Interest rates at 7%

RHemmings

seven-day-weekend wrote: »

Right, yes....age and equity.... thanks all.

Although....if the house prices are too high for FTBs anyway, well does it matter if BTLs buy them? I don't see how this is putting the prices up, unless the BTLs pay over the odds?

If a FTB can't aford a mortgage on a house for £150k, well they can't afford it, so how is the BTL stopping them having the place?

Sorry to be so dim, economics is not my strong point!

Because demand for properties = speculative (e.g. BTL) demand + actual demand for places to live. So if the BTL demand disappeared, house prices would have to adjust to the new supply/demand balance, and potentially fall so that the FTBs can afford them. So, with eager BTL investors competing against each other, the price might go up to £150K. But if sentiment turns and BTL comes to be seen as a losing investment, sellers of houses will have to price them lower so that the remaining buyers, mainly FTBs, can buy them. Or they won't sell.

RHemmings

pinkshoes wrote: »

:-) I like your sense of humour!

I wasn't being humorous. Or at least not intending to be. I think a dirty bomb attack on London would cause effects due to sentiment, people not wanting to live there, that would be way greater than any physical damage (including radiation) due to the bomb itself.

seven-day-weekend

RHemmings wrote: »

Because demand for properties = speculative (e.g. BTL) demand + actual demand for places to live. So if the BTL demand disappeared, house prices would have to adjust to the new supply/demand balance, and potentially fall so that the FTBs can afford them. So, with eager BTL investors competing against each other, the price might go up to £150K. But if sentiment turns and BTL comes to be seen as a losing investment, sellers of houses will have to price them lower so that the remaining buyers, mainly FTBs, can buy them. Or they won't sell.

Light has dawned! Simple really, isn't it?:rotfl: :rotfl: :beer:

mystic_trev

seven-day-weekend wrote: »

Perhaps it's me, but I don't see why people say BTL puts FTBs out of the market?

Surely the FTBs could buy the houses when they become available just as easily as the BTLs? The BTLs don't get them 20 grand cheaper or anything, do they?

Or have I missed something blindlingly obvious?

Not really. Many of the BTL's are being bought by boomers with plenty of money to spare. I know because I'm one and that's what I did 11 years ago!

Generali

seven-day-weekend wrote: »

Right, yes....age and equity.... thanks all.

Although....if the house prices are too high for FTBs anyway, well does it matter if BTLs buy them? I don't see how this is putting the prices up, unless the BTLs pay over the odds?

If a FTB can't aford a mortgage on a house for £150k, well they can't afford it, so how is the BTL stopping them having the place?

Sorry to be so dim, economics is not my strong point!

The argument (that I don't entirely subscribe to) is that BTLers are bidding up prices for properties (that bit is undeniable) and that something must be done to stop it (that bit I don't agree with).

There is a massive speculative bubble in UK housing that has built up. BTL has pumped in quite a lot of this air. The way it and most other bubbles work is similar:

1. Asset prices start rising.
2. People borrow against those paper profits to buy more of that asset
3. As people are now demanding more of that asset at any given price, the price will rise
4. People can borrow still more against their rising asset and buy yet more of the asset. As people see the easy profits available, more pile in to the market.

What happens next:
5. One day, sentiment changes. It needn't be a big change or any event that causes it. Prices start to fall.
6. As prices start to fall, the process of borrowing more to buy is no longer available. Falls in price start to accelerate.
7. Now it gets nasty. People who have overstretched themselves are desperate to get out. Forced selling starts. At this point, if you're very unlucky, you discover that if prices are falling quickly enough there is no market price. That is there are no buyers at almost any price.

Parts 1-4 are already happening. It remains to be seen whether 5-7 will occur. I think they will, others don't.

mystic_trev

I've got some tulip bulbs to shift - anyone interested?

Generali

mystic_trev wrote: »

I've got some tulip bulbs to shift - anyone interested?

It's all the same thing. Tulip bulbs, dot com shares. It doesn't seem to matter: greed (aka human nature)+borrowed money = bubble.

Anyone know what happened to that bloke that remortgaged his house to day trade dot com shares for the Sunday Times?

ukbondraider

When rates were down at 4% or even 3.5% why the hell did people not fix their mortgage to the rest of the term?

What was everyone waiting for?

Likewise even at 5.5% now, those that take out new mortgages, why arent they fixing for the term or at least 10 yrs given the climate.

The 7% level wouldnt matter then?????????????????

Dumb a55 brits.

Woby_Tide

ukbondraider wrote: »

Likewise even at 5.5% now, those that take out new mortgages, why arent they fixing for the term or at least 10 yrs given the climate.

Probably due to the penalties levied by most of the banks on longer term fixes. Predicting a persons life/circumstances over 3-5 years is hard enough, 10-25 years even harder

lynzpower

jackdoor wrote: »

Immature.

You're either a dreamer (with minimal self-respect and expect everyone else to bail you out) or you're just a kid messing about on the board.

that is very much uncalled for! :mad:

Who are you to dictate who can have whast opininon

I agree, its better to live your life than constantly sitting around navel gazing over interest rates.
I have been party to these discussions for over a year, work in the industry nd will contribute to more debates time after time. Whether that changes the economy- I dunno

maybe im just immature :rolleyes: