, simply because they are better than when worked out financially against getting a new product at this time.

Certainly myself and I assume many others, will choose fixed products when mortgage rate increase.

This for me is a very valid point.

Consumers are taking advantage of the SVR's for the current years and will likely fix (could be for 5 or 10 years), when rates start to rise.

This means that roughly 1/3 or 1/2 of the mortgage product is gauranteed to be at the lowest in recent history and goes a long way to ensuring security and that the amount paid out over the duration of the loan is kept to a minimum

On the 0% rates you mention, there is a vast difference between the BoE rate and mortgage rates.
Last I looked, you could get a 5 year fix for around 4.79%, not that much different as I recall to the peak of the housing market

OK, but what fixed rate will you be able to achieve when rates start to rise? You are being incredibly naive by not realising what has actually happened to the mortgage and funding market over the past 2-3 years. The spread between base rate and fixed rates, or perhaps more appropriately swap rates and fixed rates, has blown out from the region of 0.25-0.50% to 2%-3% or more. That means when rates go back to "normal" the fixed rates are going to be 7% or 8%. The assumption that banks can absorb all of the extra costs put on them by the FSA and the Government and not charge a bigger spread is completely imbecilic.

Here's 3 reasons why mortgage credit will NEVER again be as cheap as it was during the boom. The SLS. The FSA liquidity regime. Central clearing of interest rate swaps.

As usual we get a load of mudslinging from the underinformed and overpompous.

IveSeenTheLight

Charterhouse wrote: »

OK, but what fixed rate will you be able to achieve when rates start to rise? You are being incredibly naive by not realising what has actually happened to the mortgage and funding market over the past 2-3 years. The spread between base rate and fixed rates, or perhaps more appropriately swap rates and fixed rates, has blown out from the region of 0.25-0.50% to 2%-3% or more. That means when rates go back to "normal" the fixed rates are going to be 7% or 8%. The assumption that banks can absorb all of the extra costs put on them by the FSA and the Government and not charge a bigger spread is completely imbecilic.

Who's indicating that I would wait until BoE rates are back to 5% before I would re-evaluate my mortgage products.

I re-evaluate them every couple of weeks at least.

When I see there start to be a rise in mortgage rates above what I calculate my risk on, then I'll probably re-assess.

When 5 year fixes are start to rise above 5%, then I'll look a lot more closer.

I wont be waiting till they are 7-8%, that would be naive.

So far, I've been massively overpaying on my mortgage product.
I've been paying them always below 5.5%.
As long as I am gaining financially while the rates are low, I will continue to plough the money into the mortgages.
There is a good chance that by the time mortgage rates start to rise, I'll be tying my products into a final 5 year fix and have paid of my mortgages saving years off the normal amortization period.

That's certainly not being naive.

Charterhouse

All I'm saying is if you expect rates to rise and 5yr fixes to remain sub 5% that's very naive. You are right you can assess mortgage rates rapidly and frequently but you are still a prisoner of big swap rate moves which underly the mortgage rates.

I'm glad you've been overpaying, but at current rates it's the wrong thing to do. I overpay because my mortgage is at 4.79%, but if you're on 2% or similar I think there are better things to do with your cash (just make sure it's still liquid to use for overpayments when rates start to rise)

IveSeenTheLight

Charterhouse wrote: »

All I'm saying is if you expect rates to rise and 5yr fixes to remain sub 5% that's very naive. You are right you can assess mortgage rates rapidly and frequently but you are still a prisoner of big swap rate moves which underly the mortgage rates.

I'm glad you've been overpaying, but at current rates it's the wrong thing to do. I overpay because my mortgage is at 4.79%, but if you're on 2% or similar I think there are better things to do with your cash (just make sure it's still liquid to use for overpayments when rates start to rise)

I'm not saying my business model is the best, but it certainly provides me with a huge amount of security and a decrease in risk.

I've tried my hand at shares and been bitten, it's a low risk model for me all the way

RDB

So this move is presumably driven more by politics than by a desire to improve the functioning of the financial markets. And that's what really scares the markets right now. Investors were happy enough to "shake the hand of the government", as Bill Gross of Pimco once put it, back in 2008. That's when the government's hand was holding a big wad of money to bail them all out.

But now it's payback time. Governments are running out of bail-out money. We're seeing stimulus packages turn into austerity packages. And taxpayers are rightly annoyed that financial institutions seem to have entirely avoided any increased regulation while still enjoying massive bonuses.

http://www.youtube.com/watch?v=Nu33ceuCpFE&feature=player_embedded

RDB

chucky wrote: »

facts? which facts? you remembering in your imagination the average house price in the 1990s isn't fact. sorry to disappoint....

once you get me a video on youtube or the price of houses compared to gold i might start to take you seriously instead of ripping the pi$$ out of you

Interestingly, just as it does now, the average UK house cost just above 200 ounces of gold in 1970. Back then, a sterling buyer would pay £4,874 for the average house. If ever you needed an example of how gold maintains its purchasing power over extended periods, while that of fiat currencies evaporates, there you have it.

For a moment I will lower myself to your level Chuck.
I think you`ll find you are ripping the pi$$ out of yourself.

Try and think what point you are trying to make, then articulate it in good English. You seem to be proving my point every time that houses are over valued at the moment.

chucky

RDB wrote: »

Interestingly, just as it does now, the average UK house cost just above 200 ounces of gold in 1970. Back then, a sterling buyer would pay £4,874 for the average house. If ever you needed an example of how gold maintains its purchasing power over extended periods, while that of fiat currencies evaporates, there you have it.

For a moment I will lower myself to your level Chuck.
I think you`ll find you are ripping the pi$$ out of yourself.

Try and think what point you are trying to make, then articulate it in good English. You seem to be proving my point every time that houses are over valued at the moment.

here's articulated for you - it's looking like gold is in a bubble and property is very cheap...

spin it however you like... it's all yours...

RDB

chucky wrote: »

here's articulated for you - it's looking like gold is in a bubble and property is very cheap...

spin it however you like... it's all yours...

You seem to be spinning well enough yourself.

Just out of interest can you find any leading economists who like you think gold is overvalued and houses are undervalued?

Its easy to find plenty who all think gold and especially silver are way undervalued at present. Its even easier to find those who agree house prices are overvalued at present.

.

IveSeenTheLight

RDB wrote: »

Its easy to find plenty who all think gold and especially silver are way undervalued at present. Its even easier to find those who agree house prices are overvalued at present.

Valued against what criteria?
What the general public can afford? or What purchasers can afford?

There are loads of anecdotals of how people would like to afford a Ferarri but only a certain percentage can.
It's the same with houses, not everyone can afford to buy.

There is no doubt the market sets the rates and the house prices are set by the demand (desire and ability) and the supply of property.

If you wish to compare house prices against gold and you believe gold is undervalued (as suggested by the experts you refer to) then in theory, instead of house prices in real terms being back in line with 1970, you could see house prices going back even further.

In my opinion, comparing house prices to gold is as affective as comparing them to cheese.
It reminds me of the saying whilst at school: -
"What's that got to do with the price of cheese?"
(Answer: - It has nothing to do with it. It has ne real correlation. People don't buy property in ounces of gold)

On saying that, there is a huge recent increase in people wishing to obtain gold

chucky

RDB wrote: »

Its easy to find plenty who all think gold and especially silver are way undervalued at present. Its even easier to find those who agree house prices are overvalued at present.

sorry to break it to you, but... just because you see videos on youtube and random blogs on the internet about gold being cheap or even expensive - it doesn't mean it's true...