How panic in Europe will hurt UK house prices

Flight2quality

The Bank of England may lose control of interest rates
British house prices have been remarkably resilient following the global economic crisis. Sure, in 'real' (inflation-adjusted) terms, they've fallen a fair bit from the peak, outside London. But they remain hugely expensive on a historic basis.

What's kept them propped up? Bulls will go on and on about supply and demand. But in reality, it all comes down to interest rates. With the Bank of England slashing the bank rate to 0.5%, many homeowners have seen the cost of their mortgages plunge to unheard-of lows. That's enabled people to hang on to homes they might otherwise have been forced to sell.

http://www.moneyweek.com/investments/property/uk/how-panic-in-europe-could-hurt-uk-house-prices-13901

HAMISH_MCTAVISH

Moneyweek.

Zzzzzzzzz

Xiderpunk

Flight2quality wrote: »

The Bank of England may lose control of interest rates
British house prices have been remarkably resilient following the global economic crisis. Sure, in 'real' (inflation-adjusted) terms, they've fallen a fair bit from the peak, outside London. But they remain hugely expensive on a historic basis.

What's kept them propped up? Bulls will go on and on about supply and demand. But in reality, it all comes down to interest rates. With the Bank of England slashing the bank rate to 0.5%, many homeowners have seen the cost of their mortgages plunge to unheard-of lows. That's enabled people to hang on to homes they might otherwise have been forced to sell.

http://www.moneyweek.com/investments/property/uk/how-panic-in-europe-could-hurt-uk-house-prices-13901

Do not quite understand this logic, why is the assumption there that low interest rates are supporting people who otherwise could not afford their houses? Are there figures supporting this? I fail to believe the vast majority of people who buy houses neglect to mentally factor in higher interest rates. Sure I guess there are always a few village idiots around however I am sure the vast majority of home owners could afford a much higher rate.

Home owners that I know personally, myself included are largely overpaying their mortgages to pay them off early. If interest rates jumped up then it would just mean less ability to reduce the term.

Cleaver

Flight2quality wrote: »

What's kept them propped up? Bulls will go on and on about supply and demand. But in reality, it all comes down to interest rates. With the Bank of England slashing the bank rate to 0.5%, many homeowners have seen the cost of their mortgages plunge to unheard-of lows. That's enabled people to hang on to homes they might otherwise have been forced to sell.

I've said this before on here, but there's a huge amount of people who won't be that bothered about interest rates changing. When we bought a house in 2003 we fixed at 4.7%, when that ended in 2008 rates were dropping and we went on to SVR of 4%. We fixed again at the start of 2011 at 3.99% for five years until 2016. We don't plan to have much of a mortgage left by 2016, but that's a 13 year period when our mortgage will be between 4% and 5%.

I'm sure some people will be screwed when rates rise, but most people will be fine and keep their house. It might mean cancelling SKY, making their own meals from scratch instead of ready meals and eating out and one less holiday a year, but they'll get there.

Flight2quality

HAMISH_MCTAVISH wrote: »

Moneyweek.

Zzzzzzzzz

Always good to resort to when you know you have been proved wrong yet again :T

vax2002

7560 people a day arrive in the UK for the first time every day. DOUBLED under the coalition, yes immigration has doubled
houses are in shortage.

HAMISH_MCTAVISH

Flight2quality wrote: »

when you know you have been proved wrong yet again

Mate, I've been pretty spectacularly right about house prices every year since I started posting on these boards, and only use ONE account to defend my position.

You have to resort to disposable accounts to throw away at the end of each argument, that's how badly you lose the debate.:D

Flight2quality

vax2002 wrote: »

7560 people a day arrive in the UK for the first time every day. DOUBLED under the coalition, yes immigration has doubled
houses are in shortage.

"What's kept them propped up? Bulls will go on and on about supply and demand. But in reality, it all comes down to interest rates.

But it's not just down to the Bank. The cost of home loans may be bottoming out. And it all stems from what's going wrong in the European banking system.

That'll make credit even harder for businesses and households to get hold of. And this is where the interest rate risk we were talking about earlier comes in.

In other words, almost every day, UK banks are being forced to pay more to borrow in the money markets.

And if banks have to pay more to borrow money, they'll have to charge the likes of you and me more to borrow as well."

Well worth reading the rest of the article.



It certainly seems we are nearing the end of cheap easy credit.

It doesnt matter how many people would fancy living in a certain house all that matter is who can raise the asking price.

Flight2quality

HAMISH_MCTAVISH wrote: »

Mate, I've been pretty spectacularly right about my prediction that gold and silver were going to crash 100% guaranteed when I joined this site in 2009. Yes silver was $8 and gold was under $1000, but I will be right one day

Yes yes Hamish you will be right one day with your prediction that "gold and silver were going to crash 100%guaranteed" the only thing is we will have the boom first which is still to come :rotfl:

purch

How panic in Europe will hurt UK house prices. The Bank of England may lose control of interest rates

What complete and utter !!!!!!!! !!!!!

The debt problems of the Eurozone are not affecting the U.K. Quite the reverse in fact.

Gilts are strong, and getting stronger.

Sovereign Credit Default Swaps clearly show how the U.K. is now considered a safer debt issuer than any Eurozone country........even Germany.

UK 5 yr CDS 96
Germany 5 yr CDS 108
France 5 yr CDS 207
Spain 5 yr CDS 447
Italy 5 yr CDS 548
Greece 5 yr CDS 3,535 :eek:

The Bank of England remain in complete control of the U.K Base rate, and won't come under any pressure from a steepening yield curve to raise it any time soon.

Yet again Moneyweek proves itself to be a less than useless source of economic comment or information.

Don't embarrass yourself by quoting from it, or linking to it.

They do not have a clue !!!!!!

Flight2quality

With share prices plunging and fears over Europe rising, homeowners might take comfort from the idea that at least interest rates won't rise. But they shouldn't be so sure. All David Stevenson is saying is why now could be the time to fix your mortgage rate.

We are in a deflationary environment. Stock markets are going down all over the world. Real estate is going down all over the world, even commodities are going down all over the world. Some are predicting oil will go down to $10 for example to show how much deflation we have.

http://www.youtube.com/watch?v=tj2s6vzErqY

The house price bulls love to shout about how in big inflation their debt is being inflated away. But they do not want to think about big deflation and their debts are surging against everything else.