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.

And thank you @BarbaraofSeville for explaining my point better than I did. We were all shafted by the banks, etc 20 years ago when property prices started to rise. It’s a shame people didn’t refuse to buy property at ridiculous prices which were artificially inflated by unsustainable low interest rates. It’s a shame banks didn’t refuse to lend. I blame Phil and Kirsty for some of this. 😉. People got so swept up in seeing their home as a way to make money.

Right. Of course the landlords who claim to be doing such a public service by buying up existing housing stock and renting it out to would be buyers at inflated rents will say "But where will people rent!". It's as though they think all their properties dissappear in a puff of smoke once sold by Landlords. What will happen is those properties go back on the market at lower prices meaning many renters finally get the chance to be owner/occupiers.

A friend of mine is a secretary for a company with a large btl portfolio as one arm of the company. She says they started selling the majority of them a few months ago as they expect prices to drop dramatically. So sell quick now before the crash and then buy them back at half the price down the line. Just another money making scheme for them.

@onthefencesitter price wise it completely depends on the area though, a few of my younger colleagues have bought houses recently for the same price as a flat by moving to the outer zones. I also have a lot of neighbours/school mum friends who have sold their 2/3 bed flat & bought a house for the same price in the outer zones. I'm pretty sure the outer boroughs have seen some of the largest growth in London recently.

We were all shafted by the banks, etc 20 years ago when property prices started to rise.

Very good point, the trouble is a lot of people have been made to feel "rich" this way. Obviously some of turned that into cash but many people are buoyed by the fact there house is now a million or whatever on paper & that encourages wider spending.

It’s a shame people didn’t refuse to buy property at ridiculous prices which were artificially inflated by unsustainable low interest rates.

The problem is though for many that was preferable to renting. It's a shame sellers didn't lower their prices.

To those who say that people overborrowed - that was the system. Also don't underestimate how much the system needs it now. For example, under spending into social care assumes people can pay themselves, more and more pensioners go private with cash from their homes, younger people need large inheritances to pay for new houses. So it's not just individuals overspending, it's also successive governments under spending and using the fact that people had more cash in their houses to make up the difference

it's also successive governments under spending and using the fact that people had more cash in their houses to make up the difference

yep & obviously younger people have paid the price for this with wages stagnating & assets inflating.

All this said, housing prices will always rise over longer periods. You need enough income to weather the invariable storms though! Recently helped a relative downsize and the £3500 property in 1970 went for almost £600K this year. Borrowing up to the max you could afford on a 1.25% rate was never going to end well!

Thanks for posting that.
Just to re-live another past experience we lived through in the cycle, after the craziness of those 15% interest rates, in 1987/8 when they dipped to around 6/7%, there was a manic increase in property. Literally if your house didn't sell in a week, the agent advised to increase by a few £1000s. People were being gazumped as a matter of course, because by the time they were ready to exchange - maybe 10 - 12 weeks later, the house had jumped in value and many sellers demanded more money or pulled the sale. It was even crazier than the recent Covid/rush to buy during theSD holiday.

...should have said..manic increase in property prices!

I don’t understand- if yr house didn’t sell they encouraged you to increase the price? @20questions

They can.

First house seven years ago, had mortgage of 100k (130k house) on 30k salary.

Moving now have 270k mortgage (450k house) on combined salaries of 85k

@Nolongerteaching No - they encouraged seller's to gazump the buyer!
By the way..I had to laugh when I saw your user name..me too 😂

@20questions think there’s loads of us🤣🤣🤣🤣

Boris alluded to a home owners bail out, paying a mortgage in the same way they would private rent. The government cannot afford mass repossessions. It would cost far too much and the social cost would be horrendous

You can still buy a house for 3 times your salary in some of the towns around here , small terrace houses. But it’s still possible.

Absolutely @BarbaraofSeville !!!

Before from what MIL says you could buy 3xDH's salary or anybody's salary. Wife's salary was in many cases money for a rainy day or holidays, repairs, granny's savings etc. Now it is effectively 10xsalary as you need a couple to buy together! If people didn't have to spend most of their earnings on rent and mortgages they would had had some savings in case they couldn't work (pandemic anyone?). It infuriates me that people cannot save for a rainy day.