Experts... Price to fall in 2011

IveSeenTheLight

bigheadxx wrote: »

I don't agree with that at all. We are still in unchartered territory.
The "experts" would never have predicted 0.5% interest rates in a million years and it is certainly not what anybody was expecting in 2006, 2007 or even 2008.

They may not be mugs but they are not always right. SVR % at 1 or 2%, some people are paying literally 0% interest. If they had seen that coming they would not have not have let it happen.

My "pessimism" is not the next few years but in about five years when interest rates could reach highs not seen since the 1990's.

As I said a ten year+ fix sometime next year.

The risks to lenders of falling rates is not the same as the risk of them rising.
If lenders are prepared to offer 5.2% 10 year fix, then they surely are not predicting high interest rates over that timeframe, else they would be calculating the interest rate higher.

Being able to fix almost half the mortgage term for only 5.2% is extremely competative and beneficial for people wishing to secure their monthly mortgage payments.

bigheadxx

IveSeenTheLight wrote: »

Being able to fix almost half the mortgage term for only 5.2% is extremely competative and beneficial for people wishing to secure their monthly mortgage payments.

As I said, fix for ten years next year before rates start to rise.

Euphoria1z

bigheadxx wrote: »

As I said, fix for ten years next year before rates start to rise.

personally, if i could i would. But now that income is checked, i will come no where near the income miltiplier, i fail at even 5.5 times my income (of 2 jobs).

I would take the 5.2% fixed for 10 yrs in a flash if i could.

IveSeenTheLight

bigheadxx wrote: »

As I said, fix for ten years next year before rates start to rise.

Currently rates are falling.
I'm interested to know how you could predict rates will rise next year.

I'm not in that industry, but if I was in the business of lending money and the indicators was that the rates would be raising next year, I wouldn't be lowering my 5 and 10 year fixes now as currently is happening.

Graham_Devon

IveSeenTheLight wrote: »

Currently rates are falling.
I'm interested to know how you could predict rates will rise next year.

I'm not in that industry, but if I was in the business of lending money and the indicators was that the rates would be raising next year, I wouldn't be lowering my 5 and 10 year fixes now as currently is happening.

Why not?

If you can buy money today at a fixed rate that still allows you your required profit, why would you not lower your rates, become competetive, and get the punters in?

The money is bought today, at todays price. They don't stand to lose out if rates rise, as they haven't bought a variable rate.

IveSeenTheLight

Graham_Devon wrote: »

Why not?

If you can buy money today at a fixed rate that still allows you your required profit, why would you not lower your rates, become competetive, and get the punters in?

The money is bought today, at todays price. They don't stand to lose out if rates rise, as they haven't bought a variable rate.

Ok, let's go the next step.
Why would the lender that's offering the money at today's fixed rate offer lower rates if they thought it would rise significantly in that time period?

At some point someone is lending money at rates they believe they can make a profit on over that time period.

Graham_Devon

IveSeenTheLight wrote: »

Ok, let's go the next step.
Why would the lender that's offering the money at today's fixed rate offer lower rates if they thought it would rise significantly in that time period?

At some point someone is lending money at rates they believe they can make a profit on over that time period.

It's all based on LIBOR isn't it?

I'm not going to put my foot in this one though as it's not something I know enough about.

My point was merely about the mortgage lenders, who don't stand to lose out on a fixed rate if interest rates go up. You were kind of making out lenders dont think base rates are going to go up as they are offering lower fixes.

Who may or may not actually lose out further down the chain, I don't really know. My point was the lender has bought the money at a certain price, and have lent it to the consumer with a profit margin over the term regardless of the base rate and where it may or may not go.

IveSeenTheLight

Graham_Devon wrote: »

It's all based on LIBOR isn't it?

I'm not going to put my foot in this one though as it's not something I know enough about.

My point was merely about the mortgage lenders, who don't stand to lose out on a fixed rate if interest rates go up. You were kind of making out lenders dont think base rates are going to go up as they are offering lower fixes.

Who may or may not actually lose out further down the chain, I don't really know. My point was the lender has bought the money at a certain price, and have lent it to the consumer with a profit margin over the term regardless of the base rate and where it may or may not go.

At some point though I guess there is someone who has lent money at a rate they think they will be making a profit on and they are basing this on a risk of rates rises.

They are pricing accordingly to what they think rates will rise over the period.

I guess though that there is a risk that they get it wrong and they have lent at a rate below what rates could rise to and in real terms earn less than they could.

the point however is that they have valued the risk to the rates and adjusted accordingly.

JonnyBravo

IveSeenTheLight wrote: »

Ok, let's go the next step.
Why would the lender that's offering the money at today's fixed rate offer lower rates if they thought it would rise significantly in that time period?

At some point someone is lending money at rates they believe they can make a profit on over that time period.

Don't see what you're angling at here. The fixed rate is still high compared to the base rate. My take is they still think it's going to go up but not as much as they used to think.
The difference is pretty minimal.

IveSeenTheLight

JonnyBravo wrote: »

Don't see what you're angling at here. The fixed rate is still high compared to the base rate. My take is they still think it's going to go up but not as much as they used to think.
The difference is pretty minimal.

It's a nigh on certainty that at some point the BoE base rate will go up.
It's clear however that they think that this will occur after a longer period given they are reducing their long term fixes.

Someone posted a 10 year fix from 5.2%.
I've seen 5 year fixes from 4.19%
That's a pretty clear indicator for me of where they think rates will be over that timeframe..