Halifax Jan +0.6% MoM -1.8% YoY

Graham_Devon

HAMISH_MCTAVISH wrote: »

No Graham, the timing of rate rises really is quite important to the outcome.

If rates rise now, you could make a reasonable case that prices may fall.

If rates don't rise until unemployment is falling, bank lending is improving, business activity is increasing, and the economy recovering, then the chances of house price falls due to rising rates become very slim indeed.

Which is all lovely.

But on the other side of things, what if rates rise before your best outcome scenario?

Graham_Devon

Rinoa wrote: »

When certain lenders are offering 10 year fixes at 3.99%, it's reasonable to assume that rates will remain low for many years.

Why?

Could you explain please?

That money has been priced up tdoay at todays prices.

Rinoa

Graham_Devon wrote: »

Why?

Could you explain please?

That money has been priced up tdoay at todays prices.

Fixes are based on future rates assumptions, not today's.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Which is all lovely.

But on the other side of things, what if rates rise before your best outcome scenario?

You said the timing of rate rises doesn't matter, that it's only delaying the inevitable.

I pointed out that timing does matter, and the outcome you predict is not inevitable at all.

So we'll see when rates rise who was correct.

mr_fishbulb

Rinoa wrote: »

When certain lenders are offering 10 year fixes at 3.99%, it's reasonable to assume that rates will remain low for many years.

You could get 10 years fixed at 5.39% in 2007, was it reasonable to assume that rates wouldn't change for many years then?

Graham_Devon

Rinoa wrote: »

Fixes are based on future rates assumptions, not today's.

Come on now. I'd be offering you a towel, but you are not that wet behind the ears.

Rinoa

mr_fishbulb wrote: »

You could get 10 years fixed at 5.39% in 2007, was it reasonable to assume that rates wouldn't change for many years then?

Fixes are based on probabilities. This doesn't assume they will never vary.

Here's a snapshot of market data.

http://www.swap-rates.com/UKSwap_extended.html

Rinoa

Graham_Devon wrote: »

Come on now. I'd be offering you a towel, but you are not that wet behind the ears.

Best keep it for your own ears if you think mortgage fixes are based on current BoE rates.

Graham_Devon

HAMISH_MCTAVISH wrote: »

You said the timing of rate rises doesn't matter, that it's only delaying the inevitable.

I pointed out that timing does matter, and the outcome you predict is not inevitable at all.

So we'll see when rates rise who was correct.

Well I'm a little confused in all honesty. Theres a free one for you.

You state that rate rises won't have any effect to the market if the economy is recovering.

I do take issue with that.

You see. For someone on an SVR of say 3% today, a base rate rise to 3% could see that SVR at 5-6%.

For someone with a mortgage of lets say 100k, just for ease, this increase would take their montly payment from £478 to £591 (5%).

That's an increase of £113 a month.

Now yo ucould say people will be able to afford this, and I would agree, some people will. But the point is, with the market only stagnant with base rates this low, those unable to afford the increase could tip the balance.

I'm not really sure how increasing jobs and increasing GDP is going to help someone find that extra £113 a month. If for instance I am struggling today to pay the mortgage and rise finance for a house, how is increasing GDP and employment going to help me find the extra money? I'm already employed. For someone in employment, increasing GDP and increasing employment means very little, and doesn't put an extra £100 a month into their pay.

So maybe you could explain a little more what you mean with your scenario, and how it will actually help people with increases in their mortgage costs?

The above figures, I'm sure you will agree, are very conservative. They are there to make a point, not to be scruntinised to the enth degree.

mr_fishbulb

Rinoa wrote: »

Fixes are based on probabilities. This doesn't assume they will never vary.[/URL]

I know how they work

They are not a crystal ball and by that nature was pointing out that you can't just "assume that rates will remain low for many years."

I think they'll probably be low for quite a while too, but that is because our economic output will be low. Which in turn means there is less increase in money for the housing market.