Is inflation starting to hit the housing market?

james_toney

Harry_Boyle wrote: »

Be my guest. Do try and remember what you are actually looking at though - i.e. read Thrugelmir's post re:correction hasn't finished...

but the correction could take many years to finish, for example if houses fall by only 1 -2 % (but they are not they are actually rising at the moment)

it could take 10 -20 years for the correction to finish. none of us really know how or what is going to happen, so everything is a gamble. I gambled on getting a BTL and so far the gamble is paying off. For me to lose this gamble, interest rates would have to get to at least 8%, lose my job and tenant not paying.

All three could happen, but that is a risk I am prepared to take.

IveSeenTheLight

Graham_Devon wrote: »

Inflation wouldn't erode your mortgage payments though.

Only wage inflation would do that, and the problem the CML describe is inflation and wage inflation not keeping up (hence it getting harder).

But Graham,
Your increasing wages with a decreasing outstanding mortgage.

Buying now secures the debt against future rises and ensures that the debt is likely to lower.

Not buying and you have an increased risk of rental costs increasing further , thus further reducing your disposale income.

Graham_Devon

IveSeenTheLight wrote: »

But Graham,
Your increasing wages with a decreasing outstanding mortgage.

Buying now secures the debt against future rises and ensures that the debt is likely to lower.

Not buying and you have an increased risk of rental costs increasing further , thus further reducing your disposale income.

Why do some of the pro house price people struggle to understand the basic of wages rising less than all other costs?

Just because your wages rise, it does not mean your mortgage payment is easier to pay. To do that, your wage rise has to outstrip your increasing outgoings, which for the majority, isn't happening at the moment.

May be alright for a few well off people. But thats about it.

james_toney

Graham_Devon wrote: »

Why do some of the pro house price people struggle to understand the basic of wages rising less than all other costs?

Just because your wages rise, it does not mean your mortgage payment is easier to pay. To do that, your wage rise has to outstrip your increasing outgoings, which for the majority, isn't happening at the moment.

May be alright for a few well off people. But thats about it.

very true and very good point

N1AK

Graham_Devon wrote: »

Buying anything is a bet against inflation.

Buy a fridge today and it may well be cheaper than next year if inflation hits it.

Sorry Graham but I think you're mistaking 'inflation' for something else. Inflation is the increase in the price of a defined good or service, or a group of goods and/or services.

Some items like fridges may decrease in price as technology becomes cheaper etc but if inflation is positive then the average price of buying a good or service is increasing.

Thus buying goods or services now is actually a way of protecting yourself from the risks of inflation (and especially high or hyper-inflation) because generally goods (and the results of services) increase in value with inflation whereas by definition the currency that inflation is defined against will not change.

If I thought inflation was going to average more than 10% over the next 5 years then I'd dump all the cash I could into commodities and assets that don't depreciate quickly. If inflation was low then I'd have less reason to spend because I can probably buy more if I invest the money now and spend it later.

Harry_Boyle

Graham_Devon wrote: »

Why do some of the pro house price people struggle to understand the basic of wages rising less than all other costs?

Just because your wages rise, it does not mean your mortgage payment is easier to pay. To do that, your wage rise has to outstrip your increasing outgoings, which for the majority, isn't happening at the moment.

May be alright for a few well off people. But thats about it.

What you seem to be struggling to understand is that housing costs are either at the mercy of inflation if you rent or at the mercy of interest rates if you buy.

If you rent then there is nothing you can do to combat inflationary rent rises except to move to increasingly cheaper accomodation, which can then give you different problems.

If you buy then you can combat interest rate rises by obtaining a fixed rate mortgage to freeze your housing costs and/or make overpayments to reduce your housing costs.

It's not rocket science.

Harry_Boyle

james_toney wrote: »

but the correction could take many years to finish, for example if houses fall by only 1 -2 % (but they are not they are actually rising at the moment)

I've highlighted the salient point.

N1AK

Graham_Devon wrote: »

Just because your wages rise, it does not mean your mortgage payment is easier to pay. To do that, your wage rise has to outstrip your increasing outgoings, which for the majority, isn't happening at the moment.

You're absolutely right on this and it is frustrating that some people don't seem to get it.

If someone got a £120 pay rise they'd be £6.8 a month (32% lost to tax and NI) higher paid. However if they were currently spending £500 a month on petrol, food and other products affected by inflation then a 2.5% rate of inflation would increase that cost by £12.50. So they'd have ~£6 less per month after food etc to pay the mortgage etc.

Now you might think a £120 pay rise is unrealistically small but that's 1% for someone earning £12k so it genuinely is representative for the kind of people who would be struggling in the first place.

wotsthat

Graham_Devon wrote: »

Just because your wages rise, it does not mean your mortgage payment is easier to pay. To do that, your wage rise has to outstrip your increasing outgoings, which for the majority, isn't happening at the moment.

May be alright for a few well off people. But thats about it.

Why assume everything stays like for like. My mortgage has just become easier to pay. I've not had a pay-rise nor has it reduced in price - I've cancelled Sky.

The key is to spend time trying to a) reduce personal inflation rates and b) to minimise the proportion of income that is spent. So, yes, the well-off will be at an advantage but I find that most well-off people don't arrive there by accident.

It's not for ever - something will give - in the meantime there's a choice of doing nothing (and getting poorer) or doing something that allows standard of living to be maintained or even improved for less money.

Graham_Devon

wotsthat wrote: »

Why assume everything stays like for like. My mortgage has just become easier to pay. I've not had a pay-rise nor has it reduced in price - I've cancelled Sky.

The key is to spend time trying to a) reduce personal inflation rates and b) to minimise the proportion of income that is spent. So, yes, the well-off will be at an advantage but I find that most well-off people don't arrive there by accident.

It's not for ever - something will give - in the meantime there's a choice of doing nothing (and getting poorer) or doing something that allows standard of living to be maintained or even improved for less money.

That;s OK when you have your house, especially when you paid a much lower price compared to todays prices...probably on a decent mortgage rate that no one else starting out could get.

Try doing it when you don't and are still trying to achieve what you currently have.