to think that the low interest rate is the cause of massive house prices

[2shoeprintsintheblood]

probably am, but surely if they raised the interest rates house prices would come down....(yep I don't understand so please explain it to me nicely)

But house prices were really high back when interest rates were high. They've fallen back since interest rates went down, not risen.

Or am I talking too recently? I'm just thinking about the last 5 years or so.

dont agree shoeprints
we bought 5 years ago, rates were high, prices were high.

luckily for us our area hasn't slumped so now rates are down we're ok.

BUT i remember when my mum and dad bought their house in 1990. they had a spell of paying 13% interest rates on their mortgage. house prices weren't epicly high though as they'd never have afforded the house.

just not that simple, but i can't explain why either. :)

5 years ago rates were not high. They were medium (6-7% or so). High interest rates are 10% and over. They are currently incredibly low.

And yes 2shoeprints if they raised interest rates then house prices probably would go down. However, they don't necessarily want that to happen. And there would also be other effects - for example, people and companies would save more rather than spend, and they want to encourage spending.

but don't we need to save not borrow(very confused emotion)

If you want a brisk economy, you need people spending rather than saving. If you want a degree of personal financial security you need to save rather than spend. Always a balancing act.

House prices are about supply and demand. Houses in nice areas near good schools and where there is plenty of employment remain very expensive. In not-so-nice areas, where schools are poor or where there is a lot of unemployment are cheaper... that's just how it goes.

If the interest rates are low but lenders what borrowers to put down 25% of the value of the property before granting a mortgage then that affects the market as well.

...lenders 'want' borrowers..

but low interest rates are a bit of an illusion - for someone wanting a NEW loan, the cost of borrowing really isn't that low, the interest rates offered way exceed the 0.5% base rate in the headlines, and larger deposits are required.

YANBU the amount of cheap credit availible in the economy in the early 2000s was probably the biggest reasons why we had such a property bubble.

House prices are coming down..they havent gone up for quite some time.

Saving not borrowing is not going to help the economy. Not to mention all the people that suddenly wouldn't be able to pay their mortgages.

It's not so much the interest rate as how easily you can get a mortgage.