Another Interest Rate Prediction

Procrastinator333

julieq wrote: »

But you're oversimplifying. If the desired outcome is to buy, which I'm guessing it is, then the danger is the market runs away. Because you can't see that until it's too late (detectability criteria), it's a higher ranking risk than the corresponding risk on the "purchase now" side that you get locked into a situation. You only actually lose money on a house at a point when you're forced to sell it, see the analysis of risk 2 above.

The market is clearly not "running away" Last 3 months are a total of 0.5% for LR, -.04% for hali and 0.1% for Nationwide. You see that ramping up overnight and suddenly 1,2,3% growth month on month? If you do then I understand your point, but for me there isn't really a less likely scenario over the next year or 2.

julieq wrote: »

Also it's not as if rental is isolated from other aspects of housing costs. You're not avoiding the risk that your rent will go up by accepting the risk that the market runs away. Rents will tend to be fixed at a percentage of capital value over time.

I can't be bothered to find it, but that is not true. Rents have not kept pace with the capital value. By a long way.

RenovationMan

Graham_Devon wrote: »

Not sure what it's like where you live.

But to rent the equivalent 180k house here, would cost £680-£780 a month.

Makes a big difference to the calculatons. £916 a month would get you a better house than you could buy at 180k.

I didnt come up with the £916 per month, Mr P did in his original example. I agree that you can rent much cheaper places, you can also do a house share to really keep costs down. You can do this forever and have a bucket load of disposible income. I'll never say that buying is cheaper than renting, but the fact remain though that if someone is looking to buy then now is a good time to do so as we look to be continuing in a sustained period of low rates.

Mr P's quite right to say that most FTBs can live in rented accomodation for a year, 2, 5, 10 or even the rest of their lives and it will be cheaper than buying, especially if they share, but not everyone want to rent.

When I rented in the past, it was fine and I had a good time with a flat share with a mate and a house share with a few other mates. I'm definitely not anti-renting. Any comments I therefore make on this board are squarely aimed at people like myself who own already or are looking to buy.

I do admit that I'm confused why anyone would be on here talking about mortgage interest rates and house buying if they're content to remain renting for several years.

Procrastinator333

RenovationMan wrote: »

I didnt come up with the £916 per month, Mr P did in his original example. I agree that you can rent much cheaper places, you can also do a house share to really keep costs down. You can do this forever and have a bucket load of disposible income. I'll never say that buying is cheaper than renting, but the fact remain though that if someone is looking to buy then now is a good time to do so as we look to be continuing in a sustained period of low rates.

Mr P's quite right to say that most FTBs can live in rented accomodation for a year, 2, 5, 10 or even the rest of their lives and it will be cheaper than buying, especially if they share, but not everyone want to rent.

When I rented in the past, it was fine and I had a good time with a flat share with a mate and a house share with a few other mates. I'm definitely not anti-renting. Any comments I therefore make on this board are squarely aimed at people like myself who own already or are looking to buy.

I do admit that I'm confused why anyone would be on here talking about mortgage interest rates and house buying if they're content to remain renting for several years.

Mr P - I like it

Maybe we or I am splitting hairs here. If someone wants to buy because they have a family, settled job etc etc then I'm not saying don't (That will be me in a couple of years and will over ride the financial reasons I outline in previous posts).

Just that the FTB doesn't really lose and if anything gains by waiting for a year or 2 in a stagnant market. The level of gain or loss is pretty minimal, even on like for like properties. So I don't think it is true to say to the FTB there has never been a better time.

Also, as the first example and your personal circumstances show, once the higher LTV's kick in and sub 3% rates become available, it builds a strong case for buying instead of renting.

Why am I on here - because we do plan to buy at some point in the next 18 months to 3 years. Probably closer to the 18 month mark. We could buy sooner if we wanted to. So house prices and interest rates are very relevant to me.

I could ask the same question of you. You have bought your plan is in place and you are paying it off. You have thrown the dice and it is really too late to change your decision, so why come on here?

The answer for both is that we find it entertaing in some way and perhaps hope to learn something in amongst all the carp that gets thrown around here.

Off out now, so I will have to wait for tomorrow for the next round of this thread. Have a good day all.

RenovationMan

Procrastinator333 wrote: »

I could ask the same question of you. You have bought your plan is in place and you are paying it off. You have thrown the dice and it is really too late to change your decision, so why come on here?

I tend to be more involved with the interest rate (for obvious reasons) and general economic discussions rather than the ones about house prices. Ive no real interest in how much houses cost any more because we've bought what the guys on the MFW board call a 'forever' home, and while we're not here forever, we will be here for 20 years or more. I will therefore be interested in house prices in 20 years when we come to sell, but I doubt (hope?) that we all still wont be on here by that time.

Once I get my equity up to 50% or beyond and arrange my 10 year fixed rate, I doubt I'll be terribly interested in discussing interest rates any more either.

Gorgeous_George

tbourner wrote: »

You don't have to! Most people have learnt from the boom years follwed by the now busting years that overpaying would have been a good idea rather than squandering the spare money created by low rates. If interest rates suddenly go up to stupid figures again people that could have saved themselves by overpaying would be in the poop.
Obviously it depends on your age, equity, job and many other factors though, wasn't pointing at you directly just generally people should overpay wherever possible.

Hmmm...

Spending money enjoying life while you are young enough to enjoy is considered unresponsible. Saving or overpaying the mortgage on the other hand - so that you can be richer in later life - is ok?

You live once. What will your headstone read?

Here lies a man who lived life to the full, enjoyed holidays all over the world and died a pauper

or

Here lies a man who was mortgage free

It is all about balance.

GG

Batchy

The reason people buy is CONTROL, tenants have little control, a lot of disruption, and find it hard to be able to personalise, have pets, and generally live the life that a social tenant takes for granted. If you compare to social housing then I could accept that its all about costs, but very often its not the case, as people who live in them are not able to be in a position to buy, but thats another discussion.

However, what you can't show me financially, is that if I choose to rent now, for whatever market value it is, that in the same 25 year period at the END I would end up owning a house, by paying the same money as a mortgage as I would have paid into rent over the exact same period, That I would then have enough (savings) left over to pay for the house cash. Its IMPOSSIBLE to show this as we dont know what houses will be worth. The way people HEDGE this risk is to get a mortgage (fix the cost of the house), the way people limit the interest cost is save for a deposit HARD, and limit / hedge against interest rate risk by OVERPAYING. Renting is a short term alternative, but anymore than 5 years in total in rented and your wasting valuable time. yor missing cycles, and need to just get on board.

What ever financial implications there are, you have to take into account SOCIAL factors of getting on with your life.

Ive done enough hard saving personally, I expected prices to correct themselves by circa 30% and IMO they have. SO no matter what happens, I feel I have done the right thing, and timed it right (but only to the best of my ability). I saved up my deposit and rainy day fund. its now time to get on board for me. Its not a bad time, its probably a good time, but it probably isnt the BEST time. Only when we look back in history will we be able to see who was right and who was wrong.

Lets compare notes in 10 years? ;-)

Procrastinator333

Batchy wrote: »

The reason people buy is CONTROL, tenants have little control, a lot of disruption, and find it hard to be able to personalise, have pets, and generally live the life that a social tenant takes for granted.

Good tenants have plenty of control. Both this place and the last, we have done anythig and everything we wanted and our last LL offered to redecorate and drop 10% of the rent (which was already low) to keep us.

Now there are limits to that, you are not going to be able to pick your own kitchen or knock a wall down, but apart from that, be a good tennant and you get what you want.

I'm not really disagreeing with you here, perhaps only on the extent that tenants have control. When we buy it will be in part so that we have that control over longer timescales (family considerations) and that last piece of freedom that does lack from renting.

But having said that, it isn't all about control. History shows owning is cheaper than renting long term. So the other reason we will buy is because it is cheaper.

Batchy wrote: »

However, what you can't show me financially, is that if I choose to rent now, for whatever market value it is, that in the same 25 year period at the END I would end up owning a house, by paying the same money as a mortgage as I would have paid into rent over the exact same period, That I would then have enough (savings) left over to pay for the house cash. Its IMPOSSIBLE to show this as we dont know what houses will be worth. The way people HEDGE this risk is to get a mortgage (fix the cost of the house), the way people limit the interest cost is save for a deposit HARD, and limit / hedge against interest rate risk by OVERPAYING. Renting is a short term alternative, but anymore than 5 years in total in rented and your wasting valuable time. yor missing cycles, and need to just get on board.

Whoever said renting is financially a good idea over 25 years? That is not my point. Simply that I disagree that there is any rush for the FTB. In a stagnant market, they likely lose nothing or gain a little by waiting. Renting is not always dead money.

People talk about either saving hard, or working to overpay. Well the best and quickest way to do that as a FTB is to continue living in a smaller place in a stagnating market.

An who knows, if all of us FTB's did this, we could actually crash the market and get it cheaper in the end too

Batchy wrote: »

Ive done enough hard saving personally, I expected prices to correct themselves by circa 30% and IMO they have. SO no matter what happens, I feel I have done the right thing, and timed it right (but only to the best of my ability). I saved up my deposit and rainy day fund. its now time to get on board for me. Its not a bad time, its probably a good time, but it probably isnt the BEST time.

Good, nothing but respect for those who make their own decisions and stick by them.

Batchy wrote: »

Only when we look back in history will we be able to see who was right and who was wrong.

Lets compare notes in 10 years? ;-)

Well, I think the only thing everyone on this forum can agree on is that we can't all be correct. So we will see!

RenovationMan

I was rooting about in the MSE basement to try and find a post I made a few years back (still looking ) and I found this. I remember that the ITEM Club had been subject to a recent discussion and thought it'd be handy to see how their prediction here stands up. I know it's not 2013 yet, but everyone seems to think that rates will stay at 0.5% until then. Seems like a decent prediction from back in 2010.

sabretoothtigger

Im already wrong in being surprised we stay low this long but I knew as soon as they did QE all bets are off. In 2009 they started that and I bought gold which doubled and its hard to predict rates when they are fixed by the biggest debtor but they rise in line with bond demand for rates basically.
Ask a bond trader how much real demand there is, thats your most direct answer - negative euro helps us


Rates were high in defence of the pound back in the early ninities and I think a similar high tide mark will apply at some point this decade also

The difference this time we maybe have doubts on Germany that we didnt then, though they have grown alot since also so I think thats temporary.
The other side would be our relative link to the dollar which should be much easier this time, do we go down with Dollar and not raise rates. Somewhere in between as we export to many global countries not in debt.

The bottom line is we do import and just ignoring great drops in exchange rates is not feasible as it raises our costs beyond feasibility. Best hope is exports which creates real demand for pound in exchange, we have declining GDP..
Petrol raises cost of food or anything transported nationally, £2 petrol per litre will occur, etc

LittleMissAspie

If the base rate goes down are mortgage rates likely to go down? I ask because we are coming to the end of our fixed rate. A new fix is 0.2% higher than the SVR so I can't decide whether to fix or not. A few months ago the fix was the same as the SVR, then they increased it by 0.6%, then they dropped it by 0.4%. So I'm just wondering how likely it is that the fix will drop again to the SVR rate.