Why are posters so Obsessed with House Prices?

chucky

treliac wrote: »

House prices are of quintessential importance as they are the barometer of the economoy we operate within.

it obviously is in those [STRIKE]wishing[/STRIKE] [STRIKE]hoping[/STRIKE] waiting for house prices to crash...

treliac wrote: »

Okay, where's chucky to argue with me.

i'm here duchess - the best bit about your post is that the usual clowns (minus Malcom - my 2nd top poster) thanked your post. anything that mentions chucky or a something against chucky automatically gets the usual clowns excited, even if they don't agree with it. love it

borntobefree

macaque wrote: »

1. High house prices deny young people decent accomodation.
2. High house prices increase the cost burden on companies employing people. This makes the economy less competetive.
3. High house prices mean that a disproportionate amount of savings get diverted into property. This means that the wealth creating side of the economy is starved of investment.

All true. But high interest rates make property expensive and low interest rates make property cheap. £200,000 at 7% is a monthly repayment of £1414 at 4% it's £1056. Much cheaper;)

Graham_Devon

borntobefree wrote: »

Ok - so posters on this board are waiting for prices to fall as they can't afford to buy a house at current purchase prices but if interest rates rise they still won't be able to afford the monthly repayments, so maybe they just need to earn more?

In this case, where you have assumed they would not be able to afford any interest rate rises and assumed stuff about the boards posters....it would be silly to usher them into taking the debt now just because it's cheaper for a couple of years.

But in general, it's not that people can't afford the mortgage payments. It's that people cannot afford the deposits required.

The good thing about buying at a lower price, is not only do you pay less for the house, you also pay less per month in mortgage payments. Every interest rate rise costs you less because the size of the debt is less.

We can go round and round. Just saying "they need to earn more" is fine, but this is a country wide problem. Not an individual problem for the miniority. On a country wide level "just earning more" is quite difficult to achieve.

There is a lot of arguments for taking on debt. They have been demonstrated on this thread. But theres no argument that can win over the initial price of the house.

borntobefree

Gorgeous_George wrote: »

As it is, I'm more obsessed with base rates. With two lifetime tracker mortgages, the first Thursday of each month brings a smile to my face. As time passes, the impact of rising base rates diminishes.GG

Makes sense to me.:D

System

Graham_Devon wrote: »

But in general, it's not that people can't afford the mortgage payments. It's that people cannot afford the deposits required.

We discussed this before, but even a 20% drop in prices isn't going to dent a deposit much (well, 20% obviously )

If someone can't afford a 15k deposit, can they afford a 12k one after a 20% drop? What do you think is a realistic deposit for a FTBer to have to pay?

What FTBers need is 10% mortgages to come back with decent rates, yet FTBers seem to be against that.

Graham_Devon

borntobefree wrote: »

All true. But high interest rates make property expensive and low interest rates make property cheap. £200,000 at 7% is a monthly repayment of £1414 at 4% it's £1056. Much cheaper;)

And £160,000 at 7% is a monthly payment of £1,144.

At 4% its £853.

I'm using £160,000 as many 200k properties will have fallen over the last couple of years to that price.

Just by waiting, any person who bought at 160k instead of 200k has saved themselves £270 per month, £40,000 on the house and about 4k on stamp duty if they are a first time buyer.

Why do you keep using the same price and just adjusting the interest rate to tell us it's cheaper to buy as the debt is cheaper. You are using a static price, but variable interest rate. Both are variable.

What's more, you keep ignoring the fact that the debt is not that much cheaper, only marginal for those taking on new mortgages. The people benefitting from the low rates are those with existing mortgages on trackers, or SVR.

New buyers are getting a slightly cheaper rate than I could in 2006, but they have to pay a fee for the mortgage, a large one, something that most didn't have to pay years earlier.

chucky

borntobefree wrote: »

Ok - so posters on this board are waiting for prices to fall as they can't afford to buy a house at current purchase prices but if interest rates rise they still won't be able to afford the monthly repayments, so maybe they just need to earn more?

the problem with that logic is that they need them to fall more than 10% from now and probably closer to 15% for it to have been 'profitable' for them. what happens i they don't drop by that... they lose out...

if these are the margins they're playing with they're playing a dangerous game...

that applies more to those that could buy now - not the ones that are saving for a deposit.

borntobefree

RenovationMan wrote: »

Well, For Example :

Cost of home 200,000 in 2007
int at 2% 25 yrs 54,313
Total cost of home £254,313

Cost of same home 176,000 in 2010 (12% reduction from peak)
int at 5% 25 yrs 47,794.00
Total cost of home £223,794

Quick figures using the mortgage calculator on your link.

So basically, FTB are obsessed with house prices and OOs are obsessed with interest rates, and both for very good reasons.

Your figures are wrong I'm afraid.
£176,000
int at 5% 25 years £132,664
Total cost of home £308,664.

So waiting for a fall of 12% in house prices, but this leading to a 3% increase in interest rates, leads to the house being £54,351 more expensive.

With a 2% rise interest rate, the house is £24,384 more expensive, even with a 12% drop.

With just a 1% rise in interest rate and a 12% drop, the house is £3930 cheaper by waiting (but this doesn't take into account rent paid out)

chucky

Originally Posted by borntobefree
Do you see why the interest rate matters?

Graham_Devon wrote: »

Yup, and never disagreed otherwise.

so what you're saying now is that it's a good time to buy property now on a good interest rate.

Graham_Devon

borntobefree wrote: »

Your figures are wrong I'm afraid.
£176,000
int at 5% 25 years £132,664
Total cost of home £308,664.

So waiting for a fall of 12% in house prices, but this leading to a 3% increase in interest rates, leads to the house being £54,351 more expensive.

With a 2% rise interest rate, the house is £24,384 more expensive, even with a 12% drop.

With just a 1% rise in interest rate and a 12% drop, the house is £3930 cheaper by waiting (but this doesn't take into account rent paid out)

Nope.

The only way this would ever work is a fix for 25 years.

Max fix as far as I'm aware is 10 years. Most of the people we are actually talking about here will find it nigh on impossible to actually get this. 5 year fix is more realistic.

At which point, you move over to SVR or remortgage.

At which point, you pay the going rate for your current debt. Assuming no overpayments, the person who bought cheaper will always win here as their debt will be less and the rates will be the same for both.

For the initial fix years, you are correct. Anything past an initial fix, and the house at the higher price is more expensive in terms of interest and therefore will cost you more.