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.

Climate change is not minuscule what a ridiculous statement. If there is a conspiracy or ignored reality it is buying or building where homes are getting flooded out regularly as floodplains expand. Have you seen the 2050 flood plan predictions? That is not so far away. Local councils are giving out flood defence grants and some coastal properties are expected to disappear in the next 30 years.

Agree that climate change is a massive concern

I agree with a lot of this, especially that the rapid increases in HPs has been a negative thing, using housing as an investment class has been awful and that lots of people have allowed their homes to become dilapidated (and then still expect top rates!).
I haven't said that HPs will become 'low' (I think that's just Crashy) but I think they have fallen and will continue to do so in real terms and possibly not rise (in real terms) again. Prices come down to affordability (demand being desire for something and ability to afford it). That over rides other factors. Long term, the asset wealthy boomer generation will die off. There is no chance that their children and grandchildren, in aggregate, can afford these homes at current prices. The UK economy, etc is clearly on a downwards trajectory so I don't see any bright prospects which could lead to significant salary rises.

I have heard it suggested that the gap between rich & poor will widen even more in future depending on whether the children of “boomers” inherit their property assets or not. Sounds feasible to me.

Agreed. I also think that we are on a cliff edge and agree that the figures are absolutely massaged for political reasons. Things are much worse than they seem.
I do think The Fed will cut base rates later this year and restart QE at some point when things look really bad (note recent bank failures already). I would expect this combined with incoming inflation will produce more inflation at some point. That would be my real concern if I had stretched because rates could go a lot higher in the relatively short term.

I don't think Lightscribe means that the effects of climate change will be minuscule. I think he/she means that it will only have a minor effect on house prices when compared to the massive effect of changes in demographic as the boomer generation die and the following generations can't afford their homes (plus other v significant factors).

As I stated before in regards to prediction models, the speed of change in population demographic will effect housing supply/need and the types of dwellings (no need for so many energy and cost intensive 5/6 bed houses anymore) more so than climate change. That’s not ridiculous at all, it’s the most likely outcome by 2050.

The observation on demographics is interesting but when would you expect an impact on housing prices? The issue I see is that it takes about 30 years to pay off a mortgage and people ideally own in retirement entirely. That doesn’t leave much time in a lot of working lives to wait for possible future reductions

Most people are not waiting for reductions as some sort of strategy IMO (although many will be confident they will get a cheaper house now by waiting) they are being told that they can no longer borrow enough to satisfy sellers brainwashed by years of cheap debt, that means they are out of the market and sellers are fighting over a much reduced pool of buyers. As with all crashes when it goes it goes very quickly, sentiment seems to turn overnight, we are not fully at negative sentiment on property yet, but we are getting there.

Well neither of us can tell the future @CrashyTime so will have to wait and see.

We don’t know if it’s “most people” or not Crashy. But there are certainly quite a few waiting for a great property at a great price believing that it should be possible to get both as they put their faith in people telling them the market is collapsing.

I think a minority of people will achieve that dual goal but most will find that the good properties maintain their value surprisingly well though may take longer to sell in this kind of market.

@Twiglets1 it is that which concerns me too, combined with the nasty comments about people with mortgages being ‘debt junkies’ / ‘cheap debt’ etc. That does seem mean and intentionally belittling of what is likely to be people’s best financial choice. Still waiting to hear about renting in retirement. That looks like a really worrying experiment to me

Yes, the 'debt junkies' comments are totally unfair.
Most people in the UK prefer to buy if they can because of the awful rental market and partly because this is usually the advice they receive, the general prevailing sentiment is that buying is better. It is certainly true that some buyers stretch themselves too much or don't actually crunch the numbers properly or don't understand the numbers. However, most people simply want a secure home for their family and are not greedy or unrealistic, at least not within their frame of reference.

Sonia SWAP rates have been rising. These drive the rates for fixed rate mortgages. They do bounce around and I have no view on long term rates other than to agree with most seasoned observers that they are unlikely to go back down to the recent lows. That would only happen in the event of a critical economic crisis.

The BoE rate impacts those on variable rates and trackers.

https://www.standard.co.uk/business/first-time-buyer-mortgages-hsbc-halifax-b1137168.html

As a poster on HPC pointed out - without the FTB borrowing money the banks will be in trouble with previous loans as house prices drop! The media is also pumping out the "renting more expensive than buying" meme today, so obvious that the only game in town is to keep the masses borrowing, what a shambles of an economy.

I've been reading your posts on various threads for a while. It isn't clear whether you WANT there to be a property crash so you can get on the ladder or you want to perpetually rent? Which is fine of course but your rhetoric is quite confusing

In response to @CrashyTime

I am saying that the public were ripped off by bankers and government when basic shelter became an investment chip, the bankers got to lend a lot and get big bonuses and government got to hide the lack of wage growth behind the "paper value" of property (people thought they had hit the jackpot and didnt pay much attention to the lack of wage rises!) I am saying that many of the public are too gullible to work out for themselves how cheap lending isnt (Wasn`t for their benefit - I keep forgetting that the cheap money era is over, it went on so bloody long!) for their benefit, so we need a proper property price correction so people once again understand that a house is just for living in, not for trying to extract the maximum amount of money from (off the backs of future borrowers)

@CrashyTime but surely you can appreciate that other external factors such as availability of housing, location (close to good schools, in desirable areas, good transport links etc) all influence property prices as these are also driven by what people are willing to pay.

Whilst willingness to pay is linked to various factors such as affordability (borrowing), wealth (whether generational or 'new money') etc, this does also drive house prices. I am willing to pay more for a property that is in catchment for an excellent school and I can also walk to the station.

I think the way you are presenting it is quite reductionist and ignores the fact that what influences property price is multi factorial

Yes I agree, but what drives everything is FTB lending, they create the bottom of "the ladder", the zero rates were allowing people to keep borrowing more and more to compete with others for schools etc. as the monthly price to service the debt stayed relatively cheap, cheaper than renting in many cases, this is why people were sucked in and didn`t understand (or want to understand) that interest rates were going to be forced up at some point and their quite large debts would suddenly become expensive. For example the massive London bubble was allowing people to sell up in London and go basically anywhere else in the UK to outbid locals for the best property near schools etc. As the cheap debt dries up and the London bubble equity dries up people will be doing this less, and the "excellent" house near the "excellent" school will eventually change hands for less money?

IMO the state of housing in this country and schools too means those houses will not be going cheap any time soon. They sell or pass between families before they reach the open market where I live. Supply and demand is a factor. If you want a nice garden, space, some privacy, the ability to walk to a desired location conveniently and pleasantly - some quite common desires - you are looking at a very small amount of properties in each area because new houses like that are very rare. There are likely to be a lot of other types of property reduced first. I do agree that the housing market is damaging people and overall affordability would be better for society but I can’t see a crash that creates it.

”excellent” in schools isn’t a notional idea. Have a look at how many primaries are rated exceptional and you will get an idea why people might be excited about the prospect of sending their child there. If you find the right one it’s better than private school plus you can walk there if you are lucky. If the hard to find house that allows that lifestyle is reduced I would be amazed given the supply to demand of that opportunity.

I am talking about the wider UK housing market not some unique house in a village near a good school, houses near good schools being "hard to find" and "only changing hands rarely" isnt going to save the UK housing market, that market runs on debt and is at the mercy of the global bond markets and isnt going to be much affected by how much parents want to stretch their finances for a house near the right school.