6% mortgage rates; trouble a'ht Mill

[Twiglets1]

This is a new 6% mortgage rates thread as the last one is almost full.

Thanks to KievLoverTwo for suggesting the second part of the title to reflect all the squabbling these threads are causing. Which could be a thing of the past of course. But realistically, it won't be.

@rainingsnoring for the me reason these trends are here to stay is the gap between housing supply, land supply and the growing population. Especially when climate change and flooding plus coastal erosion reduce the amount of viable land in the country. Although I do genuinely appreciate the different perspective and especially the long view. If we are taking a long view the changing climate needs to be considered IMO

Agreed, many many people have been brainwashed by cheap debt, posters who have seen economic reality from past decades will know that things can change very quickly indeed!

They are not here to stay though are they because at one point recently house sales/mortgage applications dropped to 35 year lows, why keep banging the "supply and demand" drum, no one buys it any more.

Housing supply not matching population growth is documented on virtually every government housing review, not just in this country but in most developed nations @CrashyTime. It’s been a fact in this country for decades. Rental or owned or part owned with a mortgage everyone needs somewhere to live. Property prices are not that dependent on whether individuals are choosing to rent or buy. I am yet to be convinced by an argument that an individual is likely to be cash rich enough to rent in retirement in the next decades. In less than a decade the population renting has increased from 10% to 20%. What will happen in terms of housing the retired is an enormous social experiment which should concern everyone. In a world where rental housing is reducing in supply and tenants can be evicted at 2months notice renting is no where near secure enough to be presented as viable alternative to buying. Supply and demand is real in housing and I am not referring to whether you yourself or people you know want to get a mortgage.

Also I think the idea that the industry is trying to build a bubble is naive. Most people who can afford to buy, they want to sell houses if they are in that market but not so badly they are very reduced as sooner or later they do sell. It’s much more dysfunctional than that and dystopian in my opinion. The industry and the government don’t care enough about secure homes to be able to do anything about it. It isn’t a conspiracy to sell a dream it’s the reality of a market where internationally now the gap between rich and poor is growing. The idea that would correct to ordinary people buying homes is to me crazy. The cash rich will buy up all the homes if they are ever reduced in that way, internationally. This isn’t a situation where the ordinary person is going to win unfortunately

Agree that internationally the gap between the rich and poor is only growing. It's a phenomenon you see in so many countries not just UK unfortunately.

I don't see trends towards people in society becoming more equal just people wishing it would happen.

"The idea that would correct to ordinary people buying homes is to me crazy. The cash rich will buy up all the homes if they are ever reduced in that way, internationally."

If you keep telling yourself something over and over maybe eventually reality will be false? The cash rich have already piled into commercial property, BTL and AirBnB, the first one was probably the worst investment of their lives in many cases and the other two will soon follow IMO. It wasnt that long ago that ex-council houses in the UK changed hands for 15k, the main change was CHEAP DEBT TO THE MASSES, take that away and an illiquid asset falling in value and costly to maintain isnt really a great investment.

A bit like people wishing and waiting for interest rates to be cut?

I agree that we need to thing about all these things when considering longer term trends. I'm not sure how much of an increase we will see in population over the next few decades. The 'domestic' population is falling and will continue to fall so it will depend on immigration policy.
I also agree that we will see more people living in poverty rather than more having greater quality of life in a financial sense.
It is, of course, impossible to make fully accurate predictions in 6 or 12 months ahead. I just don't think it's correct to assume that real house prices will continue to rise forever.

@rainingsnoring yes I agree they may well not rise forever, but unless there was a significant decrease in either price or deposits required I cannot see affordability coming back to a healthy rate for society. I agree that people are having less children but there is still a lot of demand for property as an asset class, it won’t be over supplied to a point that affects price IMO. No one knows, but to me saying house prices will be low soon seems to be incredibly unrealistic, I just cannot see it happening. I do think that the scale of property price increases especially in the 80s have been bad for society in many ways. Now it is a matter of trying to make it to a secure home that suits you as best as you can whilst you can I think, that is certainly what I have done personally and if property price increases slowed I would prefer that as it would be better for the next generations. Someone once said on here that increases in price made people want to make money out of homes in a way they hadn’t expected to and I agree. Secure possession of homes is essential and should be available. I also think people relied on property price increases rather than maintaining home and that has led to many dilapidated homes on the market people cannot now afford to renovate. It is a mess and waiting it out for price reductions is a bad idea I think if you have any possibility of buying, I am not convinced many people are but that would be impossible to measure.

I think I posted on here back last summer when I was getting anxious about rising rates. Our 2% fix ends this month.

when we locked in our first deal, 6 months out, last September we went for a 2 year fix at about 5.8%. The deal has gone down several times since then and is now at 4.44%. However the 5 year (which we’d previously discounted) is now at 3.89% so think we’re going to go for that.

good luck to anyone trying to navigate it all and judge what the best decision is. I feel quite fortunate in that we’re not having to re fix at the worst time and also that this is coming for us just as our youngest has started school and we don’t still have hefty childcare costs.

Prices will continue to go up, down and sideways ad-infinitum. And given enough time they'll always recover to a previous historic high.

But I'm reminded of our very first property. Paid £50K early 1988. Sold for £62K a year later - a 24% increase in a year. Next time it sold was 5 years later for £35K - a 40%+ fall. So folks should be aware that these types of movement are possible.

@XVGN yes these types of movement are possible but over the last 2 property price reduction periods stagnation has been more realistic due to the more regulated market and what is at stake now financially. This means that even in economically challenged times there are less repossessions driving the reduction market in a few ways - higher deposits are required, lenders need to work with customers more and lenders are required to answer more for the price they sell at.

Agreed - those will mitigate the impact. But I wouldn't trust to luck. At any peak, I'd be wanting to be extra sure of my future security.

I honestly think you are in denial as to what is happening, commercial property has been hammered, BTL and AirBnB will get hammered as soon as a recession kicks in, there is plenty of supply and residential property will also get hammered as rates stay high or go higher.

You dont need mass repos for a price crash, although I think a lot of people will default when their fixes come to an and they realise that zero rates are not going to bail them out this time. you just need people to stop buying property at present prices (already happening) and even if people pull up the drawbridge and stay off the market it just takes one nearby sale to drop the value of your house!

It is the repossessions that drove those record crashes though. As that was a genuine bubble the banks didn’t loose out as they still got their money back when selling. It isn’t the same now.

@CrashyTime I would rather be proved wrong with a home than wait for something that won’t happen. Hard to be in denial about a market I have worked in for decades as I see it move every day

No that is reality, the only question mark is over will it be May, June or will it be later. I know you wanted them to keep on rising to 6%, 7% or more & maybe genuinely believed they would but they didn’t.

@XVGN the entire point is that there is 0 future security in renting. This thread and the preceding threads have reminded me a lot of conversations when it is apparent that people have made below par decisions/ maybe for sympathetic reasons and everyone who sees that pulls their punches about why it is a bad situation: Last year was the best year to buy in a long time. If you were waiting for it to get easier you were possibly wrong. Similar to not having a pension, things are getting tighter and you need to make progress each year to get ahead or you could completely loose out. Catching up is increasingly difficult. If there is a crash - that might help you; assuming you have a deposit and mortgage term in your earning income to run? Or shall we go back to poking fun at the debt? Does that still look like such an easy target?

I already said the limit for this wave would be around 5.5% base rate for the central banks (look at previous posts).

Inflation rose to double digits during the first wave. That will return in the next wave, but won’t hit the consumer end of the pipe for a while yet.

US jobs report came in that employment was much higher than expected. When looking into those numbers you will see government jobs accounted for that, civil and private were in decline. EU already in recession, us next, China in hot water, the economic landscape is not in a good place. US will eventually follow.

US stock market at crazy highs due to AI led speculation boom in tech and the FAANGs, all the whilst the Chinese stock market (the country that actually makes the worlds stuff) is at a 5 year low.

I refer to this as a Wile E. Coyote moment.

Paper figures are being massaged for elections. The property market is at the exact same juncture, as sellers can’t sell and buyers can’t buy. US real estate transactions fell by more than 50% in 2023. Corperate real estate is a train wreck.

We haven’t even begun to feel the repercussions of ‘higher rates for longer’ yet. Could additional waves of inflation send mortgage rates to 6-7%? yes (and some poor credit ones are already that high).

But if central banks raised higher, far more will be broken by then (see US regional banks in trouble once again).

Our population growth is through immigration who generally rent and don’t buy houses (especially at these elevated levels)

Boomers as they grow older will eventually die (massive incline over the next decade). The younger generations can’t afford to buy. That tells you the eventual direction.

Then in turn with the younger generation not having the ability to have children themselves which won’t be able to be offset through migration (see China birthrate)

Climate change and land erosion won’t even factor and will be miniscule in contrast to how rapid this population demographic change will occur.

Oh are you and Crashy the same person?

Nope. I’m just putting my 2 pence in on some of the points.

I like to interject every so often to put a global wider economic perspective on matters, because if you listened to the media articles that you like to post, you would think inflation is because of Brexit, and higher mortgage rates were the fault of the Liz Truss mini budget.

ok you're not Crashy, but I've never posted an article suggesting that inflation is because of Brexit and higher mortgage rates the fault of the Liz Truss mini budget.