Will the rate rise change your buying/selling plans?

nelly_2

talksalot81 wrote:

I am guessing your friends not to be mathematicians.

Imagine repayments of £1000.

1) Interest rate 12%. Rate rises 6%
2) Interest rate 4%. Rate rises 2%

Which one makes a bigger difference to the repayments? Answer - neither. Both result in a repayment of £1500.

So this 0.25% rise is basically the same as a 0.75% rise in 1990.

Interestingly, the rate was well above 10% through the 80s. At crashing point, the rates were only just below 15%. So that is a 50% rise to yield the crash (many people believe the IRs were the major factor). In 2003 we got to 3.5%. Today we are at 5.25% - 50% above what we were at the minimum...

-and to add to that, 10 years ago people only borrowd 3.5 times their salary.

Now what are they borrowing 4/5/6 times just "too get on the ladder"


people have already borrowed far more then they should have so adding another quarter percent to it hits far harder than it used to + credit cards etc get it too.

nelly_2

ravenfield wrote:

they were also saying the house market will not crash until at least 2012 because of Olympic. .

because of olympic standard stupidity?

HokeyCokey_3

ravenfield wrote:

they were also saying the house market will not crash until at least 2012 because of Olympic. So in theory, the house market will keep rising until 2012. Conclusion = better buy now than later.

Who are they........? lol

Is it the government playing its latest game of chinese whisper?

talksalot81

HokeyCokey wrote:

Who are they........? lol

Is it the government playing its latest game of chinese whisper?

To quote:

ravenfield wrote:

All of my friends

So 'they' appear to be his friends... I am unsure whether the poster is telling us because he believes them or because he thinks they are crazy...

mystic_trev

ravenfield wrote:

All of my friends commented that 0.25% increment is nothing at all. 10 years ago the interest rate is much higher than 5.25% so even if it increases to 7% it won't have any impact to the booming housing market. you only have to pay 0.25% extra on morgage per year but the house price rise is around 10% a year. some think it's likely to drop back to 5% by end of this year.

Looks like you and your friends must have fallen out of the Silly tree. The reason House prices hadn't started rising dramatically until 10 years ago was because they we're just coming out of a slump - where high Interest rates had been prevalent. Now Interest rates are going up again and I'm afraid they're not going to come down quickly - we have a rather large problem called inflation! Pity you and all your "friends" didn't take out low fixed rates when they were available - no doubt you'll come back and say they did!

ravenfield

talksalot81 wrote:

To quote:

So 'they' appear to be his friends... I am unsure whether the poster is telling us because he believes them or because he thinks they are crazy...

I'm don't know what to believe. All this time i thought the housing market will slow down but it didn't.

Those friends of mine who commented that it will rise are the rich ones. to be precise they are doctors, bankers, accountants, lawyers. All of them seem to agree house price will keep rising until at least 2012. I'm the only one who thinks it will slow down but I have been wrong for two years now. one doctor + banker couple almost bought another house of £500k value in london (posh area) but the seller pull out at last minute, probably the seller thinks the price will keep booming for another good year.

Snow_Dog

Aha, there's your clue, in a circle of friends that includes in the plural, doctors, bankers, accountants, lawyers.

Most peeps I know would be happy/are happy with just the one house and on the wages most of them are on then thats about what they can stretch to. Many can't.

Mind you, I do know an accountant. But then he's only got one house afaik.

BettiePage

Snow_Dog wrote:

Mind you, I do know an accountant. But then he's only got one house afaik.

Positively freakish then

fivemice

It won't be changing our plans.
We worked out the other night that with a 15 yr mortgage we could afford interest rates upto 22% or thereabouts and that's not allowing for any future wage increases.

We are buying a house to live in, not to make money on. If we make money on it, it's a bonus but we plan to buy a house and live in it for the long term.

Martinslovechild

ravenfield wrote:

I'm don't know what to believe. All this time i thought the housing market will slow down but it didn't.

Those friends of mine who commented that it will rise are the rich ones. to be precise they are doctors, bankers, accountants, lawyers. All of them seem to agree house price will keep rising until at least 2012. I'm the only one who thinks it will slow down but I have been wrong for two years now. one doctor + banker couple almost bought another house of £500k value in london (posh area) but the seller pull out at last minute, probably the seller thinks the price will keep booming for another good year.

Personally, I believe that the housing market will peak in 2010. This is based on a mixture of demographics and historical trend analysis from Nationwide's website. After peaking, the market historically takes 2-3 years to crash or return to trend. On this basis, I estimate that house prices will hit trend in 2013 (a fall of 38% from their current levels), falling further to below-trend in 2014 (to approximately 50% of their current levels), before slowly increasing from 2015 onwards.

America and Australia have a head start on the UK. Some properties in Australia are already selling at a large discount to their peak. In America, where a 2-bedroom apartment in Venice or Santa Monica readily sells for $800,000 upwards, prices are steadying off. The market may well pick up there (as it will continue to do so here throughout 2007-08) before peaking in 2010.

If you want to listen to a very interesting discussion on one American guy's predictions for the future of the stock market & housing market, then click here. What happens in America generally tends to happen here shortly afterwards.

Another very interesting source of information on the whole house price subject is the website housepricecrash.

It's worth noting that today's rate rise, far from "spooking the market" like some journalists have suggested, lifted the FTSE-100 over 1% !!. Several economists have predicted a rise to 5.75% by the end of 2007 - looking at recent inflationary figures, this now appears to be extremely likely.

Once you understand that the housing market, like the stock market, operates in a cycle, it makes total sense that it should peak and trough. The stock market is still undervalued in historical terms (average P/E of 13, well below the long-term average of 17) whereas the housing market is 38% overvalued. Which one would you choose to invest in right now?

Let's face it - house prices need a shakeout just like the tech-wreck of 2001-03. It gives first-time buyers a real opportunity to get into the market, it makes a jump up the property ladder for existing homeowners much more realistic and tips the balance back to a sustainable long-term market away from a bubble. Unfortunately, a bubble is exactly what it is and bubbles ultimately burst. Roll on 2010.