Interest rates rises

[dancemonke]

How much are these going to affect house prices? I'm worried because my sister is about to buy (currently under offer - but it's a probate sale so is taking forever and they haven't agreed a fix yet) - and just feels like everything is properly about to tank. (She's not on here, otherwise she would be asking!). The rises that are now being projected are absolutely terrifying tbh. No one seems to be thinking these are short term rises either. If interest rates sit at - say - 5% more than they have been on a £300,000 mortgage for ten years - that's £150,000 more to pay (is this correct maths? 5% of £300,000 is £15,000 a year over ten years). It's unaffordable. And I know a LOT of people who are stretched and coming to the end of their terms and have absolutely no idea how they are going to pay the increase.

I was looking to buy this year and put my flat on the market..I will probably wait and see what happens. Mortgage deal expires in 2024 but we are overpaying.

It should definitely affect prices..people would think twice before getting a large mortgage. As my DH says we could afford to pay our current mortgage if it tripled. Not so much for a larger flat...

Always difficult to predict. Interest rises means houses becoming more expensive to fund via mortgage payments. So in theory house prices should reduce.
However, a lot of people took the opportunity to move when the stamp duty was reduced, and a lot of people won't want to move now due to house price uncertainty and increased mortgage costs, which could result in less houses coming to market, meaning the prices don't fall.
If they are planning to stay there for a long time and can afford the mortgage repayments then there is less need to worry.

Rate rises are here, and they will absolutely affect prices. It was always going to happen and people taking on large mortgages should have been stress testing the size of the loan against higher interest rates for themselves. I'm fixed for just under 4 years, I'm overpaying by 10% a year, and could withstand a rate of 25% at the end of my term (unlikely but that's my own personal due diligence). What I'll actually do is live well within means, and pay it all off instead.

For anyone wanting to trade up, lower house prices mean you take on less debt.

House prices are purely a function of what people can afford to borrow and afford to pay.

Lenders are currently pulling offers while they relaunch new rates www.standard.co.uk/news/uk/mortgage-halifax-skipton-market-fixedrate-b1028242.html

But wouldn't people find it impossible to trade up if mortgages are very expensive even if they have decent equity in their current place (playing devil's advocate here).

Thats what my DH thinks.

But wouldn't people find it impossible to trade up if mortgages are very expensive even if they have decent equity in their current place (playing devil's advocate here)

It will be easier for people who have good equity and or big chunks of cash to add to their purchase. Remember that if all houses drop by 25% for example the houses that are more expensive to begin with reduce by a greater amount in pounds.

As @LimboLass says above.

Hypothetically if your house is 100k, 25% drop is a 25k reduction. If the one you wanted to trade up to is 200k, 25% drop is a 50k reduction. Less debt to take on.

As interest rates rise, prices drop (same happens in reverse).

It's easier to pay off less capital at higher rates, than more capital at lower rates.

The market is made by the houses that DO sell, the houses that do sell will sell at the price set by mortgage lenders, whether you sell or not your house price goes down if someone in your area sells a similar one for less than you paid.

Yes, the interest rate rises will definitely affect house prices. They have already started to in most areas and prices are likely to fall much further as they continue to rise. The crazy budget has just made the situation much worse for asset prices as, not only are the BOE to raise rates more but the yields have risen massively which also affects borrowing.

Good news on the mortgage front, cheap debt has ruined society, and many people will be ruined before it is squeezed out of UK culture.

Good news on the mortgage front, cheap debt has ruined society

Truth!

People shouldn’t be borrowing more than 3x their salary. That was always the cut off in the past when interest rates were historically what they now seem to be heading back to. If people can’t get mortgages for houses then ultimately house prices will have to fall drastically.

Agree. The problem is we now have a debt based Ponzi scheme which will collapse if we stop taking on more and more debt. The government and bank know this. They have, effectively, encouraged moral hazard and are now at the point where it is all about to fall apart.

I can see that at 4%, 5% but at 7% or 8%.....

@onthefencesitter

do you think ir could go higher than 7%?

Cheap debt has destroyed every fibre of society, and the right of passage for people to have the security of a stable home. Basic requirements on Maslows Heiracy of needs.

You observe the rules of the game, and you play your best hand.

In the 80's or when ever it was, it became easier to make a massive upside as explained up thread because the mist expensive houses lost the most value. Timing is key I guess as you need to gauge if its still loosing or beginning to go back up. I bought 9 years ago and maxed out then put with a 25% deposit. House has almost doubled in that time so I'm.hoping we have a big enough buffer. I really do feel for recent FTBs.

So, htb finishes this month, perhaps they will bring something else in for those at the bottom end?

They can’t let new owners with massive mortgages carry the weight of it all

If mortgage rates get near to 7% it's going to be a shitshow. That's a lot of income servicing debt instead of being spent on the wider economy so jobs will be impacted. Plus public services are going to be in more of a sorry state.

Very possible. The market is predicting that. Base rate of 5/6% would mean 7/8%.

They bailed us out with the energy prices because of boomers in their massive houses. Would the Tories care about home owners their 30s and 40s who overall tend to vote labour. Hopefully some pensioner would be crying about their retirement/holiday fund being decimated (aka their house) and then they may do something. If you aren't old or earning above 150k ,they just ain't interested.

In the 80s interest rates were 15%. There were many repossessions. I heard stories of people deliberately wrecking their houses e.g. flooding them and/or destroying the interiors because they were so bitter. You have to have lived through the cycle of high/low interest rates to understand that things can, and do change.
I remember in the last 70s/early 80s we could afford a house (in London) for £17,000 but £21,000 was waaay out of reach.

Well there are an awful lot of old people so we may be in luck as some will want to downsize, some will have used equity release & plenty will want the NHS to be functioning.

In the 80s interest rates were 15%.

For how long?

You have to have lived through the cycle of high/low interest rates to understand that things can, and do change.

But you are comparing completely different things. 5% interest rates today are the equivalent to double figs from the past because of high house prices.

I remember in the last 70s/early 80s we could afford a house (in London) for £17,000 but £21,000 was waaay out of reach.

and how much do these houses cost now...