Three-quarters of homebuyers fear interest rate hike that could 'push them over the e

Graham_Devon

robmatic wrote: »

Who says 7% in 2 years, and how or why would they rise to that level so quickly?

I wouldn't be surprised if you've gleaned this from one solitary crank on Youtube...

If interest rates can drop 5% in a few months, why can interest rates not rise the same amount in 2 years?

It's happened before, remember.

I'm not saying it will happen, I'm just questioning why it can't, and why you call others who think the possiblity is there, crackpots.

HAMISH_MCTAVISH

llubdlog wrote: »

No it was star hedge fund manager Crispin Odey who said back to 7% faster than anyone expects.

And he said it would happen because of massive wage inflation.

In which case debt gets inflated away.....;)

robmatic

Graham_Devon wrote: »

If interest rates can drop 5% in a few months, why can interest rates not rise the same amount in 2 years?

It's happened before, remember.

I'm not saying it will happen, I'm just questioning why it can't, and why you call others who think the possiblity is there, crackpots.

They could do in theory, but such rapid change would either require our economy not to be completely fooked, or to be completely fooked in a completely different way.

And there is a bit of a difference between the possibility being there and being highly likely.

Graham_Devon

robmatic wrote: »

And there is a bit of a difference between the possibility being there and being highly likely.

Well it's a good thing no one said that then, isn't it!

bristol_pilot

Only people who have mortgaged themselves to the hilt on interest-only mortgages are likely to be affected. I did some spreadsheet calcs for my own (repayment) mortgage and if interest rates go up by 5% it will not cost me more than the equivalent of a couple of nights out a month. And that is on a fairly large mortgage. There seems to be a bit of folk memory of when interest rates hit 15% in the 1980s - put that into my spreadsheet then I'd start to notice! But 5%? No sweat. And if my wage inflates - even better!

geneer

HAMISH_MCTAVISH wrote: »

And he said it would happen because of massive wage inflation.

In which case debt gets inflated away.....;)

This is discraceful.
Only the debt of bulls who chose to buy at peak gets inflated away!
What about those bears who chose to buy after the crash?

robmatic

geneer wrote: »

This is discraceful.
Only the debt of bulls who chose to buy at peak gets inflated away!
What about those bears who chose to buy after the crash?

Errm, everybody's debt gets inflated away, bearish and bullish alike. The smart thing to do is to take into account the effect of inflation over time when performing your calculations. For example, we have experienced roughly 10% wage inflation over the last 4 years, which along with the low cost of servicing debt, means that somebody who has been waiting to enter the market for that long may not be benefiting as greatly as a more simplistic analysis would suggest.

TedButler

bristol_pilot wrote: »

Only people who have mortgaged themselves to the hilt on interest-only mortgages are likely to be affected. I did some spreadsheet calcs for my own (repayment) mortgage and if interest rates go up by 5% it will not cost me more than the equivalent of a couple of nights out a month. And that is on a fairly large mortgage. There seems to be a bit of folk memory of when interest rates hit 15% in the 1980s - put that into my spreadsheet then I'd start to notice! But 5%? No sweat. And if my wage inflates - even better!

Not only interest only will be affected, most people who have bought the last few years who could only just afford the repayments will become distressed sellers. They will see house price falls begin to accelerate and start dropping the price to sell ahead of the next guy.

If they can not afford to drop the price enough to get a sale because of neg equity and they can not earn enough over time to pay the now higher monthly mortgages then we may see the tidal wave of repossessions that is being talked about when interest rates goback above 5%.

wotsthat

Forest_12 wrote: »

Looks like home owners are anticipating rate rises and acting accordingly

Maybe lenders are anticipating continued low rates and actively trying to flog fixed rates to enhance margins?

robmatic

TedButler wrote: »

Not only interest only will be affected, most people who have bought the last few years who could only just afford the repayments will become distressed sellers. They will see house price falls begin to accelerate and start dropping the price to sell ahead of the next guy.

If they can not afford to drop the price enough to get a sale because of neg equity and they can not earn enough over time to pay the now higher monthly mortgages then we may see the tidal wave of repossessions that is being talked about when interest rates goback above 5%.

Anyone who bought in the last 4 years will have done so with a low LTV and on a modest (4x) salary multiple. And your man Crispin Odey is suggesting that they will be experiencing massive wage inflation, which would make the repayments increasingly affordable.

It might not be quite the apocalypse that you wish for...