To think the amount available to borrow for a home is going to be slashed?

[SwanBuster]

At a fixed rate of 1.5% for five years, a 250k mortgage offer would mean paying back £1000 per month.

Let’s say that’s what a given family might be able to afford as monthly repayments. These were readily available until recently.

It looks like fixed rates are going up fast … if they hit 5% then for the same ‘affordable’ £1000 p/m payment would mean they can borrow a maximum of £171k.

And if affordability drops further because of other expenses (let’s say they can now only afford 900 p/m because of rises in other bills), then that drops even further to about 155k.

what do you think the impact will be? AIBU to think this is going to hit the housing market quite hard?

It's not really a benefit if you're trying to climb the property ladder. Sure, your home as increased in price, but so's the one you're moving to.

Houses prices won't crash. Their ascent may slow a bit, possibly even pause, but they won't go down.

Demand for housing outstrips supply and while this remains the case, the price will keep rising.

That simply isn’t true. Anyone who’s ever made a profit on a house - and that’s just about everyone who’s owned one in the last 30 years - has benefited. Why boomers? Unless you sell your house it’s fairy money and you get no benefit from the notional increase in value.

That's true for many I would say except some boomers as that generation generally has seen the huge gains. It's not fairy money if you have still have a million left over after downsizing.

ever increasing prices aren't helpful to those trying to move up the ladder as the gaps get wider that's why it's really only the ones at the top who benefit if they downsize.

They never did. The rates of interest are usurious and they’re fucked if they need a care home.

equity release has changed though, you can't borrow 100% & some are even using it to circumnavigate iht.

I doubt the housing market will drop much; prices won't rise so fast and will level out but at the end of the day... supply and demand isn't it. There's a shortage of housing stock, and people need somewhere to live, and in the long term home ownership is always always always going to be an investment and also gives a better quality of life in terms of security and consistency than renting. I think particularly in more attractive areas, houses will continue to sell well.

Demand for housing has always outstripped supply, that hasn't prevented crashes in the past. I bought a flat in 1989, a year later it was worth 25% less.

Supply an demand for housing is dependent on supply and demand of credit though.

And the figures posted in my original post show pretty categorically that credit pretty much has to be affected, with quite a dramatic effect on the marginal buyers size of mortgage.

Yes, I think borrowing amounts will reduce and the housing market will slow. Only those who absolutely need to sell will put their houses on the market and lack of availability will keep house prices reasonably stable - they may dip a little bit not much.

And again, I’d ask you what do you think will happen when the amount that can be borrowed is dramatically slashed?

Surely because almost anyone who has sold has done so in order to "move up the chain" - and therefore buy a house that has gone up in value more than the one they are selling. Ergo it has cost them money overall.

Prices are set at the margin though.

the person who has to sell, can only sell to someone who can afford the home, and affordability is set by credit unless they are a cash buyer. And a cash buyer is likely to be less inclined to purchase in cash at least at peak prices if they know that credit availability is lessening …..

I think for most people - house prices will go down. However, there are plenty of industries in London who have increased wages. For those people, even additional expense due to the interest rates is fine. My prediction is we'll have at least two different markets somewhere like London - lots of places that were up and coming, not that desirable, mainly populated by people whose wages havent gone up seeing house values going down. However, it will be interesting to see whether other places e.g. Highgate, Dulwich, Peckham, Wimbledon, Clapham, etc etc etc will stay the same or go up in price. Many of the people buying in nice areas arent buying it with a mortgage or buying it with their parents. There are a lot, a lot of very rich people in London - if you're both on 150k per year, i.e. 300k family, I bet you can afford the increase in interest rates. What I suspect it gaps between naice and not naice places will widen. What I am also curious about is which areas will stay naice and which wont.

I also think that the government are going to have to target property wealth. The nhs needs more money as does social care & this will grow with the ageing population. wages will have to rise & more investment in training etc will be needed as our labour shortage will only get tighter (unless immigration). They can't burden workers much more but much more money is needed.

Remind me what was the incoming immigration population in 19 8 9 and what proportion of smaller first time buyer homes we’re on a buy to let Mortgage ?

I would cautiously agree. The very, very best homes are always going to have multiple prospective buyers, just like a Picasso, and will probably always end up in a bidding war.

But the very, very best homes are a vanishingly small amount of the overall housing stock. An identikit Taylor Wimpey executive shitbox is not.

They will not target property wealth they’ve made it incredibly clear that they are going after PAYE wealth, and the current governments plan is quite clearly let the NHS fail.

My opinion is they will prop up the property market with some sort of introduction of MIRAS so if you can hold onto your job you will be absolutely fine.

There is very likely to be emigration kicking in soon, at least for recent-ish immigrants who haven’t already got a ‘stake in society’ (I.e. a house).

The UK economic situation is not looking good, to put it mildly - as is the general global one too, to be fair.

But if you were an immigrant with no financial ties and it’s a choice of a shitty situation in the Uk, or a shitty situation back home, which would you pick? I think it will be increasingly the latter.

As far as buy to let owning the ‘first rung’ on the ladder - you’re right - they own a lot. But, as already mentioned, they are the ones with the debt, not the renters. Many of those who entered recently may find it is going to be increasingly tough for them to justify owning said asset when there is a high risk of needing to dig into other parts of their income to subsidise their mortgage payment if renters have their incomes squeezed beyond the point where it was feasible for them to pay.

And again, I’d ask you what do you think will happen when the amount that can be borrowed is dramatically slashed?*

I didn't say that I think borrowing will be 'dramatically slashed.' That's your narrative, that mortgage interest rates will go up to 5%! Professional predictions don't suggest that, talk is of possibly as high as 3% by 2023. Which historically is still very low. We've had such incredibly low rates for so long that people seem to have forgotten that this has been unprecedented. The govt will do everything in its power to prevent a housing crash and rates rising too high because it would be a disaster for the economy. I predict house prices will stop rising so fast and will level off. If people have stretched themselves to the limit with borrowing or haven't fixed their mortgages for several years then they might be in the shit- but they'll still need to live somewhere so we might see some downsizing or moving to cheaper areas

They will not target property wealth they’ve made it incredibly clear that they are going after PAYE wealth, and the current governments plan is quite clearly let the NHS fail.

depends who is in power I guess. the inequality will just drive more young people away.

and the current governments plan is quite clearly let the NHS fail.

not sure the older generations will tolerate this

There is a limit to the tax burden that can be imposed on workers, and sooner or later the state will have to look to property wealth, but I don't think we're there just yet. The Tories are very disinclined to do this, for obvious reasons, and will need to learn the hard way (dragging the rest of us along with them) first.

In answer to the OP, yes I do think the amounts available to borrow will be reduced. This will impact some parts of the property market much more than others.

Seen this happen twice now and it’s not nice for the people on the receiving end 😔

A case of take it one day at a time and buckle in for a very bumpy ride 😔

Erm - yeah. You don’t seem to be able to read properly.

1. I was asking you the question about what would happen if they were slashed, not suggesting it was your narrative. I’m fully aware it’s mine.

2. I was talking about real mortgage rates, not the Bank of England base rate. New 5 year fixes will be at 4% in weeks according to most analysts.

3. the government is out of bullets. This is now a matter of monetary, not fiscal policy.

There is a limit to the tax burden that can be imposed on workers, and sooner or later the state will have to look to property wealth, but I don't think we're there just yet. The Tories are very disinclined to do this, for obvious reasons, and will need to learn the hard way (dragging the rest of us along with them) first.

I agree, it will come but not yet.