Interest Rates could hit 6% very soon!

meanmachine_2

Melissa177 wrote: »

FTBs account for about 36% of new home loans, which is still fairly high, but not as high as the 50%+ in the 90s.

If there were no FTBs coming into the market from the bottom, common sense tells you it would crash, as there would be no fuel for the bottom of the ladder, and the people on the next rung up wouldn't have anyone to sell to.

Oh man, it's like groundhog day on here sometimes.

CML figures are extremely suspect as they include property returners in their FTB figures.

You sell a property, go into rented or back home, or whatever, then come back into the market and *!!!!!!* you're a FTBer.

Look at the rest of CML's figures. FTBers are now borrowing a whopping 3.31 times their earnings?!!!!

Think about that figure. Does that sound even close to reality to you?

Stop acceptin everything you read and *think*

Melissa177

I know ten people/couples who have bought their first home recently, all in their mid twenties, in and around London.

I don't like using anecdotal evidence, but it seems to me that people are still jumping onto the property ladder. It's just that their disposable income is being squeezed more.

It is a myth that it has ever been easy to get onto the property ladder. My parents friends all describe the same hardships as my generation has, but 25-30 years ago.

Also, with the advent of the internet, and sites like moneysupermarket/MSE, there are more people who are inclined to switch their mortgages every few years so that they are on the best rate. I'm not sure whether this is classified as a "New Home Loan".

I have queried before on these forums what defines a "FTB", incidentally, and I think the conclusion was that it's not BTLers/people who aren't in a chain, but might include people who've got divorced and are buying for the first time on their own.

nelly_2

Melissa177 wrote: »

I have queried before on these forums what defines a "FTB", incidentally, and I think the conclusion was that it's not BTLers/people who aren't in a chain, but might include people who've got divorced and are buying for the first time on their own.

I'd say its a first time buyer meself

meanmachine_2

Melissa177 wrote: »

I have queried before on these forums what defines a "FTB", incidentally, and I think the conclusion was that it's not BTLers/people who aren't in a chain, but might include people who've got divorced and are buying for the first time on their own.

Yes, a first time buyer is someone who has never bought before and is not using unearned equity to assist their purchase.

Not hard, is it?

Now consider the other point re: the CML figures.

According to them, FTBers are only borrowing 3.3x their income.

If the average FTBer loan is around 130K, that means the average FTBer is on 39K - way above the average.

Sounds fishy? Too right.

Melissa177

Sounds about right if you're buying as a couple, which most FTBers are.

I know quite a few singletons (myself included) who have jumped onto the property ladder, but they are earning a fair whack for our age in the City.

Snow_Dog

Melissa177 wrote: »

I know ten people/couples who have bought their first home recently, all in their mid twenties, in and around London.

I don't like using anecdotal evidence, but it seems to me that people are still jumping onto the property ladder. It's just that their disposable income is being squeezed more.

It is a myth that it has ever been easy to get onto the property ladder. My parents friends all describe the same hardships as my generation has, but 25-30 years ago.

Also, with the advent of the internet, and sites like moneysupermarket/MSE, there are more people who are inclined to switch their mortgages every few years so that they are on the best rate. I'm not sure whether this is classified as a "New Home Loan".

I have queried before on these forums what defines a "FTB", incidentally, and I think the conclusion was that it's not BTLers/people who aren't in a chain, but might include people who've got divorced and are buying for the first time on their own.

We bought our first property in 1994, the mortgage seemed huge and it was a daunting prospect, when we went down to 1 wage three years later it was even worse for a while. Tell me a better year to have bought their first place.

My parents bought their first place in about 1975 and struggled to get a mortgage despite both working at the time. Mainly down to dad being self employed (ironically with years of top profit trading history).

Its always been hard to get started and it always will be. There wont be a HPC tomorrow wiping off 65% of property prices and all the sensible ones can then buy a mansion with 30 acres for spare change.

Guy_Montag

I think the CML reagard anyone on a normal record who is buying without selling as an FTB.

So STR getting back on the ladder, BTL on residential mortgages, ex-pats returning from abroad & people buying second homes all count as FTBers according to the CML.

wibble68_2

Getting back to interest rates.

What level of interest rates would it take to a) Stop the market and b) cause a correction.

My own opinion is that it will take 6% - 7% rates to stop the market and 10% rates to cause a correction back to the historical norm.

I see that many people on here have implied that we will never see 15% rates again so there will not be a correction. Well due to current house price / wage ratios and the amount lenders are willing to loan, I would say that we don't need to get anywhere near 15% to cause a correction.

Somebody posted an affordability chart a while back. Something like house price / wage ratios x base rate. Has anyone got a link to this?

King_Of_Fools

wibble68 wrote: »

What level of interest rates would it take to a) Stop the market and b) cause a correction.

It was reported that if interest rates hit 7.5% then that would equal the ratio of mortgage to wages that was reached during the last crash when interest rates hit 15%.

So rates of 6% this time would be equivalent to rates of 12% in the last crash.

meanmachine_2

Melissa177 wrote: »

Sounds about right if you're buying as a couple, which most FTBers are.

I know quite a few singletons (myself included) who have jumped onto the property ladder, but they are earning a fair whack for our age in the City.

*sigh*

No, the CML figures refer to SINGLE incomes.

I literally give up.