Halifax Jan +0.6% MoM -1.8% YoY

julieq

Interest rates can go up very considerably without any significant effect on what people can afford (as at least one broadly based study has shown), and you can't escape the cause and effect that what will push rates up is a widespread recovery when confidence will have improved.

Employment and employment prospects are a far more reliable indicator of price fluctuations than interest rates. As a matter of fact, prices tend to be rising fastest when interest rates are rising, because interest rates are a mechanism for slowing an overheating economy. You can't decide you're only going to bother with one variable in a complex system, you have to understand that things work together.

If you want to hang on to the belief that somehow the only thing keeping prices up is interest rates and when they nudge upwards everything is going to go over, then be my guest, but the evidence and history is against you.

I actually think the recovery will come quicker than we thought and rates will therefore edge upwards sooner than many expect. I also think it will make on the skinny side of FA difference to house prices.

Graham_Devon

IveSeenTheLight wrote: »

For those that bought post 2008, it may be true that they are not aware of higher rates, the longer rates are low, the higher likelyhood that wage increases (wage inflation / promotion) will mean that the proportion of expenditure placed on mortgage interest decreases, thus future rate rises will already be factored in because of higher income.

[/edit]

This is where I lose patience with this argument.

You make it sound as if payrises are outstripping the cost of living. Which isn't the case, and hasn't been the case for a few years.

I dunno. I feel many of these arguments put forward are done with little thought and little application to reality. It's just "wages will have gone up, therefore they will have more money for the mortgage". It's simply not the case in real situations. Wages will have gone up, but the cost of living will have gone up more.

Just look what's happened to car insurance for instance. Mines doubled in the space of 3 years, and that's WITH downgrading the car to one with a (far) lower insurance group.

IveSeenTheLight

Graham_Devon wrote: »

Have a look around you and have a look at the cases put forward for low rates.

Having a look around me, I don;t see many economist predicting homeowner armageddon when rates rise.
Indeed, many are predicting that rates will stay low long enough to ensure that this is an unlikely scenario.

Graham_Devon wrote: »

The nation has got very used to, and is now planning their finance around these low rates. I don't take this from anywhere, it was stated on the radio by a "qualified" commentator who is involved in mortgages.

I'd be interested if you could do some research to link this said discussion and statement.
Indeed, IIRC there have been a number of stats showing mortgage repayments at record levels, indicating that in general, people are paying down their mortgages meaning there will be less of an impact when rates rise back to levels when people could afford them in the past.

Graham_Devon wrote: »

The longer it continues, the more conformtable people get.

Therefore the greater the shock when something does happen.

Would you disagree?

A rather simple statement and sure, when rates rise, you have to adjust your budget, as many have in the past.

Take a simple example.
For a mortgage of £100k, an interest rate rise of 0.25% will increase the mortgage payments by £20.83 per month

When rates rise, they are not predicted to rise quickly.

Similarly I ask: -

What percentage of homeowners do you think will not be able to cope when rates rise? Hint, you may want to consider reposession rates when rates were higher.

For those that bought pre 2008, their likely benefitting from these lower rates and the longer it continues, the greater opportunity they have to pay down the debt (as the stats appear to show they are doing).

If people are paying down heir debts due to low rates, when rates rise, arguably it will affect fewer people han it did when rates were at previous historical norms.

IveSeenTheLight

mr_fishbulb wrote: »

The wage inflation that is predicted to be lower than inflation this year? http://www.guardian.co.uk/money/2011/nov/08/pay-below-inflation

The problem with looking at this average inflation is that it can be vastly different for home owners.

Nevertheless, if you have a mortgage debt of say £100k and you get year on year wage increases, the debt will have reduced whilst your income has increased.

If the price of other things has increased greater than your wage inflation, then it simply comes down to how you budget your finances.

Maybe get rid of sky, don't get the iPAD2, cut down on drinking / smoking etc

IveSeenTheLight

mr_fishbulb wrote: »

The wage inflation that is predicted to be lower than inflation this year? http://www.guardian.co.uk/money/2011/nov/08/pay-below-inflation

what's inflation predicted to be in 2012?

IveSeenTheLight

Graham_Devon wrote: »

This is where I lose patience with this argument.

You make it sound as if payrises are outstripping the cost of living. Which isn't the case, and hasn't been the case for a few years.

I dunno. I feel many of these arguments put forward are done with little thought and little application to reality. It's just "wages will have gone up, therefore they will have more money for the mortgage". It's simply not the case in real situations. Wages will have gone up, but the cost of living will have gone up more.

Just look what's happened to car insurance for instance. Mines doubled in the space of 3 years, and that's WITH downgrading the car to one with a (far) lower insurance group.

I think you need to look at budgetting a bit more.
Of course the price of other things can go up more than others, but then that's your choice to continue to do so.

How do you prioritise your expenditure against income?

For most people, I believe they will pay their main bills i.e. houseing / utilities etc before having a figure to leave them for the rest of the month.

If you need to cut down, cut back, drop a shopping level, walk more, get a takeaway less, etc etc etc, then you will do so.

I was in a shop the other day, looking for enough food to russel up a nights meal whilst awaiting the food delivery to come.
Most of what I bought was reduced in price, but as I was using it the same day, what was the point in paying extra as I was not putting it in my fridge for a few extra days.
It may have only saved me a couple of pounds, but if need be, I could do that dailly.

I'm sure there are many other things you could cut back on before that necessity though.
How much toys does your son have compared to you when you were a child.
I know my kids have so much more, indeed, much more than they need.
In fact the best fun they can have is with another person and that comes free.

When I think back to how my life was as a child, the stories I've heard of parents / grandparents and how they were brought up, it puts todays demanding society into context.

some people really need to take stock of what lifes necessities are.

FTBFun

Graham_Devon wrote: »

Just look what's happened to car insurance for instance. Mines doubled in the space of 3 years, and that's WITH downgrading the car to one with a (far) lower insurance group.

This is more to do with increased risk of fraudulent claims and uninsured drivers though.

It has so little to do with monetary policy i'm surprised (well, only slightly surprised) you've brought it up.

Graham_Devon

IveSeenTheLight wrote: »

Having a look around me, I don;t see many economist predicting homeowner armageddon when rates rise.
Indeed, many are predicting that rates will stay low long enough to ensure that this is an unlikely scenario.



I'd be interested if you could do some research to link this said discussion and statement.
Indeed, IIRC there have been a number of stats showing mortgage repayments at record levels, indicating that in general, people are paying down their mortgages meaning there will be less of an impact when rates rise back to levels when people could afford them in the past.



A rather simple statement and sure, when rates rise, you have to adjust your budget, as many have in the past.

Take a simple example.
For a mortgage of £100k, an interest rate rise of 0.25% will increase the mortgage payments by £20.83 per month

When rates rise, they are not predicted to rise quickly.

Similarly I ask: -

What percentage of homeowners do you think will not be able to cope when rates rise? Hint, you may want to consider reposession rates when rates were higher.

For those that bought pre 2008, their likely benefitting from these lower rates and the longer it continues, the greater opportunity they have to pay down the debt (as the stats appear to show they are doing).

If people are paying down heir debts due to low rates, when rates rise, arguably it will affect fewer people han it did when rates were at previous historical norms.

And this is where the discussion becomes null and void.

Firstly, not once has anyone suggested "Homeowner armageddon". That is putting a whole new context on what we were discussing, and you are quite correct, no one has forecast that, hence we are not talking about that.

We are discussing where house prices are now (stagnant / slightly falling) based on low interest rate levels, and what higher interest rate levels may do to the balance.

We don't really need research and statistics to back up what someone was stating. Equally we don't need research and statistics to disprove it. It's clear people are getting used to low interest rates.

I've already agreed with you regarding owners who bought prior to 2008, so no need to fall back onto that argument. It's been 4 years since 2008 however. There are more people out there.

As for people paying down mortgages....how many times. Even the BOE have suggested there is no evidence that people are paying down their mortgages en masse. You just keep stating people are. Over and over again.

DaddyBear

MrRee wrote: »

So, there you have it ...... no crash in House prices.

A 1.8% YOY drop with inflation running at 5% suggests otherwise. Not a crash, but a definite downward drift.

Graham_Devon

IveSeenTheLight wrote: »

If you need to cut down, cut back, drop a shopping level, walk more, get a takeaway less, etc etc etc, then you will do so.

Yer, thanks for the advice.

While the dance I'm witnessing is finely tuned and would score a healthy 8 on strictly, I'm bored of trying to drag you back to what was said.

if you are trying to convey that the solution to higher interest rates for homeowners, even when housing is stagnant and people are struggling today, is to quit your sky subscription and saving 75p in fuel and walking to your local corner shop, I believe this conversation is pretty much over.