The Next Nail in the Coffin

Generali

westernpromise wrote: »

To put it another way, base rates have been above 10% for only 20 of the last 300 years, and all 20 were between 1970 and 1995.

This has led some to suppose that "normal" rates are 10%, because that's what they can remember. Actual retail lending rates today, however, are much closer to the 300-year trend than to the 1970-1995 trend, so there is good reason to think that that era was the aberration.

It's partly why I think we aren't even half way through the era of ultra low rates yet: they actually aren't that low at all.

!

Interest rates (base rates) are at a record low.

Nominal interest rates since the inception of the BoE bave averaged 5%. TBH a good rule of thumb is if base rates aren't 5% you need to wonder why not.
I don't know where 10% came from. 10% rates are exceptional.

chucknorris

Generali wrote: »

!

Interest rates (base rates) are at a record low.

Nominal interest rates since the inception of the BoE bave averaged 5%. TBH a good rule of thumb is if base rates aren't 5% you need to wonder why not.
I don't know where 10% came from. 10% rates are exceptional.

I consider 5% to 6% to be the long term 'normal', if I was buying a property today, that is what I would base my calculations on, although it wouldn't surprise me if 3% to 4% becomes the new 'normal' in a decade from now. But of course I'm guessing, no one knows, so I would also consider the risk of higher rates too.

westernpromise

Generali wrote: »

!

Interest rates (base rates) are at a record low.

Nominal interest rates since the inception of the BoE bave averaged 5%. TBH a good rule of thumb is if base rates aren't 5% you need to wonder why not.
I don't know where 10% came from. 10% rates are exceptional.

That's why I was careful to talk about retail lending rates. Which aren't that low. A typical SVR is 3 to 4%. At a time in the past when the base rate was 5%, that would have been 6%. 4%, 6% - same thing, really. Only a handful of us have BoE tracker mortgages from 2008 but most don't and thus most are paying mortgage rates much closer to long term 6%-ish historical levels than the 16 and 17% lunacy rates we saw in that 1970-1995 period.

I reckon we are in for 25 years of these sorts of mortgage rate. 16 to go. And of course if you bought in 2008 and fixed for 10 years now, you'd be getting 19 years out the 25 of your mortgage term at those rates. So already we are at the point when these rates can be considered normal. A low rate that lasts as long as a mortgage term can't really be considered a short-term aberration.

westernpromise

Crashy_Time wrote: »

As opposed to the same four or five people batting the same idea (HPI forever!) back and forth between themselves, endlessly, on a hidden forum that is an embarrassment to the main web site :rotfl: Classic mentalist behaviour :rotfl: In the future students are going to do PHD`s on the mental state of the posters here. Even Joe the plumber down the pub knows that the bankers rigged the property game so they could punt loans and make big profits, nothing more than that, the utility value of a house hasn`t changed since your great grand-parents days.

What's your BCR Crashy? Was I right? Is it 125%?

Have desperate vendors round your way started to offer the house for negative prices, i.e. they pay you?

Generali

westernpromise wrote: »

That's why I was careful to talk about retail lending rates. Which aren't that low. A typical SVR is 3 to 4%. At a time in the past when the base rate was 5%, that would have been 6%. 4%, 6% - same thing, really. Only a handful of us have BoE tracker mortgages from 2008 but most don't and thus most are paying mortgage rates much closer to long term 6%-ish historical levels than the 16 and 17% lunacy rates we saw in that 1970-1995 period.

I reckon we are in for 25 years of these sorts of mortgage rate. 16 to go. And of course if you bought in 2008 and fixed for 10 years now, you'd be getting 19 years out the 25 of your mortgage term at those rates. So already we are at the point when these rates can be considered normal. A low rate that lasts as long as a mortgage term can't really be considered a short-term aberration.

Why 25 years?

You're a lot better at this lark than me if you reckon you can predict interest rates 19 years out. That or delusional.

economic

im really quite shocked how stupid some people can be on this forum.

look - you all assume prices will go up long term and if there is a correction/crash they will just rebound. why are you so confident that will happen? because it happened in 2008/09? yeh ok good luck to you if you assume that.

i myself have sold and am buying because the economics of renting do not make sense so prefer to buy to live but i am certainly not buying for invesment at these prices. i rather invest in global trackers with US as overweight.

with a bit of thinking out of the box, one could determine that actually london prices have not gone up that much in real terms and international ccy terms. below is my personal example, of course you may have done better then me but it just shows that even though you think you made a lot of equity in fact its not as much as you think:

my seller bought in 2006 for £322k
i bought in 2013 for £465k
i sold in 2016 for £580k

thats a 80% gain in 10 years or 6% compounded. However if you price it in dollar terms (which is a lot betetr reflection of international value then pound) then its up only 26% in 10 years or 2.6% annually compounded - a bit lower then uk inflation. so in 10 years there has been 0 price change in real dollar terms.

interestingly my seller sold up as she moved to australia. she had made 45% nominally on the flat however GBP has fallen 30% vs. AUD and so she only made around 15% nominal terms and in real terms that would be pretty much nothing,

my view is that we will probably not see a sharp correction however prices will soon start to stagnate and in real terms an especially in international currency terms it will decline from here perhaps long term.

im still buying and having a large enough mortgage yet still manageable will help to preserve my wealth.

chucknorris

economic wrote: »

im really quite shocked how stupid some people can be on this forum.

If you are going to be rude about people, at least have the courage to identify which posters that you are referring to.

I do not think that posters are assuming that prices will always go up in the long term, I think you are confused. My view is that on the balance of probability I was (was because I am not interested in investing in property in the future) happy to take the chance that in the long run that they will rise. I think most property bulls here take the same view, it isn't that they assume prices will go up, I think they think it is good bet that they do, there are very few certainties in life, but still have to make investment decisions anyway. Personally (and I have posted this many times) I seriously doubt if London prices will rise in real terms, but I would be very confident that they would rise nominally.

It was only a couple of months ago that I posted this:

chucknorris wrote: »

They usually mean nominally too, I do have doubt about real term gains from this point in time, but I have been wrong about that before.

wotsthat

economic wrote: »

look - you all assume prices will go up long term and if there is a correction/crash they will just rebound. why are you so confident that will happen? because it happened in 2008/09? yeh ok good luck to you if you assume that.

Weren't you saying property prices were cyclical?

economic

but point is in real terms london boom has not been a boom over the last 10 years if you price in dollar terms.

prices are cyclical like everything is. however some cycles are longer then others. time matters as well as price.

economic

chucknorris wrote: »

I seriously doubt if London prices will rise in real terms, but I would be very confident that they would rise nominally.

so you are very confident that they would rise nominally? over what time frame? why are you so confident. this is what i mean when i say a lot of people assume prices will rise long term. i am not confused.