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Debate House Prices
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Low rates are now endangering the economy
Comments
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Graham_Devon wrote: »What she wants is to start raising rates now in order to reduce the problems in the future that have been built up today.
She makes her point pretty well IMO.
If, as she suggests, house prices are rising and people are taking on debt because they can afford the low rates, then we are storing up problems for the future.
I can't comment on normal transactions, but help to buy is certainly a "buy today, pay tommorow" scheme in that you can't afford the deposit, so you pay it later on.
Considering in 5 years time those taking help to buy today will likely face higher rates when they come to remortgage or stay on the same mortgage (due to interest rates rising) and then have to start paying the deposit loan back at the same time, there is potential for issues there.
We can stem these issues simply by making changes today. We should all be concerned, it's OUR money help to buy customers are borrowing. Especially considering they are borrowing against a house that will lose up to 10% of it's value straight away due to th new build premium.
There could be some serious increases in their housing costs 5 years down the line when interest rates have gone up and loan repayments kick in.
It might all just be fine. But we can see the potential problems and they are not exactly small. Maybe Ros Altman is correct and we should be thinking just a little further ahead?
Are people allowed to borrow more just because rates are low.0 -
Are people allowed to borrow more just because rates are low.
Not neccesarily no, which is why I stated I couldn't comment on any normal transaction.
My comments were regarding help to buy, where, by definition, you are helped because you cannot afford to buy in the market under "normal" conditions.0 -
Are people allowed to borrow more just because rates are low.
Indeed.
The new affordability calculations already include tests at higher interest rates.
Again, what Ros Altman wants to do is raise interest rates so the people she represents can get more risk free money.
She wants savers to get high risk free returns from banks, and for banks/government to take on that risk of default, instead of savers having to invest directly in higher risk products such as equities, property, or business investment to get higher returns.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Graham_Devon wrote: »My comments were regarding help to buy, where, by definition, you are helped because you cannot afford to buy in the market under "normal" conditions.
Rubbish.
If lending conditions were "normal" the 'help to buy' scheme wouldn't be needed at all.
It's only compensating for a broken and dysfunctional mortgage market, as and when that mortgage market returns to normal and starts lending properly again it can be withdrawn.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Graham_Devon wrote: »Not neccesarily no, which is why I stated I couldn't comment on any normal transaction.
My comments were regarding help to buy, where, by definition, you are helped because you cannot afford to buy in the market under "normal" conditions.
So the only additional cost will be servicing the loan, £175 per £10,000 borrowed increasing by RPI + 10 -
So the only additional cost will be servicing the loan, £175 per £10,000 borrowed increasing by RPI + 1
No, as I said, the additional costs will be servicing the loan and also any increased mortgage rate costs.
Given we are looking 5 years into the future to 2018, who knows where interest rates may be. Certainly fixes on help to buy products will have ended. But if they are paying 4% today, it's not particularly outrageous to suggest their mortgage rate could have doubled by the time servicing the loan also hits.
The aim of the thread was to discuss this, as this is what Ros Altman was discussing. Unfortunately, it seems, it's impossible to discuss without having to wade through all the forumonics.
So much so, I'm wondering now what point this board has left as it appears simply to be a playground now.0 -
Graham_Devon wrote: »if they are paying 4% today, it's not particularly outrageous to suggest their mortgage rate could have doubled by the time servicing the loan also hits.
Eh?
What on earth makes you think it's not outrageous to suggest 8% mortgage rates will return within 5 years?“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »Eh?
What on earth makes you think it's not outrageous to suggest 8% mortgage rates will return within 5 years?
It may be outrageous to you, but it would have been equally outrageous to you to suggest in 2007 mortgages rates would be at 1.6% in 5 years time.
They are.
Things change, dramatically, and quickly, as we have learnt. What Ros Altman is suggesting, and what I agree with, is that we should start raising rates slowly to avoid the possibility of any dramatic and more damaging changes later down the line.0 -
Graham_Devon wrote: »What Ros Altman is suggesting, and what I agree with, is that we should start raising rates slowly to avoid the possibility of any dramatic and more damaging changes later down the line.
In other words, you want to raise rates prematurely, because you want house price rises to be slowed.
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »In other words, you want to raise rates prematurely, because you want house price rises to be slowed.
Yawn.
...........0
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