Inflation hits 3%

sarkin

Here we go inflation is up, interest rates are up, better pencil in another .25%for February. This market is going to die on its feet now. Looks like its going to be the race to get out by December. For those of you not on fixed rates good luck

fivemice

Hmmm... I know next to nothing about inflation and interest rates and how they relate to eachother and the implications of both on everyday life.
BBC News has a video on their website that seems to suggest that interest rates will go up again in Feb, but that inflation will then fall later in the year - is fixing a mortgage rate still a good idea?

sm9ai

Together with fixed rates being withdrawn things don't look good.

But then again when has the market ever done what common sense suggests it should. It will probably crash when people least expect it.

sm9ai

fivemice wrote:

is fixing a mortgage rate still a good idea?

yes, a number of people expect rates to be up to 6.5% soon :eek:

tkane

A crash is a certainty....question is...how soon will it come?

fivemice

Why is a crash a certainty?

tkane

fivemice wrote:

Why is a crash a certainty?

I don't know if I'm allowed to advertise another forum here but the following will give you a very extensive answer to your question...

http://www.housepricecrash.co.uk/forum/index.php?act=idx

Sorrys mods if this isn't allowed but I discovered that forum from here so what the heck

gil13

I just wish the BOE did a 1/2 point last year, they could have got the job done a lot early than likely now, in saying that I expect no more than another 1/2 point during this cycle and I hope they take off one or two of the increases end of 2007/early 2008. I expect by this time inflation will be on it's way back down again through lower utility bills, the only worry is that as people become more aware of their own levels of inflation that this will fuel wage demands that will be an inflationary pressure in itself, a vicious circle. the wheels came of this government along time ago and now the chancellors cart is looking bumpy. Over regulated & over taxed.

Jon211

Al_Mac wrote:

Accordinng to the paper at the weekend, fixed rates have already moved in readyness for the Feb increase

Looking at bond prices too, I checked out the 8% 25/09/09 UK Gilt and the yield has increased by 0.41% since the end of November so it looks like the markets have pretty much priced in another increase too.

I think a crash is only a certianty if people think it is. The housing market is vastly driven by sentiment.
The only reason it has kept on rising so much is the view that it will continue rising with people saying things such as 'You've got to get on the ladder now before prices rise too much.'

If the sentiment changes from this to 'You'd better wait for a while to let house prices come down a bit.' then demand will fall rapidly.

The tricky bit is predicting when this will happen!

Personally I was looking to buy (as a FTB) in Q2 of this year. Now I'm having second thoughts about things, not because of affordability issues, but because of uncertainty in the market.

tkane

gil13 wrote:

I just wish the BOE did a 1/2 point last year, they could have got the job done a lot early than likely now, in saying that I expect no more than another 1/2 point during this cycle and I hope they take off one or two of the increases end of 2007/early 2008. I expect by this time inflation will be on it's way back down again through lower utility bills, the only worry is that as people become more aware of their own levels of inflation that this will fuel wage demands that will be an inflationary pressure in itself, a vicious circle. the wheels came of this government along time ago and now the chancellors cart is looking bumpy. Over regulated & over taxed.

The only problem is....interest rate changes take between 6 months to a year to get through the economy and have an impact...so you won't be seeing ANY decreases until at least 2009, ceteris paribus.

Every possible indicators of a major slowdown or a crash in the housing market are now at their peak, the BOE were stupid not to increase rates last year....they could have prevented a shock right now. It's just too little too late, yet again.

Any increase from now is going to have a big impact on those with variable mortgages and of course the many Britons who are in debt. Inflation will not be decreasing in the immediate future....it will take at least a year before the current hikes in IRs start to have an effect. All this leads towards only one end: a major correction in house prices...or a full crash like in the late 80's early 90s.

fivemice

tkane - ahh yes, i particularly like this quote from a signature from a user there - "'The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts' - Bertrand Russell"

And anyway, since the market is cyclical, it doesn't really matter when you buy, does it? Surely the next load of price rises will be even higher than they are now?

Either way, I'm not buying a house as an investment, I'm buying a house as a home so that I don't run the risk of being evicted every 6 months.