House prices

Gorgeous_George

It's all about sentiment.

Any rise in interest rates by the BoE would be a clear signal that more rises were likely.

Houses cost whatever borrowers can afford to pay. If mortgage rates rise, which is not guaranteed, house prices will fall.

I have owned property for over 30 years. I have seen the cycles. I'd fear if any of my children were to buy at the moment. Schemes to buy half or a quarter of a house while paying rent to a builder are worse than not buying at all.

People save for years or borrow deposits from family. It would be a shame if those deposits were wiped out by house prices falling. It has happened before but the numbers were much smaller then.

GG

Thrugelmir

Gorgeous_George wrote: »

Any rise in interest rates by the BoE would be a clear signal that more rises were likely.

More rises are likely. That's an obvious fact. Just a question of when.

Mr_Costcutter

Gorgeous_George wrote: »

Any rise in interest rates by the BoE would be a clear signal that more rises were likely.

GG

What makes you so sure about that?

westernpromise

George

If you've owned property for over 30 years your thinking is probably heavily skewed by the gross abnormality of the interest rates we've experienced over those 30 years.

In 1990, with a commonplace mortgage rate of 17% (base rate plus 2%), at the end of the first five years of the mortgage term you would have paid off less than 2% of the amount you borrowed.

30 years ago people thus had basically no prospect of escaping negative equity. They probably took out their mortgage when rates were 8%, they then doubled, and as a result not only did you make no inroads into the debt, but the doubling of the rate left you nothing with which to overpay to get ahead. People were then stranded for 10 years or more by a 25% price correction.

Fast-forward to today and someone who bought with a 90% mortgage, fixed for five years at 2.7% (which an FTB can), will repay over 15% of the amount borrowed over those first five years. Coupled with the 10% deposit, this means that it would take a fall of 25% at the end of year 5 versus what you paid in year 0 to put you into negative equity.

Negative equity is yesterday's problem. It simply can't happen again on the scale we've previously seen.

Renting is not the answer, as Crashy can testify. You spend 3 or 4 thousand a year renting per £100k of property value and at the end of the same five years you've blown maybe £20k on renting a property that probably isn't £20k cheaper unless you've both called and timed the market perfectly. Ask yourself how likely that is. Indeed, ask Crashy how likely that is.

MobileSaver

Your argument is flawed on so many levels.

Gorgeous_George wrote: »

It's all about sentiment.

No it's not. House prices are based on a myriad of factors including supply and demand, interest rates, availability of credit and sentiment.

Gorgeous_George wrote: »

Houses cost whatever borrowers can afford to pay.

Utter nonsense. Around a third of property bought is with cash, no mortgage needed, and there are now more mortgage-free home-owners than mortgaged home-owners. The last three properties I bought were all with cash.

Gorgeous_George wrote: »

If mortgage rates rise, ... house prices will fall.

Simply not true. Prices may fall or they may rise, prices are based on much more than just interest rates.

Gorgeous_George wrote: »

I'd fear if any of my children were to buy at the moment.

So you'd rather they pay off their landlord's mortgage in the meantime instead of their own? At what point would be the "right time" for them to buy? When the "right time" comes how do they manage to time their purchase just right so they're not at the beginning of a 6 or 12 month tenancy or just about to accept a new promotion where they need to be in a specific location for work or kid's schools etc? If you are really teaching your children that they can time the property market you are doing them a serious disservice.

Filo25

Looking at the underlying macro data at present I also wouldn't be expecting ongoing aggressive rate rises.

Yes inflation is high due to Sterling's devaluation, but growth remains anaemic as does wage growth, so I wouldn't necessarily forsee a vicious inflationary spiral being imminent unless we see further significant sterling devaluation.

I do think we will see a rise in November (the BoE has staked too much of its credibility on it not to), but a very slow pace from there, in the medium term I suppose a Corbyn government would be the obvious risk for rates, but apart from that I struggle to see a clear driver for rates to be above say 3-4% looking 5-10 years out, especially given we still have some further fiscal tightening ahead.

_CC_

The fact you can pick up a 10 year fix for under 2.5% tells you what lenders think about the notion that rates are going to rise significantly.

Gorgeous_George

MobileSaver wrote: »

Sure will! Based on your prediction we'll know who is right by Christmas...

Are you related to brit1234? (For those that don't know the story, brit1234 infamously predicted a 50% crash by Christmas, in 2008 I think it was... some of his HPC friends are still waiting!)

No, I am not related to any other MSEer that I know of.

I never agreed with the hpc brigade.

I did believe that interest rates would remain low for 10+ years.

I also believed that the next interest rate move would be down when rates were 0.5%. I still believe interest rates could move lower over the next two years.

Christmas is too soon for any meaningful correction, if that is what it is. However, interest rates could rise, immigration could fall, house building could increase. All things that would reduce house prices.

I own a number of properties. I won't be selling because my tenants deserve better. But equally, I wouldn't be buying over the next few years.

I hope everybody gets lucky.

GG

Crashy_Time

economic wrote: »

The problem with time will tell is you maybe waiting a very long time and before you know it you are 50 and renting a bedsit!

You bought straight back into the bubble didn`t you? How much down are you so far?

Crashy_Time

westernpromise wrote: »

George

If you've owned property for over 30 years your thinking is probably heavily skewed by the gross abnormality of the interest rates we've experienced over those 30 years.

In 1990, with a commonplace mortgage rate of 17% (base rate plus 2%), at the end of the first five years of the mortgage term you would have paid off less than 2% of the amount you borrowed.

30 years ago people thus had basically no prospect of escaping negative equity. They probably took out their mortgage when rates were 8%, they then doubled, and as a result not only did you make no inroads into the debt, but the doubling of the rate left you nothing with which to overpay to get ahead. People were then stranded for 10 years or more by a 25% price correction.

Fast-forward to today and someone who bought with a 90% mortgage, fixed for five years at 2.7% (which an FTB can), will repay over 15% of the amount borrowed over those first five years. Coupled with the 10% deposit, this means that it would take a fall of 25% at the end of year 5 versus what you paid in year 0 to put you into negative equity.

Negative equity is yesterday's problem. It simply can't happen again on the scale we've previously seen.

Renting is not the answer, as Crashy can testify. You spend 3 or 4 thousand a year renting per £100k of property value and at the end of the same five years you've blown maybe £20k on renting a property that probably isn't £20k cheaper unless you've both called and timed the market perfectly. Ask yourself how likely that is. Indeed, ask Crashy how likely that is.

Crashy Crashy Crashy, HPC HPC HPC etc. etc. all day every day. You spend far too much time on here, it is very sad.