House prices falling isn’t helpful while interest rates are so high

[lousong]

Rates are 5% and climbing. On TV they are saying it’s good news for first time buyers, how can it be? They’re just going to be paying more interest instead. I think people are having kids older and older because we are all told to buy houses first and it’s fast becoming impossible, especially for those who rent. The average salary doesn’t buy the average house. Somethings got to change?

I feel sorry for the youngsters today and yes, we paid high interest rates too , but it doesn't make it right. They are screwed whatever they decide to do. It is hard.
I'm sure you'll be flamed op or people just won't agree , but I think your right.

Supply and demand. Prices won’t fall that much due to their not being enough accommodation available.

There

It’s only ever a good time for cash buyers.

I cant be bothered to work out the maths of how much a starter home would have to fall by to be the same monthly cost as before interest rates rose again.

200k at 2% prior

Now choose
100k at 5%
200k at 5%
Clearly the 100k one is better value right now

Can’t believe rates were 3% last year and now are 5.5

It's far easier to pay off a smaller amount of capital at higher interest rates, than a large amount of capital at low interest rates. Inflation, pay rises etc erodes the size of the debt far quicker too, so smaller loan, higher rates is better.

I found that out as FTB in the mid 90s. Worked out great.

Everyone in home ownership is to blame.

Everyone wants to make £1000s on each house they buy.
Which has worked for 3 decades.
But we've priced our kids and grandkids out of home ownership. So they will live with us forever.

It will feed into new builds interest rates won't come down. New build prices will have to fall to sell anything and that will feed through the market.

Everything around us is "reduced" and still not selling.

Agreed, it’s awful. We have only been in our house 2 years and have had to remortgage at a shit rate (hindsight is a bitch). My dsis and her partner are keyworkers and can’t even afford a 1 bed flat where we are (SE). Ridiculous.

It always works this way. Prices only get lower when borrowing is more difficult and expensive. When borrowing becomes possible, the market races ahead again. Even if you have cash to buy, supply dwindles to almost nothing. It does suck, because nobody really benefits.

That’s so unfair for them. What do they do? Though they might actually be better renting at least for now

So sad but so true. It’ll have a knock on effect on age of parents

Interest rates are very temporary whereas house prices will trend upwards significantly over time with temporary dips that buyers can take advantage of to get a bargain.

We were relatively unlucky with our first purchase at the top of the market with a 3 year fixed rate of 6% (early 2008) but then very lucky with our second purchase 3 years later at the very bottom. Only got a rate close to the low base rate once that was less than 60% LTV (still have 18 months to run on that at 1.79%!)

Nobody has a right to buy their own home - prices are set by supply and demand, if you can’t afford it you can’t afford it. But there is never going to be huge market ‘correction’ as the consequences of that would be extremely far reaching…

It's extremely helpful if you don't need a mortgage or if you only need a very small mortgage.

@lousong they’re police officers. Yes I think so too, they have been lucky enough to live with family up until now but that arrangement is coming to an end so they don’t have much choice. I think they’re looking into shared ownership atm🤞

I think this is true. As long as mortgage rates are still about 5 percent and BoE might well raise them again yet, then FTB's will find it hard. Rental prices are high too as btl LL also have to factor in higher mortgages and btl mortgages tend to be more tracker and variable. There are fixed rates but usually come with a £2k - £3k charge.

It half makes more sense for us to stay in our HA house, even though it’s rented it’s cheaper than a mortgage would ever be but we just do need more space than two bed

I guess it depends if house prices really do drop but the whole thing is a mess. I really feel for young people, I think more should go & look for opportunities abroad.

pay rises etc

but pay is well below inflation & has stagnated in many sectors for years.

it has always been bloody difficult for FTB to get on the property ladder. It will never be easy.

What the commentators are saying is that it's now relatively easier when house prices are falling and there are fewe buyers out there to compete and banks are more willing to lend to FTB (to keep mortgage lending going - the banks are stuffed with customer deposits and have to lend). Agreed with a poster above that high interest rates are only temporary and a lower loan amount is permanent so it's better for FTB right now.

That’s true, but relies on FTBs having a high enough salary to cover repayments at the rate they are