Interest rates going up on Thursday?

[FabulousSophie]

The financial markets are 90% certain the Bank of England will finally pull the trigger on its long expected rising cycle in interest rates. If so, will this affect sentiment in an already stagnant property market?

glintandglide The gilts and bond markets give a single figure, which is the sum of all views. And it currently points to a 90% likihood of a rate rise on Thursday.

A 20% drop after doubling is still a 60% gain and a big equity buffer

I assume one reason they need to go up is to give some wiggle room after Brexit.

The banks don’t seem to think there will be a big rise in interest rates. You can still get long fixed rates at low levels. I think prices are going to stagnate for a bit due to uncertainty over Brexit and the general gloom.

The negotiate 20% off chat just sounds very naive though. It assumes all houses are priced in some completely predictable and rational way (but not for some reason taking drops into account).

The house I’m buying sold at asking in one day, twice (the first buyers lost their buyer and dropped out). It was just well priced.

Ridley asking prices are not rational.... actual sales prices are. There are still people putting their houses on at 20% bigger than they bought it for 2 years ago near me... they aren't selling... if they do they fall through because surveyors are valuing at 2016 prices... be very careful with your purchase... if you don't have a big deposit you could be in negative equity very quickly... be interesting to see your surveyors valuation... you maybe In a completely different market to me in South East London though

If I was a buyer who bought at today's asking prices, and then interest rates go up and prices reduce by the expected 20%, I would be quite upset. I am quite risk averse though, and I accept that other buyers are more gung-ho about the risks.

Depends where you are, house prices haven’t risen a huge amount in the East Midlands so a 20% drop would risk some owners being in negative equity.

Surveyors valuation was 5k over asking and my equity is 55% so I’m not too worried. I suspect it’ll be worth somewhat less than I paid for it in a years time but I can absorb that. I need to move this year to fit round school application time lines.

If I was a buyer who bought at today's asking prices, and then interest rates go up and prices reduce by the expected 20%, I would be quite upset.

This is obviously correct (assuming you’re right about the 20% drop which I don’t think you are). It doesn’t mean you’ll persuade someone to take 20% off their asking price though unless it was already overpriced. There certainly are overpriced houses out there so you may get lucky if your main criteria is a pre determined % off asking.

I’m south west London

Fabulous Sophie, can I ask you a question? Your posting style looked familiar and I can see that you only post on property threads. Could I ask why? Just being nosey...

RiddleyW If interest rates do go up, and a buyer believes the economists that calculate that prices will fall 20% over the next couple of years, the alternative route to getting 20% off is just to wait a year or two for asking prices to come down by 20%. I'm not in a mad hurry to buy today like many other people.

I'm SW too @RiddleyW and 20% off is not that extreme at the moment. I've stopped tracking now as too busy but when we were looking late 17/early 18 actual sold prices of 20% off vs original asking price was not unusual. The bigger issue is not being able to sell at all. So many houses & flats withdrawn from sale because seller can't get price they want. That won't work for very long. Our recent purchase was a new low for the street as our seller wanted quick sale & had bought ages ago, that'll make it harder for others to justify their higher asking prices.

If you are inside the m25 and are breaking the ceiling price for your road/area you must be mad. Sounds like you had a realistic seller kamma.
I agree with the withdrawn property comment... very frustrating. It's basically if I don't get my ridiculous price I'm not selling... interest rises will stop this route. But I feel this will be the only rise pre brexit and God only knows what happens after that. Low rates will be the only thing that keeps the market solvent

...the alternative route to getting 20% off is just to wait a year or two for asking prices to come down by 20%. I'm not in a mad hurry to buy today like many other people.

That's an option for some, yes. How much is 2 years' rent though? If you're renting something tiny and looking at buying something bigger then the sums might still work. If you're renting a 3 bed semi and looking to buy a 3 bed semi they may be more marginal.

No one wants to sit in negative equity, but that's dependent on your equity. Equally, if people want to buy a home rather than solely an investment the calculations aren't so black and white.

If you are inside the m25 and are breaking the ceiling price for your road/area you must be mad. Sounds like you had a realistic seller karma

Absolutely agree here. I hope you’re right but it is absolutely a gamble. We sold ours for 200k more than we bought it for in 2013 but crucially for about 50k less than it was valued last year. It’s very hard to call.

Anyway we had to move into a school catchment and we’ve fixed rates for 10 years so to be honest I’ll be gritting my teeth keeping my fingers crossed then wilfully avoiding news about property for the next few years!

And yes it depends on how motivated sellers are/ how the maths works. We wouldn’t have sold at much less than we got because we wouldn’t then have been able to afford to buy a house (any house, at all) near a school. We’d have had to stay put and scraped together school fees.

Does anyone know, if I have a mortgage in principal and the rates change whilst we are doing survey and paperwork, will I be offered the old or the theoretical new rate?

Alexalee True. The seller who withdraws their property because they cannot get their asking price risks finding that if/when they come to re-list, prices in their street will have fallen more. If they re-list for their original asking price, they may now be asking much more than their neighbours, and so are even less likely to sell than they were before.

I’d be very surprised if they go up.

Scrolblewomp You should still get the old rate.

That's good to know, having a mortgage nightmare despite being solvent and running a very profitable business, finding it hard to pin down a mortgage, despite having a 40% deposit. Lenders seem quite twitchy about those not on a salary!

That's another big issue too Ridley... people need a certain sale price to afford the next step

So that's how it's priced, now what it's actual value is

tentative3 I'm looking to buy somewhere more expensive than I rent. If prices fall by 20%, I would save quite a lot more than I pay in rent. So it makes sense for me.