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

Altior

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

The price of assets rising is not the illogical result, it's peoples willingness to enter into debt to buy those assets.

Ignoring the inconvenient truth that a third of all property bought in the UK is bought with cash and no debt... what is the alternative for Joe Bloggs and his partner who need somewhere to live?

I'm not sure whether you mean somewhere to buy, as opposed to somewhere to rent or buy?

I don't see that it really makes much difference? Everyone needs somewhere to live and "debt" is simply owing someone money. 

You either buy and then you owe money to the bank every month or you rent and you owe money to the landlord every month... both are a necessary debt.

lojo1000 said:

it is very hard not to over commit to debt. Renting, whilst all around you are paying incredible multiples of their income on housing and seeing them 'get on the property ladder', is hard for most people.

Typically monthly rents are higher than monthly mortgages and fundamentally mortgages are normally paid off after so many years while rent has to be paid every single month for pretty much the rest of your life. Simply by looking at renting v buying from a debt point of view, it's clear that buying is almost always the smarter option as at the end of the day it's the lesser "debt".

lojo1000 said:

Also, I understand many people view ownership differently from rent in terms of the security it gives them.

That would be because they obviously are completely different. If you buy and pay your mortgage every month then it's your house so you can stay there forever if you want and pretty much do whatever you want within your own home.

Conversely if you rent then you don't have either of those luxuries; it's not your house so you can be made to leave if the landlord no longer wants to rent to you and you're limited in what you can do in your own home.

lojo1000 said:

My practical solution is to limit the amount of leverage allowed in buying a house. Reducing debt, reduces returns to equity in the purchase and hence BTL becomes less attractive.

the ever-upward spiral of prices in excess of incomes is not good for our society and the future of our children?

The government has been implementing anti-BTL measures for years, remind me again what's happened to both house prices and rental prices since they started doing this?

We live in a capitalist market economy ruled by supply and demand. You can tinker at the edges to reduce demand but ultimately more people than ever want/need a house and there are not enough of what they want and where they want them to go around. 

So the only solution left is to increase supply, basically we need to be building loads more houses in the areas that people want them. However even this isn't a magic bullet as it's not just house prices that have risen but similarly labour and materials are much higher now than they used to be so these mass-produced new houses are probably not going to be as cheap as some people might like; the eternal HPC dream of half-price houses is just never going to happen.

The reason why there seems to be a shortage of houses to buy was that so many were bought by BTL (previously owner-occupied houses) to put into the rental sector thereby reducing housing available to buy.

If we discourage investors (returns), it will bring down demand for housing whilst freeing up supply to buy and thereby bring prices down.

Let's say your cunning plan works and you do a better job than the government of getting rid of BTL properties... where will all those people who want or need to rent live?

Govt should use tax policy to incentive BTL industry to bring in to use housing which is not in use (thereby raising supply of homes for rent). Waive stamp duty on houses not in use >1 year if brought in use within 1 year post purchase. The BTL landlord gets a stamp duty bill as normal on purchase but if the property was not previously in use this can deferred for 1 year if the buyer elects at time of purchase. Duty becomes due in 1 year unless BTL landlord evidences property is now brought into use.

Wow, in less than 24 hours you've gone from discouraging BTL completely to now incentivising BTL but on "not in use" property... that's a quicker U-turn than even the government of the day can manage! 

There are a couple of reasons why your new cunning plan won't work...

The issue regarding "not in use" properties isn't because people don't want to buy them, it's down to sellers not wanting to sell them for whatever reason; so tax incentives to buy them will have practically no effect.

The fundamental flaw though is that if a BTL investor does buy an incentivised empty property then as soon as it's back in use and being rented the investor is hit with all the other anti-BTL rules and regulations that have been imposed in recent years. I.e. the very reason that so many landlords are getting out of BTL in the first place and why renting for tenants is getting harder and more expensive as every year goes by.

You're cherry picking from my posts so I will repeat in full my suggestion re BTL:

1. Cap leverage to reduce returns to BTL investors freeing up housing for owner-occupiers
2. Reduce stamp duty on properties not in use and brought into use by BTL  on otherwise not in use properties, to increase returns to BTL investors.

As previously stated both suggestions are fundamentally flawed!

1) By "freeing up" housing for owner-occupiers you're just reducing the availability of housing for renters so you've gained an owner-occupier house but lost a rental house, what's the benefit to the housing market of that?!?!

2) Properties "not in use" are generally always also "not for sale" so incentivising buyers is pointless and as @MeteredOut pointed out would probably just result in sellers knowing you could now afford to pay an extra 3% anyway since you no longer have to pay stamp duty!

1. When people who previously rented buy a house, they no longer are creating demand to rent a house. The market is clearly skewed toward creating higher house prices else the price/wage ratio would not have increased from around 3 to 8 now.
2. Not sure where you've got your information from about "generally always"? And you seem conflicted between whether such houses would be for sale or would not be for sale.

Here is the clear inverse relationship. The av house price explosion is almost purely down to money printing, combined with an extremely long era of effective negative interest rates. Money printing + cost free borrowing = asset inflation. Housing supply is (almost) irrelevant, and you can throw in population growth into double digit millions over a couple of decades. 

Hoenir

Over time markets will naturally self correct. Suspect this is now one of those occasions. Normal interest rates are still filtering through to the real economy. The BOE will react soon enough if the underlying data suggests undue stress and a disorderly market as a result. 

Meanwhile all eyes remaon on the US Fed. The impact of their actions cannot be underestimated in terms of global monetary flows. A high % of UK mortgages being funded from overseas. 

Altior

A genuine house price correction would be catastrophic. However, this market has been malformed for a long time, with numerous cheats and manipulation, and as I have referenced before, we are extremely likely to see interest rates being reduced again, maintaining the asset inflation.

MeteredOut

Altior said:

A genuine house price correction would be catastrophic. However, this market has been malformed for a long time, with numerous cheats and manipulation, and as I have referenced before, we are extremely likely to see interest rates being reduced again, maintaining the asset inflation.

What do you mean by a "genuine" correction?

lojo1000

Altior said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

The price of assets rising is not the illogical result, it's peoples willingness to enter into debt to buy those assets.

Ignoring the inconvenient truth that a third of all property bought in the UK is bought with cash and no debt... what is the alternative for Joe Bloggs and his partner who need somewhere to live?

I'm not sure whether you mean somewhere to buy, as opposed to somewhere to rent or buy?

I don't see that it really makes much difference? Everyone needs somewhere to live and "debt" is simply owing someone money. 

You either buy and then you owe money to the bank every month or you rent and you owe money to the landlord every month... both are a necessary debt.

lojo1000 said:

it is very hard not to over commit to debt. Renting, whilst all around you are paying incredible multiples of their income on housing and seeing them 'get on the property ladder', is hard for most people.

Typically monthly rents are higher than monthly mortgages and fundamentally mortgages are normally paid off after so many years while rent has to be paid every single month for pretty much the rest of your life. Simply by looking at renting v buying from a debt point of view, it's clear that buying is almost always the smarter option as at the end of the day it's the lesser "debt".

lojo1000 said:

Also, I understand many people view ownership differently from rent in terms of the security it gives them.

That would be because they obviously are completely different. If you buy and pay your mortgage every month then it's your house so you can stay there forever if you want and pretty much do whatever you want within your own home.

Conversely if you rent then you don't have either of those luxuries; it's not your house so you can be made to leave if the landlord no longer wants to rent to you and you're limited in what you can do in your own home.

lojo1000 said:

My practical solution is to limit the amount of leverage allowed in buying a house. Reducing debt, reduces returns to equity in the purchase and hence BTL becomes less attractive.

the ever-upward spiral of prices in excess of incomes is not good for our society and the future of our children?

The government has been implementing anti-BTL measures for years, remind me again what's happened to both house prices and rental prices since they started doing this?

We live in a capitalist market economy ruled by supply and demand. You can tinker at the edges to reduce demand but ultimately more people than ever want/need a house and there are not enough of what they want and where they want them to go around. 

So the only solution left is to increase supply, basically we need to be building loads more houses in the areas that people want them. However even this isn't a magic bullet as it's not just house prices that have risen but similarly labour and materials are much higher now than they used to be so these mass-produced new houses are probably not going to be as cheap as some people might like; the eternal HPC dream of half-price houses is just never going to happen.

The reason why there seems to be a shortage of houses to buy was that so many were bought by BTL (previously owner-occupied houses) to put into the rental sector thereby reducing housing available to buy.

If we discourage investors (returns), it will bring down demand for housing whilst freeing up supply to buy and thereby bring prices down.

Let's say your cunning plan works and you do a better job than the government of getting rid of BTL properties... where will all those people who want or need to rent live?

Govt should use tax policy to incentive BTL industry to bring in to use housing which is not in use (thereby raising supply of homes for rent). Waive stamp duty on houses not in use >1 year if brought in use within 1 year post purchase. The BTL landlord gets a stamp duty bill as normal on purchase but if the property was not previously in use this can deferred for 1 year if the buyer elects at time of purchase. Duty becomes due in 1 year unless BTL landlord evidences property is now brought into use.

Wow, in less than 24 hours you've gone from discouraging BTL completely to now incentivising BTL but on "not in use" property... that's a quicker U-turn than even the government of the day can manage! 

There are a couple of reasons why your new cunning plan won't work...

The issue regarding "not in use" properties isn't because people don't want to buy them, it's down to sellers not wanting to sell them for whatever reason; so tax incentives to buy them will have practically no effect.

The fundamental flaw though is that if a BTL investor does buy an incentivised empty property then as soon as it's back in use and being rented the investor is hit with all the other anti-BTL rules and regulations that have been imposed in recent years. I.e. the very reason that so many landlords are getting out of BTL in the first place and why renting for tenants is getting harder and more expensive as every year goes by.

You're cherry picking from my posts so I will repeat in full my suggestion re BTL:

1. Cap leverage to reduce returns to BTL investors freeing up housing for owner-occupiers
2. Reduce stamp duty on properties not in use and brought into use by BTL  on otherwise not in use properties, to increase returns to BTL investors.

As previously stated both suggestions are fundamentally flawed!

1) By "freeing up" housing for owner-occupiers you're just reducing the availability of housing for renters so you've gained an owner-occupier house but lost a rental house, what's the benefit to the housing market of that?!?!

2) Properties "not in use" are generally always also "not for sale" so incentivising buyers is pointless and as @MeteredOut pointed out would probably just result in sellers knowing you could now afford to pay an extra 3% anyway since you no longer have to pay stamp duty!

1. When people who previously rented buy a house, they no longer are creating demand to rent a house. The market is clearly skewed toward creating higher house prices else the price/wage ratio would not have increased from around 3 to 8 now.
2. Not sure where you've got your information from about "generally always"? And you seem conflicted between whether such houses would be for sale or would not be for sale.

Here is the clear inverse relationship. The av house price explosion is almost purely down to money printing, combined with an extremely long era of effective negative interest rates. Money printing + cost free borrowing = asset inflation. Housing supply is (almost) irrelevant, and you can throw in population growth into double digit millions over a couple of decades. 

Don't forget housing psychology as well. The media and government obsession with the housing 'ladder' makes people think property values will always go up. The govt relies on this for people to keep increasing debt which increases the money supply which increases GDP.

"it's important people can get on the housing ladder" gives people a visual image of reaching up like it's a stairway to heaven.

And of course, being only human, people like to follow the crowd, not stick out and so ignore the financial risks they take on.

lojo1000

Hoenir said:

Over time markets will naturally self correct. Suspect this is now one of those occasions. Normal interest rates are still filtering through to the real economy. The BOE will react soon enough if the underlying data suggests undue stress and a disorderly market as a result. 

Meanwhile all eyes remaon on the US Fed. The impact of their actions cannot be underestimated in terms of global monetary flows. A high % of UK mortgages being funded from overseas. 

Yes, completely agree the Fed drives global asset flows and risk tolerance.

But would a market correction be a "disorderly market"? If you mean panic selling then, agreed. But the market should be left to find its own price. The reason why house prices are 5x incomes is because the govt/central banks keep it alive. It is too big to fail.

lojo1000

Altior said:

A genuine house price correction would be catastrophic. However, this market has been malformed for a long time, with numerous cheats and manipulation, and as I have referenced before, we are extremely likely to see interest rates being reduced again, maintaining the asset inflation.

Yep, the central banks remind me of weak parents.

2 parents in the shop with the child........

Child starts screaming, "wahwahwah"
"give him his dummy"
"no, he needs to learn to cope without it"
"you're right, let him calm down on this own, so he learns"
"wahwahwah"
"i can't stand it anymore, give him the dummy one last time"
"ok, ok, but this is the last time"
"last time? he's 32 years old!"

Central bankers talk big when prices are going up but and even have some courage as prices begin to fall. But when prices fall too quickly and the noise loudens, they lose their bottle. The path of least resistance is to give in and deal with the consequences later aka "kick the can down the road". The trouble is of course the learned behaviour they've created is don't worry about the size of your debts because everyone is doing it and the govt can't let everyone fail.

Hoenir

lojo1000 said:

Hoenir said:

Over time markets will naturally self correct. Suspect this is now one of those occasions. Normal interest rates are still filtering through to the real economy. The BOE will react soon enough if the underlying data suggests undue stress and a disorderly market as a result. 

Meanwhile all eyes remaon on the US Fed. The impact of their actions cannot be underestimated in terms of global monetary flows. A high % of UK mortgages being funded from overseas. 

Yes, completely agree the Fed drives global asset flows and risk tolerance.

But would a market correction be a "disorderly market"? If you mean panic selling then, agreed. But the market should be left to find its own price. The reason why house prices are 5x incomes is because the govt/central banks keep it alive. It is too big to fail.

The housing market requires a constant flow of transactions. If sellers , as they always some for a variety of reasons, outnumber buyers by a considerable margin. Then suppy and demand will dictate a fall in overall prices. Doesn't take much of an imbalance to tip the scales. A flat market would suffice to cause a natural correction. Though would be a drawn out affair.  

Current view from the USA is that August may see the first move by the Fed. Seems that the higher for longer narrative is finally starting to register. 

lojo1000

Hoenir said:

lojo1000 said:

Hoenir said:

Over time markets will naturally self correct. Suspect this is now one of those occasions. Normal interest rates are still filtering through to the real economy. The BOE will react soon enough if the underlying data suggests undue stress and a disorderly market as a result. 

Meanwhile all eyes remaon on the US Fed. The impact of their actions cannot be underestimated in terms of global monetary flows. A high % of UK mortgages being funded from overseas. 

Yes, completely agree the Fed drives global asset flows and risk tolerance.

But would a market correction be a "disorderly market"? If you mean panic selling then, agreed. But the market should be left to find its own price. The reason why house prices are 5x incomes is because the govt/central banks keep it alive. It is too big to fail.

The housing market requires a constant flow of transactions. If sellers , as they always some for a variety of reasons, outnumber buyers by a considerable margin. Then suppy and demand will dictate a fall in overall prices. Doesn't take much of an imbalance to tip the scales. A flat market would suffice to cause a natural correction. Though would be a drawn out affair.  

Current view from the USA is that August may see the first move by the Fed. Seems that the higher for longer narrative is finally starting to register. 

Here's the current probability of Fed cuts. First cut June, but is a moving picture.



US mortgage rates also getting pushed higher again, back over 7%.

lojo1000

I really cannot see how BoE can reduce rates whilst we're getting services data like this today and the labour market is as tight as it is. Too many people have a job and they're getting real terms wage rises.

Employment is getting stronger, not weaker.

GDP is weak from productivity issues which arose from artificially low rates over the prior 15+ years.






And that's why the mortgage rate isn't going down either. The banks may be competing with lower teaser (i.e. fixed) rates due to lower demand but their SVR remain high.