Are we expecting BOE to remain at 4.75% on 8th February 2025?

michaels

Sarah1Mitty2 said:

MattMattMattUK said:

weddingringman said:

wheldcj said:

Sorry but that is nonsense.  Unless by fortune of birth you inherit a house or the proceeds of the home you have only one option to own your own property, that is a mortgage. 

I get the addiction to low interest for phones, cars etc but most had/have no option but to take a risk that rates would not increase to these levels so quickly.  

Until a government does two things the future of home ownership for the next generation will be dictated largely by family inheritance.  Meritocracy is out the window.

1) Significantly limit how much profit you can make on homes or at least how much you can pass down untaxed through inheritance i.e massively disincentivise holding onto property until you die is the key.

2) Offer a carrot to the older empty nester generation to downsize their family sized properties, by schools and other amenities.  Therefore properly utilising our housing stock & by increasing supply reducing house prices.

My kids have absolutely no chance regardless of their eventual job an income of buying property like previous generations which is hugely depressing as a developed nation.

I disagree on the basis that over the last 4 or 5 years more and more people have began borrowing 5 or 6x incomes, and at rates that everyone knew were artificially low.

They were not artificially low, they were not artificially high, they were not artificially anything, they just were. The fact that they do not align with historical rates is largely irrelevant and does not mean that it is a correction for them to rise back to 4-6%, to think so shows a huge lack of understanding in the markets and supply and demand.

weddingringman said:

I heard on the radio that the average first time buyer borrows 250k. That’s reckless and totally unnecessary. What happened to working your way up the ladder?! There are places less than half that price, within a short drive or commute to probably 95% of jobs in the UK. It’s nonsensical for a first time buyer to be buying at enough the average house price for the UK. 

People hear lots of things on the radio, but as ever the devil is in the detail. The average is £239k, but that does not factor in income or location in the country, the amount borrowed in London and the SE is 2-5 times that of the north and midlands, however the average wage in London and the South East is also significantly higher than the national average. On average borrowing for first time buyers was 4.3 income, regardless of region. Average house price is also meaningless when looking at individuals, the average house price where I live would mean one was slightly short of the cost of a one bedroom flat, in London it would buy one a garage. 

https://www.statista.com/statistics/792294/first-time-buyer-average-mortgage-by-region-uk/

weddingringman said:

People just don’t seem to want to buy a modest place and spend a few years building equity. My first flat was well under 100k, and you can pretty much buy it for that same price all these years later. No one seems interested in them for some reason, but the extortionate 350-400k new builds were selling like hot cakes last year… strange huh…

If I could have bought a flat for £100k I could have bought two without needing a mortgage, so historical comparisons are irrelevant. £200-240k around here will get buy a one bed, or a small two bed (around the same size in square meters), the average age of a first time buyer in Q4 2022 was 37, many now need more space for growing family so tend to buy bigger later, whilst having rented smaller properties pre-children or when they were small and so space was less essential. There will of course be those who overstretch themselves to get something that they want rather than need, but that has always been the case, the biggest example of that was in the 90s with crippling mortgages, or the mid 2000s where 105-110% mortgages happened. 

This is incorrect, they were manipulated lower with QE.

Surely they are set by the BoE monetary policy committee at the short end using the base rate and at the longer end via increasing/decreasing the money supply (QE) so basically 'manipulation' by definition in that it is interference with the market - but then that is what monetary and fiscal policy is all about,

weddingringman

michaels said:

Sarah1Mitty2 said:

MattMattMattUK said:

weddingringman said:

wheldcj said:

Sorry but that is nonsense.  Unless by fortune of birth you inherit a house or the proceeds of the home you have only one option to own your own property, that is a mortgage. 

I get the addiction to low interest for phones, cars etc but most had/have no option but to take a risk that rates would not increase to these levels so quickly.  

Until a government does two things the future of home ownership for the next generation will be dictated largely by family inheritance.  Meritocracy is out the window.

1) Significantly limit how much profit you can make on homes or at least how much you can pass down untaxed through inheritance i.e massively disincentivise holding onto property until you die is the key.

2) Offer a carrot to the older empty nester generation to downsize their family sized properties, by schools and other amenities.  Therefore properly utilising our housing stock & by increasing supply reducing house prices.

My kids have absolutely no chance regardless of their eventual job an income of buying property like previous generations which is hugely depressing as a developed nation.

I disagree on the basis that over the last 4 or 5 years more and more people have began borrowing 5 or 6x incomes, and at rates that everyone knew were artificially low.

They were not artificially low, they were not artificially high, they were not artificially anything, they just were. The fact that they do not align with historical rates is largely irrelevant and does not mean that it is a correction for them to rise back to 4-6%, to think so shows a huge lack of understanding in the markets and supply and demand.

weddingringman said:

I heard on the radio that the average first time buyer borrows 250k. That’s reckless and totally unnecessary. What happened to working your way up the ladder?! There are places less than half that price, within a short drive or commute to probably 95% of jobs in the UK. It’s nonsensical for a first time buyer to be buying at enough the average house price for the UK. 

People hear lots of things on the radio, but as ever the devil is in the detail. The average is £239k, but that does not factor in income or location in the country, the amount borrowed in London and the SE is 2-5 times that of the north and midlands, however the average wage in London and the South East is also significantly higher than the national average. On average borrowing for first time buyers was 4.3 income, regardless of region. Average house price is also meaningless when looking at individuals, the average house price where I live would mean one was slightly short of the cost of a one bedroom flat, in London it would buy one a garage. 

https://www.statista.com/statistics/792294/first-time-buyer-average-mortgage-by-region-uk/

weddingringman said:

People just don’t seem to want to buy a modest place and spend a few years building equity. My first flat was well under 100k, and you can pretty much buy it for that same price all these years later. No one seems interested in them for some reason, but the extortionate 350-400k new builds were selling like hot cakes last year… strange huh…

If I could have bought a flat for £100k I could have bought two without needing a mortgage, so historical comparisons are irrelevant. £200-240k around here will get buy a one bed, or a small two bed (around the same size in square meters), the average age of a first time buyer in Q4 2022 was 37, many now need more space for growing family so tend to buy bigger later, whilst having rented smaller properties pre-children or when they were small and so space was less essential. There will of course be those who overstretch themselves to get something that they want rather than need, but that has always been the case, the biggest example of that was in the 90s with crippling mortgages, or the mid 2000s where 105-110% mortgages happened. 

This is incorrect, they were manipulated lower with QE.

Surely they are set by the BoE monetary policy committee at the short end using the base rate and at the longer end via increasing/decreasing the money supply (QE) so basically 'manipulation' by definition in that it is interference with the market - but then that is what monetary and fiscal policy is all about,

Er…. Haven’t you see how the MPC have operated over the last 3 years?!?!

lojo1000

I expect there to be an increasing gap between market gilt yields and mortgage costs as mortgage providers need to increase expectations for potential credit losses on mortgages issued.

That could add another 100-200bps on to mortgage costs if unemployment follows historic patterns during recessions. It will also make the supply of mortgages less competitive, further increasing costs.

For the last 25 years, mostly due to low inflation, lenders faced very low risk of the borrower being made unemployed and a need to foreclose; they could simply extend the term.

Now, with inflation uncertain, unemployment may begin rising to prior levels seen in the 80s and 90s - see below.

New mortgage terms last for up to 35 years in these days of high house prices (fueled by irresponsible lending) and I expect therefore mortgages issued in 2023 will experience default rates much higher than the last 25 years and therefore lenders will need to ensure better gross margins on what mortgages they do issue.



 

OhWow

Interesting article in the telegragh a couple of days ago, about the rising rates and repossession numbers up. They also metioned how those who rushed to buy during the covid stamp duty concessions, will be coming off their fix soon.

OhWow

MattMattMattUK said:

BikingBud said:

MattMattMattUK said:

weddingringman said:

wheldcj said:

Sorry but that is nonsense.  Unless by fortune of birth you inherit a house or the proceeds of the home you have only one option to own your own property, that is a mortgage. 

I get the addiction to low interest for phones, cars etc but most had/have no option but to take a risk that rates would not increase to these levels so quickly.  

Until a government does two things the future of home ownership for the next generation will be dictated largely by family inheritance.  Meritocracy is out the window.

1) Significantly limit how much profit you can make on homes or at least how much you can pass down untaxed through inheritance i.e massively disincentivise holding onto property until you die is the key.

2) Offer a carrot to the older empty nester generation to downsize their family sized properties, by schools and other amenities.  Therefore properly utilising our housing stock & by increasing supply reducing house prices.

My kids have absolutely no chance regardless of their eventual job an income of buying property like previous generations which is hugely depressing as a developed nation.

I disagree on the basis that over the last 4 or 5 years more and more people have began borrowing 5 or 6x incomes, and at rates that everyone knew were artificially low.

They were not artificially low, they were not artificially high, they were not artificially anything, they just were. The fact that they do not align with historical rates is largely irrelevant and does not mean that it is a correction for them to rise back to 4-6%, to think so shows a huge lack of understanding in the markets and supply and demand.

weddingringman said:

I heard on the radio that the average first time buyer borrows 250k. That’s reckless and totally unnecessary. What happened to working your way up the ladder?! There are places less than half that price, within a short drive or commute to probably 95% of jobs in the UK. It’s nonsensical for a first time buyer to be buying at enough the average house price for the UK. 

People hear lots of things on the radio, but as ever the devil is in the detail. The average is £239k, but that does not factor in income or location in the country, the amount borrowed in London and the SE is 2-5 times that of the north and midlands, however the average wage in London and the South East is also significantly higher than the national average. On average borrowing for first time buyers was 4.3% of income, regardless of region. Average house price is also meaningless when looking at individuals, the average house price where I live would mean one was slightly short of the cost of a one bedroom flat, in London it would buy one a garage. 

https://www.statista.com/statistics/792294/first-time-buyer-average-mortgage-by-region-uk/

weddingringman said:

People just don’t seem to want to buy a modest place and spend a few years building equity. My first flat was well under 100k, and you can pretty much buy it for that same price all these years later. No one seems interested in them for some reason, but the extortionate 350-400k new builds were selling like hot cakes last year… strange huh…

If I could have bought a flat for £100k I could have bought two without needing a mortgage, so historical comparisons are irrelevant. £200-240k around here will get buy a one bed, or a small two bed (around the same size in square meters), the average age of a first time buyer in Q4 2022 was 37, many now need more space for growing family so tend to buy bigger later, whilst having rented smaller properties pre-children or when they were small and so space was less essential. There will of course be those who overstretch themselves to get something that they want rather than need, but that has always been the place, the biggest example of that was in the 90s with crippling mortgages, or the mid 2000s where 105-110% mortgages happened. 

Please confirm the bit in bold. 4.3%? Really? I, probably like most, cannot get to the article behind the paywall!

Maybe 4.3 x income but as you will appreciate those are wholly different figures.

A lot of people do, especially in London and the South East, they live more centrally during the early part of their career, they increase their earnings and seniority and at the point when their children reach school age they move out of central London to the suburbs or Home Counties, their £2k+ rent for a flat in London equates to a mortgage on a house within commuting distance. 

That used to be the plan, but covid has meant that people moved out of London to live in a nicer area to work from home. Which then pushed up the prices in those areas outside central London and reduced the prices in central London. They had to take a loss on what they paid for their London place and get a bigger mortgage than they had planned.

With all these mortgage rises in a very short time and  Nationwide reporting a house price drop; it is reducing their LTV with each drop in value. It's also gutting to watch all that money going out in interest payments, which will not reduce their mortgage debt.

RelievedSheff

OhWow said:

MattMattMattUK said:

BikingBud said:

MattMattMattUK said:

weddingringman said:

wheldcj said:

Sorry but that is nonsense.  Unless by fortune of birth you inherit a house or the proceeds of the home you have only one option to own your own property, that is a mortgage. 

I get the addiction to low interest for phones, cars etc but most had/have no option but to take a risk that rates would not increase to these levels so quickly.  

Until a government does two things the future of home ownership for the next generation will be dictated largely by family inheritance.  Meritocracy is out the window.

1) Significantly limit how much profit you can make on homes or at least how much you can pass down untaxed through inheritance i.e massively disincentivise holding onto property until you die is the key.

2) Offer a carrot to the older empty nester generation to downsize their family sized properties, by schools and other amenities.  Therefore properly utilising our housing stock & by increasing supply reducing house prices.

My kids have absolutely no chance regardless of their eventual job an income of buying property like previous generations which is hugely depressing as a developed nation.

I disagree on the basis that over the last 4 or 5 years more and more people have began borrowing 5 or 6x incomes, and at rates that everyone knew were artificially low.

They were not artificially low, they were not artificially high, they were not artificially anything, they just were. The fact that they do not align with historical rates is largely irrelevant and does not mean that it is a correction for them to rise back to 4-6%, to think so shows a huge lack of understanding in the markets and supply and demand.

weddingringman said:

I heard on the radio that the average first time buyer borrows 250k. That’s reckless and totally unnecessary. What happened to working your way up the ladder?! There are places less than half that price, within a short drive or commute to probably 95% of jobs in the UK. It’s nonsensical for a first time buyer to be buying at enough the average house price for the UK. 

People hear lots of things on the radio, but as ever the devil is in the detail. The average is £239k, but that does not factor in income or location in the country, the amount borrowed in London and the SE is 2-5 times that of the north and midlands, however the average wage in London and the South East is also significantly higher than the national average. On average borrowing for first time buyers was 4.3% of income, regardless of region. Average house price is also meaningless when looking at individuals, the average house price where I live would mean one was slightly short of the cost of a one bedroom flat, in London it would buy one a garage. 

https://www.statista.com/statistics/792294/first-time-buyer-average-mortgage-by-region-uk/

weddingringman said:

People just don’t seem to want to buy a modest place and spend a few years building equity. My first flat was well under 100k, and you can pretty much buy it for that same price all these years later. No one seems interested in them for some reason, but the extortionate 350-400k new builds were selling like hot cakes last year… strange huh…

If I could have bought a flat for £100k I could have bought two without needing a mortgage, so historical comparisons are irrelevant. £200-240k around here will get buy a one bed, or a small two bed (around the same size in square meters), the average age of a first time buyer in Q4 2022 was 37, many now need more space for growing family so tend to buy bigger later, whilst having rented smaller properties pre-children or when they were small and so space was less essential. There will of course be those who overstretch themselves to get something that they want rather than need, but that has always been the place, the biggest example of that was in the 90s with crippling mortgages, or the mid 2000s where 105-110% mortgages happened. 

Please confirm the bit in bold. 4.3%? Really? I, probably like most, cannot get to the article behind the paywall!

Maybe 4.3 x income but as you will appreciate those are wholly different figures.

A lot of people do, especially in London and the South East, they live more centrally during the early part of their career, they increase their earnings and seniority and at the point when their children reach school age they move out of central London to the suburbs or Home Counties, their £2k+ rent for a flat in London equates to a mortgage on a house within commuting distance. 

That used to be the plan, but covid has meant that people moved out of London to live in a nicer area to work from home. Which then pushed up the prices in those areas outside central London and reduced the prices in central London. They had to take a loss on what they paid for their London place and get a bigger mortgage than they had planned.

With all these mortgage rises in a very short time and  Nationwide reporting a house price drop; it is reducing their LTV with each drop in value. It's also gutting to watch all that money going out in interest payments, which will not reduce their mortgage debt.

No more gutting then paying hundreds or thousands in rent every month for a property which you will never own.

michaels

lojo1000 said:

I expect there to be an increasing gap between market gilt yields and mortgage costs as mortgage providers need to increase expectations for potential credit losses on mortgages issued.

That could add another 100-200bps on to mortgage costs if unemployment follows historic patterns during recessions. It will also make the supply of mortgages less competitive, further increasing costs.

For the last 25 years, mostly due to low inflation, lenders faced very low risk of the borrower being made unemployed and a need to foreclose; they could simply extend the term.

Now, with inflation uncertain, unemployment may begin rising to prior levels seen in the 80s and 90s - see below.

New mortgage terms last for up to 35 years in these days of high house prices (fueled by irresponsible lending) and I expect therefore mortgages issued in 2023 will experience default rates much higher than the last 25 years and therefore lenders will need to ensure better gross margins on what mortgages they do issue.



 

All past experience shows that transaction volumes dry up if prices fall as sellers work on what their house 'should be worth' rather than the going rate.  Risk premia no doubt correlate heavily to LTV so with the recent price increases and capital repayments we would have to see a large sustained fall plus considerably higher unemployment before lenders saw any major impairment charges.  Figures above state an extra 182k in employment and thus having more money to spend on housing.

If I had a quid for every time I heard 'house prices are unsustainablely high and will crash' I would be very rich by now.

Fundamentals are demand is increasing faster than supply.

Strummer22

lojo1000 said:

Now, with inflation uncertain, unemployment may begin rising to prior levels seen in the 80s and 90s - see below.

Do you think it will, and if so, why? 

Sarah1Mitty2

RelievedSheff said:

OhWow said:

MattMattMattUK said:

BikingBud said:

MattMattMattUK said:

weddingringman said:

wheldcj said:

Sorry but that is nonsense.  Unless by fortune of birth you inherit a house or the proceeds of the home you have only one option to own your own property, that is a mortgage. 

I get the addiction to low interest for phones, cars etc but most had/have no option but to take a risk that rates would not increase to these levels so quickly.  

Until a government does two things the future of home ownership for the next generation will be dictated largely by family inheritance.  Meritocracy is out the window.

1) Significantly limit how much profit you can make on homes or at least how much you can pass down untaxed through inheritance i.e massively disincentivise holding onto property until you die is the key.

2) Offer a carrot to the older empty nester generation to downsize their family sized properties, by schools and other amenities.  Therefore properly utilising our housing stock & by increasing supply reducing house prices.

My kids have absolutely no chance regardless of their eventual job an income of buying property like previous generations which is hugely depressing as a developed nation.

I disagree on the basis that over the last 4 or 5 years more and more people have began borrowing 5 or 6x incomes, and at rates that everyone knew were artificially low.

They were not artificially low, they were not artificially high, they were not artificially anything, they just were. The fact that they do not align with historical rates is largely irrelevant and does not mean that it is a correction for them to rise back to 4-6%, to think so shows a huge lack of understanding in the markets and supply and demand.

weddingringman said:

I heard on the radio that the average first time buyer borrows 250k. That’s reckless and totally unnecessary. What happened to working your way up the ladder?! There are places less than half that price, within a short drive or commute to probably 95% of jobs in the UK. It’s nonsensical for a first time buyer to be buying at enough the average house price for the UK. 

People hear lots of things on the radio, but as ever the devil is in the detail. The average is £239k, but that does not factor in income or location in the country, the amount borrowed in London and the SE is 2-5 times that of the north and midlands, however the average wage in London and the South East is also significantly higher than the national average. On average borrowing for first time buyers was 4.3% of income, regardless of region. Average house price is also meaningless when looking at individuals, the average house price where I live would mean one was slightly short of the cost of a one bedroom flat, in London it would buy one a garage. 

https://www.statista.com/statistics/792294/first-time-buyer-average-mortgage-by-region-uk/

weddingringman said:

People just don’t seem to want to buy a modest place and spend a few years building equity. My first flat was well under 100k, and you can pretty much buy it for that same price all these years later. No one seems interested in them for some reason, but the extortionate 350-400k new builds were selling like hot cakes last year… strange huh…

If I could have bought a flat for £100k I could have bought two without needing a mortgage, so historical comparisons are irrelevant. £200-240k around here will get buy a one bed, or a small two bed (around the same size in square meters), the average age of a first time buyer in Q4 2022 was 37, many now need more space for growing family so tend to buy bigger later, whilst having rented smaller properties pre-children or when they were small and so space was less essential. There will of course be those who overstretch themselves to get something that they want rather than need, but that has always been the place, the biggest example of that was in the 90s with crippling mortgages, or the mid 2000s where 105-110% mortgages happened. 

Please confirm the bit in bold. 4.3%? Really? I, probably like most, cannot get to the article behind the paywall!

Maybe 4.3 x income but as you will appreciate those are wholly different figures.

A lot of people do, especially in London and the South East, they live more centrally during the early part of their career, they increase their earnings and seniority and at the point when their children reach school age they move out of central London to the suburbs or Home Counties, their £2k+ rent for a flat in London equates to a mortgage on a house within commuting distance. 

That used to be the plan, but covid has meant that people moved out of London to live in a nicer area to work from home. Which then pushed up the prices in those areas outside central London and reduced the prices in central London. They had to take a loss on what they paid for their London place and get a bigger mortgage than they had planned.

With all these mortgage rises in a very short time and  Nationwide reporting a house price drop; it is reducing their LTV with each drop in value. It's also gutting to watch all that money going out in interest payments, which will not reduce their mortgage debt.

No more gutting then paying hundreds or thousands in rent every month for a property which you will never own.

You can leave a rental property, you can`t leave a mortgage debt.

Sarah1Mitty2

Strummer22 said:

lojo1000 said:

Now, with inflation uncertain, unemployment may begin rising to prior levels seen in the 80s and 90s - see below.

Do you think it will, and if so, why? 

AI might eventually have an impact, but more immediately less private credit is going to "start-up" type companies, less bank credit is going to companies who employ people and if your mortgage has gone from 700 pm to 1400pm like the guy on SKY news the other night, the first thing you will do is cut spending on take-aways, nights out etc. leading to less demand for workers in those sectors that people can easily do without to pay more towards their debt.