How I intend to make £'000s

Doozergirl

mr.broderick wrote:

someone starts a thread "How can i save 50 pence in 4 weeks?" i'll guarantee you 7 posts later "House prices are going to crash.."

You're not wrong there!

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I'm priced out of the housing market. If I were fortunate to have the security of having my own mortgage I certainly wouldn't gamble it on speculating.

House prices are over valued and this is mainly due to speculation, but nobody can truly predict which way property prices will go.

There are people of housepricecrash who sold to rent as long as three years ago and have had to endure seeing their old homes rise in value so much they too are now priced out from getting back on the property ladder.

I would be very careful.

Jim_B_3

It is very possible, though, to have low interest rates without excessive house prices. Take, for example, about five years ago. Low interest rates but relatively cheap housing.

Whilst I'm here, I'd like to initiate a new form of Godwin's law; anyone who says 'housing ladder' loses. It's a meaningless phrase that simply states the obvious fact that if you have something worth a lot of money, you could sell it and get a mortgage on something worth a bit more money. It applies to everything that can be bought and sold, but I don't see people talking about the car ladder or the jewellery ladder.

CWCW: "Higher interest rates = higher monthly mortgage cost = a direct factor of affordability." The real factor of affordability is what the banks are willing to let you borrow; people have demonstrated that they are ready and willing to put more and more of their income into the mortgage, up to the absolute limit. Far more goes on mortgages proportionally now than ten years ago. I believe this is the real limiting factor in new mortgages. Before, banks would lend as much such that, say, 25% of your income went on the mortgage. Now it's as much as 50%.

mr.broderick

Jim is it ok to say "property ladder" then?

Jim_B_3

Well, it just seems to irritate people. It doesn't mean anything, but pro-HPI people use it like a mantra, as if it answers all questions and is some kind of meaningful life goal.

tomstickland

"housing ladder" is meaningless unless you add value to every house along the way, not something that the majority do.

Snow_Dog

The thing is, those HPC converts that STR'd in 2003/2004 thinking HPC was round the next bend have lost out on the 'supposed' HPI of three years which in theory blows away any advantage that they may have hoped for in selling three years ago. If their dream house falls back now by 20% of 30% will it drop back to 2003/2004 levels?

Also the people who have stuck it out are three years closer to the end of their mortgages and 'rent free' living.

I'm not saying I dont believe in HPC and was considering STRing a year ago but didn't for various reasons. But it possibly explains some of the vitreol experienced by anyone posting anything on HPC thats not strictly party line. There's a lot of very frustrated people over there.

Oh and how does it go mr broderick? "House prices are going to crash...."Note 1



Note 1 And as our Vera once sang, "don't know where don't know when".




Incidentally how do you save 50p in 4 weeks, I can understand saving 50p in the £, or saving a few minutes in the hour but...........

Alan_M_2

Snow_Dog wrote:

The thing is, those HPC converts that STR'd in 2003/2004 thinking HPC was round the next bend have lost out on the 'supposed' HPI of three years which in theory blows away any advantage that they may have hoped for in selling three years ago. If their dream house falls back now by 20% of 30% will it drop back to 2003/2004 levels?

This assumes that prices have increased since 2003/04, there are areas where they have dropped and areas where they have increased as prices are very area specific and not a general trend that is often portrayed by average statistics.

Anecdotal, but a good friend of mine living in Kent has just remortgaged and the house was valued at £285K in 2004 is now being valued at £230K for the remortgage.

Now I also have a friend who lives in Epsom and his house has doubled in the same period of time, so who is right? Well they both are, a house is worth what someone is willing to pay for it.

The house I live in has increased in value by 150% in the last 18 months, I find this a little ridiculous but it appears people are willing to pay that much so good luck to them.

cwcw

Jim_B wrote:

It is very possible, though, to have low interest rates without excessive house prices. Take, for example, about five years ago. Low interest rates but relatively cheap housing.

The low interest rates then are what has triggered the high house prices now. Low interest rates meant that people could afford bigger mortgages - affordability, once again directly affected by interest rates. This drove prices up, and still is doing to an extent as they're still historically low, but a peak has got to be reached. We're not there yet.

franklee

cwcw wrote:

£100k mortgage over 25 years at 5.2% = £594 capital repayment per month (£431 interest).

A 15% crash is more likely, prompted by the same 1.8% interest rate rise:

£85k mortgage over 25 years at 7% = £597 capital repayment per month (£493 interest).

So the actual monthly payment is the same, the house cost you less so you borrow less, but you pay more in interest payments due to the very trigger that caused your house to cost less.

This would only be true if both mortgage holders took out fixed rates for the whole term which is very unlikely. Most take fixes of 2-5 years. So after the initial fix ends the first buyer will also be facing a 7% interest rate on his loan which will be larger than the second buyers loan.

In short if you are tempted to take out a large loan due to low interest rates making it look affordable then beware that interest rates can go up. On the other hand if you take out a smaller loan albeit at a high interest rate then you can at least have lower rates to look forward to.

25 years is a long time, look how rates have varied over the last 25 years. There is little to say they won't be just as volatile over the next 25!