Stamp Duty Ending

Getting_greyer

mrlegend123 said:

Getting_greyer said:

Do you mean the MPC minutes of December 2020?  Please tell me which paragraph as I can't seem to find it.

no if I meant that I would of said that.... 

Changes in the risk‑free real rate are a crucial driver of changes in house prices — the model predicts that a 1% sustained increase in index‑linked gilt yields could ultimately (ie in the long run) result in a fall in real house prices of just under 20%.

working report number 837 dated December 2019.....not 2020 minutes... 

Jeez, ok, was checking wasn't a typo...

Anyway I've found the said staff working paper.  Your original comment of 1% increase in rate = 20% drop of asset price is slightly different to a real terms drop in house prices in the long run. 

I'll have fun reading this. BTW I also think there will not be a substantial increase in the nominal base rate for an extended period of time.

Mickey666

mrlegend123 said:

@MobileSaver. It is not nonsense, read Bank of England Report on Interest Rates dated Dec 19! They predicted 1% increase in IRs = 20% drop in asset prices. 

@Mickey666. The current financial system (new financial instruments nowadays) is different to the 80/90s.........IRs will never go up due tooooooo much debt in the system. 
Also, asset prices were not that high relative to IRs. 

@Angela_D_3. I understand that BTL is a business but it has strong benefits such as leverage, inheriting etc. There needs to be another property tax against landlords if stamp duty goes. It will be fair to the wider society, especially the younger generations. 

I certainly take your point that times change (though the 90s were only 30 years ago) but I find it hard to see why house prices will drop if interest rates rise because everyone needs somewhere to live so homes are not an optional item, therefore there will always be demand.  If an IR rise means people cannot afford mortgages then they will have to rent instead, because they will still need a home.   I can imagine the housing market slowing down but I find it hard to imagine that many people are suddenly going to sell their homes for 20% less just because IRs rise by 1%.  There will always be some people who are effectively forced to move though, and it is these forced sales that might well drop but they will not be reresentative of house prices as a whole - even if they do give the tabloids something to panic about.

But who really knows?  Perhaps your prediction will come true?.  We're all in unprecedented times that's for sure and the global economic shutdown is bound to have some sort of knock-on effect.  In times of economic uncertainty people look for stability and security, hence the usual increase in the gold price.  In terms of having a roof over your head that we all need, what better stability and security than owning your own home outright - as the majority of UK homeowners already do.  They can then look out of their windows at all the predicted turmoil, completely unaffected what someone else says their home is worth in ££££, because it will always be worth more as their home.

mrlegend123

MobileSaver said:

mrlegend123 said:

@MobileSaver. It is not nonsense, read Bank of England Report on Interest Rates dated Dec 19! They predicted 1% increase in IRs = 20% drop in asset prices.

No they did not and what you wrote was simply untrue and complete nonsense.

Firstly and most importantly the Bank of England report is talking about medium-term real interest rates not the short-term nominal interest rates that the Bank sets.

Secondly the report said that such an increase in the real interest rate if it was unexpected and persistent could result in a 20% drop over a period of many years; that is a million miles away from your claim that a 1% increase equals a 20% drop.

Thirdly the report concludes that "it does not suggest that house prices are likely to move lower" as it explains that this would mean a reversal of a 30 years trend which is unlikely and there is "little sign" of this happening.

what you said is no nonsense... if IRs were normalised house prices would drop fast. 

short term IRs would have the same effect but far sooner than medium IRs...... Real interest rates yes I know the difference! 

third part of the report which I agree that house prices will not drop because IRs will never go up... 

Mickey666

MobileSaver said:

mrlegend123 said:

@MobileSaver. It is not nonsense, read Bank of England Report on Interest Rates dated Dec 19! They predicted 1% increase in IRs = 20% drop in asset prices.

No they did not and what you wrote was simply untrue and complete nonsense.

Firstly and most importantly the Bank of England report is talking about medium-term real interest rates not the short-term nominal interest rates that the Bank sets.

Secondly the report said that such an increase in the real interest rate if it was unexpected and persistent could result in a 20% drop over a period of many years; that is a million miles away from your claim that a 1% increase equals a 20% drop.

Thirdly the report concludes that "it does not suggest that house prices are likely to move lower" as it explains that this would mean a reversal of a 30 years trend which is unlikely and there is "little sign" of this happening.

Genuine question - how can a change in anything be both "unexpected and persistent . . . over many years"?
Markets are generally fairly quick to re-normalise after any shock aren't they?  So, if IRs DID suddenly and unexpectedly rise then no doubt there would be a market reaction, by why would it persist for many years?
About 10 months ago the markets got possibly the biggest unexpected shock short of outright war - a government-mandated lockdown.  10 months on, with a lockdown still in place and the repercussions likely to remain all year, the markets (If my pension plans are anything to go by) seem to not only have weathered and recovered from the initial drop but is currently higher than it was before lockdown).  

No wonder that economics is termed 'the dismal science' - even professional economists cannot make reliable predictions, they just seem to argue amongst themselves.  Much like internet forums really

MobileSaver

mrlegend123 said:

MobileSaver said:

mrlegend123 said:

@MobileSaver. It is not nonsense, read Bank of England Report on Interest Rates dated Dec 19! They predicted 1% increase in IRs = 20% drop in asset prices.

Firstly and most importantly the Bank of England report is talking about medium-term real interest rates not the short-term nominal interest rates that the Bank sets.

what you said is no nonsense... if IRs were normalised house prices would drop fast. .... short term IRs would have the same effect but far sooner  ... Real interest rates yes I know the difference!

I really don't think that you do understand the difference.

A simple question: If mortgage interest rates increase by 1% do you think house prices will drop by 20%?

mrlegend123

MobileSaver said:

mrlegend123 said:

MobileSaver said:

mrlegend123 said:

@MobileSaver. It is not nonsense, read Bank of England Report on Interest Rates dated Dec 19! They predicted 1% increase in IRs = 20% drop in asset prices.

Firstly and most importantly the Bank of England report is talking about medium-term real interest rates not the short-term nominal interest rates that the Bank sets.

what you said is no nonsense... if IRs were normalised house prices would drop fast. .... short term IRs would have the same effect but far sooner  ... Real interest rates yes I know the difference!

I really don't think that you do understand the difference.

A simple question: If mortgage interest rates increase by 1% do you think house prices will drop by 20%?

I do know the difference about 'real' interest rates. My answer is no because we are told there is 'no' real inflation in the system except of course asset inflation aka house prices/stock market inflation. However, if mortgage rates go up 2-3 points then yes because the borrower would have to find another few grand a year on a average mortgage. However, markets are rigged by the central bankers and there is no such thing as free market capitalism any more....mortgage backed bonds brought by central banks, yield curve control, zirp, help to buy etc etc, under supply of houses etc etc 

Crashy_Time

SpiderLegs said:

Crashy_Time said:

SpiderLegs said:

Crashy_Time said:

Angela_D_3 said:

Crashy_Time said:

jimmyjammy001 said:

What I find disconcerting is that something like 50% of people have said  they will have to abort their house sale if it goes pass the March deadline, people have spent what they have saved in stamp duty on a house and have absolutely no emergency savings in place to deal with emergency expenses like just in case they don't complete by the deadline, crazy!

But if the seller puts it back on the market again it's unlikely they will get what they wanted pre stamp duty holiday as people will now have less to spend on the house they want and will need to factor in paying the stamp duty. So it could work out buyers haggling with sellers to get the stamp duty equivalent knocked off the price or they pull out. 

Wow, just shows how stretched people really are?

Or how lovely itll be to be able to buy nice things gor the house instead of paying tax with it. 

Im buying a house because i need somewhere to live.  If i pay SD which i can but if i dont thsts £3000 ill send on decor and on lical trades people who in turn will psy tax on that income.  I dont wish to be unkind or rude.  

But inflation is predicted... if thats the case buying was a great idea.  If theres a crash id need more than a 20% deposit so i couldnt benefit anyway.  Theres no risk here.  Id imagine lots of people are in the same situation.  

General inflation will raise interest rates, and that along with other rising costs will make it harder to service mortgage debt, and if there is a crash lending won`t stop (all they have done is try to keep lending since the 2008 crisis!) and it is unlikely that 20% deposits will be required when property prices are coming down?

When do you think interest rates will rise?

When do you think general inflation will rise?

February.

Your turn. When do you think interest rates will rise?

After general inflation rises.

Crashy_Time

MobileSaver said:

mrlegend123 said:

because 1% increase in IRs means 20% drop in asset prices.

What complete and utter nonsense!

mrlegend123 said:

BTL will become targets again in the budget....easy target and should be taxed more due to benefits of leverage. 

Only a few days ago you were saying BTL was already not worth it [as a business] so how could taxing it more be remotely sustainable for anyone?

Because there are large numbers of people already locked into it.

Crashy_Time

Angela_D_3 said:

mrlegend123 said:

my prediction is never because 1% increase in IRs means 20% drop in asset prices. US tried and look what happened to their markets couple of years back.

Stamp duty will be removed to keep the market afloat and they will introduced a different tax such as property tax as mentioned. 

I am not sure how property tax would work with BTL unless they introduce a different property tax just for BTL.

BTL will become targets again in the budget....easy target and should be taxed more due to benefits of leverage. 

BTL is s business.  Airbnb etc also.  You seriously think the government will target British businesses that keep peoples roofs over their heads ?  

https://www.moneysupermarket.com/landlord-insurance/buy-to-let-tax-relief/

Crashy_Time

Mickey666 said:

MobileSaver said:

mrlegend123 said:

@MobileSaver. It is not nonsense, read Bank of England Report on Interest Rates dated Dec 19! They predicted 1% increase in IRs = 20% drop in asset prices.

No they did not and what you wrote was simply untrue and complete nonsense.

Firstly and most importantly the Bank of England report is talking about medium-term real interest rates not the short-term nominal interest rates that the Bank sets.

Secondly the report said that such an increase in the real interest rate if it was unexpected and persistent could result in a 20% drop over a period of many years; that is a million miles away from your claim that a 1% increase equals a 20% drop.

Thirdly the report concludes that "it does not suggest that house prices are likely to move lower" as it explains that this would mean a reversal of a 30 years trend which is unlikely and there is "little sign" of this happening.

Genuine question - how can a change in anything be both "unexpected and persistent . . . over many years"?
Markets are generally fairly quick to re-normalise after any shock aren't they?  So, if IRs DID suddenly and unexpectedly rise then no doubt there would be a market reaction, by why would it persist for many years?
About 10 months ago the markets got possibly the biggest unexpected shock short of outright war - a government-mandated lockdown.  10 months on, with a lockdown still in place and the repercussions likely to remain all year, the markets (If my pension plans are anything to go by) seem to not only have weathered and recovered from the initial drop but is currently higher than it was before lockdown).  

No wonder that economics is termed 'the dismal science' - even professional economists cannot make reliable predictions, they just seem to argue amongst themselves.  Much like internet forums really

My pension plans are the same, but that sort of bailout doesn`t come without consequence (unless you believe that they can print and bail indefinitely? I think the next market dummy spit is going to come though when the silly bail-out numbers Biden is trying to talk up just don`t materialise) Unfortunately your pension plan jumping on funny money doesn`t help the real economy much, that is a much bigger task to bail out, and with lockdowns, trade tensions and printers on Max they might get the nightmare scenario of serious inflation in basics without any wage inflation in a high unemployment scenario? That would be a net negative for house prices.