How interest rates affect property values

mwpt

http://www.investopedia.com/articles/mortgages-real-estate/08/interest-rates-affect-property-values.asp

I really struggle to understand why people on this forum are so against this concept. I thought it was pretty much classic economics but instead when I talk about it here I feel like I'm posting some crackpot internet loon theory.

Maybe it's a pavlovian thing.

AnotherJoe

Wow that article takes several thousand words to say nothing. And it provides no actual facts not even a sorry sort of half baked correlation to show how interest rates affect prices.

I note your article is entitled "how" but doesn't actually say how . For example, let's say interest rates rise half a percent tomorrow.What will happen to house prices in the next three to six months?in numbers.

Generali

There is a pretty obvious correlation but I would add several caveats.

There are many other things to consider: portfolio flows, the general state of the economy, availability of credit being examples.

HAMISH_MCTAVISH

mwpt wrote: »

I really struggle to understand .

Quite.

Base rate 2003 - 3.5% - Average house price - £135,000

Base rate 2007 - 5.75% - Average house price - £185,000

Base rate 2009 - 0.5% - Average house price - £149,000


Interest rates only have an effect on house prices at the absolute margins, where we are rammed right up against the outer limits of affordability, and the UK simply hasn't been there at any point in the last few decades.

The bigger factor by far is the shortage of housing, which is being markedly worsened by mortgage rationing.

Graham_Devon

HAMISH_MCTAVISH wrote: »

The bigger factor by far is the shortage of housing, which is being markedly worsened by mortgage rationing.

95% mortgages alongside HTB can hardly be classed as mortgage rationing.

And if you believe that is mortgage rationing, what exactly do you want? 125% again? 150%?

Self cert?

wotsthat

mwpt wrote: »

http://www.investopedia.com/articles/mortgages-real-estate/08/interest-rates-affect-property-values.asp

I really struggle to understand why people on this forum are so against this concept. I thought it was pretty much classic economics but instead when I talk about it here I feel like I'm posting some crackpot internet loon theory.

Maybe it's a pavlovian thing.

It's not a Pavlovian thing - it's real world.

In the UK mortgages are a function of earnings. I'll be laughed out of Nationwide if I tell them to increase my loan because interest rates have fallen.

wotsthat

Graham_Devon wrote: »

95% mortgages alongside HTB can hardly be classed as mortgage rationing.

And if you believe that is mortgage rationing, what exactly do you want? 125% again? 150%?

Self cert?

I think 10% of loans were self cert. Now 0% are.

Mortgage rationing or prudent lending doesn't much matter - more people have to pay their landlords mortgages instead of their own.

HAMISH_MCTAVISH

Graham_Devon wrote: »

if you believe that is mortgage rationing, what exactly do you want?

Well call me crazy, but a good place to start might be giving a million or so of the people that pay mortgages to buy houses for their landlords, mortgages to buy houses for themselves instead.;)

cells

Graham_Devon wrote: »

95% mortgages alongside HTB can hardly be classed as mortgage rationing.

And if you believe that is mortgage rationing, what exactly do you want? 125% again? 150%?

Self cert?

We need a return of self cert 10% down mortgages. Not the fake payslip types but the type where you just tick a box that says 'I am confident I can service this mortgage'

We also probably need 95% at competitive rates and maybe even 100% normal mortgages. Or lets meet in the middle at 97.5% mortgages

Maybe that sounds dumb but I think about 10% of households could be owners if those mortgages were available but not without them. And 10% of households is nearly 3 million homes so we are talking about a huge shift of 3 million people to either owners or renters

cells

I think a general lesson in the buying process and what it costs and involves would increase owners too. Same for voting a video on the BBC to show how dam easy it is would increase participation there too. Some people must surely not do these things just because they never have and dont know what it involves.

mwpt

Same old tired arguments.