House Price Crash Discussion Thread

pickledtink

IveSeenTheLight wrote: »

But have you factored in higher interest rates
I've not checked the figures myself but it looks feasable from SetMeFree2 data that for every 1% higher interest rates, you need an 18% drop in house price when paying a mortgage over 25 years.

I will of course check out this for myself later and it will change if you pay over a shorter term but you need to factor in this

See the below link for SetMeFree2's post

http://forums.moneysavingexpert.com/showpost.html?p=9871389&postcount=2170

Yes I have. As I said my circumstances are specific to me. My deposit is very large. My mortgage term will be about 10 years only etc
However for example one FTB couple I know have been horribly caught in this. They are now paying a large mortgage taken out last Summer @ 95% on a house which is now worth 23% less than they paid for it. Money is very very tight. If interest rates are higher when they have to remortgage ( almost certain) and they can't make ends meet they have no hope of selling to even get clear of the burden.
They are in no doubt they were better off staying in rented and adding to their deposit. Let's face it they could now buy THAT house for £40,000 less!

carolt

pickledpink wrote: »

Me again.

How long do you anticipate waiting before you buy? I know some of you seem to think prices will keep on falling for years to come - do you not worry that some of you will be too OLD to get a mortgage in,say, 5/10 years time? Some of you seem to be old NOW! I

I'm 37, and as such, I think one of the oldest would-be FTb's posting on here. In 3 years I'll be 40. Still 25 years to go till retirement. That should be plenty.

If I bought now, it would only be affordable on a 30 year mortgage (well, actually, no - let's be honest - it would be unaffordable - that's WHY I'm renting and not buying at these stupid prices...:D).

I'm perfectly happy to rent, thank you, rather than cripple myself with unsustainable debt, just as house prices fall through the floor..... :eek:

Oh - and something you are clearly too young to have learnt. With age comes wisdom. When are still young, you (and I do mean YOU) imagine that you know everything, and can learn nothing.

As Churchill put it: "When I was 16, I thought my parents knew nothing. When I was 21, I was amazed how much they had learnt in 5 years."

mr.broderick

carolt wrote: »

I'm 37, and as such, I think one of the oldest would-be FTb's posting on here. In 3 years I'll be 40. Still 25 years to go till retirement. That should be plenty.

If I bought now, it would only be affordable on a 30 year mortgage (well, actually, no - let's be honest - it would be unaffordable - that's WHY I'm renting and not buying at these stupid prices...:D).

I'm perfectly happy to rent, thank you, rather than cripple myself with unsustainable debt, just as house prices fall through the floor..... :eek:

Oh - and something you are clearly too young to have learnt. With age comes wisdom. When are still young, you (and I do mean YOU) imagine that you know everything, and can learn nothing.

As Churchill put it: "When I was 16, I thought my parents knew nothing. When I was 21, I was amazed how much they had learnt in 5 years."

Sad state of affairs carol 37 and not yet on the ladder....

boinging_2

mr.broderick wrote: »

Sad state of affairs carol 37 and not yet on the ladder....

Why is that a "sad state of affairs"?

You are a very shallow person if you think house ownership is a measure of personal success.

JonnyBravo

mr.broderick wrote: »

Sad state of affairs carol 37 and not yet on the ladder....

Tut.... Luckily I don't think you'll upset a 37 year old that easily.... however....
Out of Order mr.b


What goes around comes around.


Your life is perfect presumably?

JonnyBravo

carolt wrote: »

But the idea that one should just jump in and buy the first overpriced hole just in case interest rates rise temporarily is just plain stupid.

Far better to rent until your dream home is available at a reasonable price.

That's what a lot of buyers are now doing..and a buyers' strike makes for a lot of unhappy sellers.....:rolleyes:

From what I understand that's not SMF2's point. (she? does hang out on MFW)

I (think) she's merely pointing out there's a lot more to consider to the amount you pay for a house than the agreed purchase price.
The interest you pay does make a difference. eg some people blithely sit on the SV rate for 23 of the 25 years and never overpay.

Of course in the current climate where large %age drops may be round the corner on house prices that is the primary concern but if we get back to say 10% interest rates anytime then this starts to become far more important than than the initial agreed price.


All in all .... nothing is so simple as to be crystallised to one point.

Quelle suprise or summut like that.

setmefree2

IveSeenTheLight wrote: »

But have you factored in higher interest rates
I've not checked the figures myself but it looks feasable from SetMeFree2 data that for every 1% higher interest rates, you need an 18% drop in house price when paying a mortgage over 25 years.

I've seen the light. This is what I think the maths is. I will get back to you if the maths is wrong, as I'm sure someone will let me know:D

Happy to be proven wrong but if £100,000k costs the following over 25 years:-

7%, £212,034(£18,744 more than at 6%)
6%, £193,290 (£17,913 more than at 5%)
5%, £175,377

then

£100, 000 @ 5% costs £175, 377 (£1.75377 * £100,000)
£90,732 @ 6% costs £175,377 (£1.9329 * £90,732)
£82,713 @ 7% costs £175,377 (£1.75377 * £82,713)

Therefore,
Prices have to drop 9%, then 8% to be equal to the cost of £100k at 5%.
Thus, when interest rates move 1% the market has to drop 9% for things to be the same and 17% for a 2% rise.



So if interest rates go up 1% then the market has to drop 8% (roughly) for the cost of a £100k house to be the same (over the life of a mortgage)

And if rates go up 2% then the market has to drop 17% for the cost of the house over the life time of a mortgae to be the same. to be the same.

So the market moving down by 8% in house prices is really the same as mortgage rates going up by 1%.
Happy to be proven wrong

SMF2

setmefree2

pickledtink wrote: »

My deposit is very large.

Then the impact of interest rate hikes will be less

pickledtink wrote: »

My mortgage term will be about 10 years only etc

Then the impact of interest rate hikes will be less

boinging_2

Being as your double posting so will I...

How many people have a fixed rate for 25 years?

Also if interest rates go up, would it not affect people who already have a mortgage? So in essence your point applies to everyone. Therefore if I can save some money up front when buying then I'm better off.

setmefree2

Not trying upset anyone - I'm just a curious number cruncher.:o