London property prices are STILL going up!

[teapotl]

I live on the zone 2/3 border in what is now considered a desirable part of London (but didn’t used to be). I’ve been keeping an eye on the market over the past 4 years and property prices in my area have continued to rise and rise. I thought the London market was meant to be falling due to Brexit and now Covid, but it doesn’t seem to have had any effect at all. Will London prices ever plateau or are they just destined to go up and up forever?

A question for those talking about inflation and interest rate rises -

What is the best way to protect against this? Get a long fixed rate? What if you are already in a two or three year fixed rate?

If interest rates start to rise - and they will - fixed rate mortgages will become history. Don’t forget inflation affects incomes as well as outgoings.

I remember nearly being sick on my shoes when interest rates went up to 15%. My dad, of course, was rubbing his hands! Historically low interest rates for a decade or so are part of the reason the housing market is so over heated.

I'm starting to think interest rates will stay low for some time because of the amount of money the gov has borrowed.

& because so many are only on the ladder due to low rates.

All in all, i think the main reason why people buy in this country is because renting is not very nice here - rental contracts that can be terminated in 2 months, often poor maintenance.

I agree with this & many rentals in Europe allow you to decorate.

We often talk about future proofing here, but I would be terribly sad if I bought a 2000 sq feet house in a 'family area' and then find out that I was infertile-

I don't think the only reason people want houses vs flats is just potential children in their future.

I know lots of older people who could do with downsizing but they can't find what they want in the areas they know. My MIL needs to downsize (too much house now 3500 sq ft) but she doesn't want anyone above her, wants a garden & still wants off street parking. A small 2 bed house would suit or bungalow but there aren't many options in her zone 3 area.

Agree with pp the government is benefitting from low rates too

@bilbotoy

I'm starting to think interest rates will stay low for some time because of the amount of money the gov has borrowed.

Of course you think that. A lot of people think so because they’ve been that way for a decade. All good things come to an end. The government isn’t “borrowing” money, this recession is global - where’s it borrowing it from? The government is printing the stuff but, even if it was borrowed, what better way of magicking a debt away than with a good old dose of inflation?

FT

Britain’s public borrowing will rise to more than £350bn this financial year after Rishi Sunak gambled on borrowing vast sums to minimise the long-term economic damage wreaked by the coronavirus pandemic.

With the chancellor using his summer statement to outline a new package of job support worth up to £30bn, the deficit is likely to reach 18 per cent of national income, according to Financial Times calculations. This is almost twice the size of the deficit at its peak in the 2008-09 global financial crisis.

I had understood from Sunak’s comments it was borrowing and that yes they were benefitting too from low interest rates. And found above.

@bilbotoy that is true. Basically hardly any 2 bed houses in my zone 3 neighbourhood either so I had to go for a flat. I would like a 3 bed flat, but there are hardly any market for 3 bed flats either. I don't like loft conversion rooms (thats usually the third bedroom) due to the sloping ceilings so if i had to buy a house, it would be a fairly spacious house with 3 good size bedrooms on second floor (which would then be £££ and over a million).

tbh zone 5 isn't that cheap either (so you are making a big compromise on area and still paying a lot of money for a house). Places like St Albans are very expensive too. No easy solution really!

I hope the property prices come down but a lot of people would be in trouble and I think the government would try to prop up prices as much as they can. Would not be surprised if they extend the stamp duty holiday.

I had understood from Sunak’s comments it was borrowing and that yes they were benefitting too from low interest rates. And found above

Of course he says it’s “borrowing”. The question is where from? Who or what is “lending” us all this money? It’s being printed as fast as it can be. But he’s hardly going to say that, is he? Quite apart from anything else it would make an even more complete nonsense of austerity than it was anyway.

See FT article attached. Cites borrowing

Read what I posted. Where’s it being borrowed from?

New figures show that borrowing in May was £55.2bn , nine times higher than in the same month last year.

How does the government borrow money?

The government borrows in the financial markets, by selling bonds.

A bond is a promise to make payments to whoever holds it on certain dates. There is a large payment on the final date - in effect the repayment.

Interest is also paid to whoever owns the bond in the meantime. So it's basically an interest-paying "IOU

The buyers of these bonds, or "gilts", are mainly financial institutions, like pension funds, investment funds, banks and insurance companies. Private savers also buy some.

BBC

That explains how it’s repaid. It explains nothing about where it comes from in the first place. Where do the financial markets get it from?

The buyers of these bonds, or "gilts", are mainly financial institutions, like pension funds, investment funds, banks and insurance companies. Private savers also buy some.

It says who is buying the bonds

You’ll have to take over googling now if you want to get more info

But it’s borrowing not ‘borrowing’

Why wouldn’t what us being reported be the case? Obviously these bonds are funding it, therefore borrowing

There are still institutions with money, they haven’t been hit as hard as 2008

A friend of mine is looking at 2 bedrooms in London (SW) as an investment property and she told me that everything they want to look at is being snapped up in days!

It’s “borrowing”. In reality it’s printing money. And the only way to pay for it is inflating it away.

New figures show that borrowing in May was £55.2bn , nine times higher than in the same month last year.

Is this not true?

The best economists, bankers, investors, fund managers, etc, on this planet are deeply divided and unsure on what exactly will happen to interest rates and inflation (and when: saying rates will go up at one point is meaningless if they go up only after, say, 6 years).

The notion that a bunch of random users on mumsnet (including me, of course) may know better is fanciful at best.

We all have our opinions, guesses, hunches, expectations, etc, but please, please, let's not pretend they are anything more than that!

"A question for those talking about inflation and interest rate rises -

What is the best way to protect against this? Get a long fixed rate? What if you are already in a two or three year fixed rate?"

The best way to protect against a rise in interest rates is to fix your mortgage for longer. This has costs: the longer the period you fix it for, the higher the rate. Those who fixed a 5-year rate on their mortgage 5 years ago ended up paying a lot more than they would have paid simply remortgaging every 2 years. Not just this: there are typically high early repayment charges for the duration of the fixed-rate period; so a 5-year fixed rate means you cannot realistically move before those 5 years are up.

I am not saying never fix for longer periods, I am saying do think carefully of all the pros and cons.

To protect against a rise in inflation, well, there are inflation-linked products, including gilts issued by HM Treasury, however fixed-rate saving accounts (so-called bonds) may yield more.

My London property has done me very well, most years it out earns me!

Just buy anything that you can and it'll probably do you very well. Just don't wait, they're going to shoot up again soon.

@marysuzairn What colour’s your Lamborghini? Oh wait... it’s paper wealth that you’ll never actually realise till you downsize and then you’ll be lucky if you have the energy or the health to use what’s left of it after paying for pension/care home costs etc.

I just think it’s idiotic that people desperately throw all their money on their primary residence and don’t save or plan their finances properly. Then as the paper value grows, they think “ooh I’m rich...” while their lifestyle hasn’t changed one bit. How Hyacinth Bucket-esque!

paper wealth that you’ll never actually realise till you downsize and then you’ll be lucky if you have the energy or the health to use what’s left of it after paying for pension/care home costs etc

What utter bollocks. Our mortgage is paid off and we’ve retired. We’re about to downsize and had big plans for travelling and having a whale of a time for at least the next ten years. Then a global pandemic came along ....