B of E cuts interest rates

ManAtHome

Not just you MM - think we've been through this one before...

It's obviously been easier to adjust to a low interest rate environment than a low inflation environment. Low inflation generally means low pay rises (increase in pay rises being described as 'derisory' last couple of years), which means it takes much longer for you salary to double (around 10 years at 7% pay rise, 20 years at 3.5%). Much less likely to double in real terms due to the effect of taxes. Also, inflation is more likely to be understated for lower earners - less likely to be 'saving' if a holiday in OZ or the latest techie gadget is reduced, but obviously open to council tax, power, water, food, petrol, insurance etc increases.

Low inflation/interest rates means it's much easier to service the weekly repayments, but means you have to do this for a lot longer.

By the way, I bought my house for 3p (I wish) - mortgage went from 3 times salary to less than salary in under 10 years due to the high inflation/pay rises effect. If inflation/pay continues at 3%, would be closer to 40 years to hit the same position. As you've (probably) said several times - crazy.

zag2me

Meanmachine, its never a good time to buy, whether house prices are high or low, interest rates high or low ect. Especially for a first time buyer. Houses are for living in, not for investments.

ManAtHome

That's true Zag, but the point is if you're (over) stretching to buy, you have a hell of a long time to go before you can afford to change your circumstances (start a family, cut down on overtime, split up whatever).

meanmachine_2

zag2me wrote:

Meanmachine, its never a good time to buy, whether house prices are high or low, interest rates high or low ect. Especially for a first time buyer. Houses are for living in, not for investments.

I think it depends on the personal circumstances of the FTBer.

Anyone with a sizeable deposit naturally does a lot better in a high int rates/low house price environment. But they also have higher opportunity costs to consider (in other words they lose more income by shifting from the liquidity of a savings account into illiquid bricks and mortar).

Those who have no savings *think* they do better in a low int rate, high house price scenario.

In truth, only banks win in both scenarios.

I just find it depressing that so many people on here think above inflation house price rises/low interest rates are "a good thing".

They're not. Low interest rates are just a way to bribe the populace into spending rather than saving.

And do you *really* need that new plasma telly?