House Prices / Interest Rates 2022 onwards

[Richie]

Recent news shows that house prices have increased YoY by the highest level since 2006.

BBC News - Average house price hits record high of £255,000
https://www.bbc.co.uk/news/business-59826341

Now that interest rates are on the increase, do we think that there will be a big slowdown next year or will they keep rising at silly speeds?

How far will interest rates rise this year and do we think this will affect house prices?

The BoE have advised lenders to loosen the lending criteria for mortgages at the same time as starting an increase in interest rates so I really don't see how this will negatively affect house prices.

However we have rising inflation, horrendous fuel cost rises coupled with a 1.5% pay cut coming in April next year (NI increase) along with rising council tax as well, all limiting spending power.

It's going to be an interesting 2022

 

[BUDFORCE]

Unpredictable.

But I don't think house prices will be largely affected, basic supply and demand after all.....

I can't see the government putting interest rates up that much either, not in 2022, it's a double edged sword to curb inflation but if you start making people homeless that'll have a detrimental effect.

I think what we may see is spiraling inflation, as much as I'd love to be proven wrong. I think people are going to have to start getting used to not having, or be prepared to pay for "luxuries" that they are used to, and I worry about people on the bread line now who are struggling to heat their houses.

 

[glenimp617]

Honestly can't see it. Houses will continue to rise, and even if mortgage rates do go up, people are still willing to take on huge debts.

I'm staggered at the amount people are willing to pay each month.

Think the golden rule is 30% of household income?

 

[HoneyBadger]

House prices have gone up plenty during covid already. We own one house and have a small, fixed mortgage on another and both appear to have risen in value. I know typically houses appreciate but there has to be a limit.

Cant see rates rising much either, it’ll cripple a lot of people.

I'm staggered at the amount people are willing to pay each month.

One of my team members is 3 years into a 35 year mortgage and I think he said he’s paying circa £1400 a month for a detached 4 bed house in Essex. I thought that was crazy.

 

[200sols]

can't see the government putting interest rates up that much either,

The government don't set the interest rates the BOE does, they are set a 2% inflation target by the government. They now think high inflation will not be transitory so rates are going to rise.

 

[glenimp617]

One of my team members is 3 years into a 35 year mortgage and I think he said he’s paying circa £1400 a month for a detached 4 bed house in Essex. I thought that was crazy.

Yeah that's a decent amount of debt. Maybe they can afford it, but the thing for me is having it wrapped around your neck for so long. We were looking at some big houses a few years back but thought better of it.

I now want to get our mortgage paid off quicker so I have some kind of control over things. If work suddenly changes, like I get a new boss, or someone becomes sick I don't want the stress.

Personally I'd be happier in a nice house paid off, then in some massive place with huge debts.

 

[HoneyBadger]

I wholeheartedly agree. I wasn’t even aware a 35 year mortgage term existed.

We have 5 years left on this house, then we’ll sell both and find our forever home and retire early.

 

[Semple]

I wholeheartedly agree. I wasn’t even aware a 35 year mortgage term existed.

We have 5 years left on this house, then we’ll sell both and find our forever home and retire early.

Can even get a 40 year term.

Tbh the term is largely irrelevant. We went for a 35 year term to reduce the monthly payment, but then overpay. The idea being that if we ever couldn't afford the payment then we could drop back to the normal amount. If we continue the overpayments, we should finish it in about 22-25 years.

When you think of the retirement age going up. Someone who's just graduated from uni at 21, won't be retiring until 68, possibly 70. That's nearly 50 years of a career. So a 40 year mortgage term is nothing really.

 

[HoneyBadger]

What you’ve said makes sense so long as your product allows you to over pay it sufficiently quickly without penalty. Shaving 10+ years off just by over paying seems ambitious, but good luck.

I’m 42 now, my plan is to be retired by 50 and the wife and and I have worked hard to make this a reality.

 

[Semple]

What you’ve said makes sense so long as your product allows you to over pay it sufficiently quickly without penalty. Shaving 10+ years off just by over paying seems ambitious, but good luck.

I’m 42 now, my plan is to be retired by 50 and the wife and and I have worked hard to make this a reality.

Overpayment without penalty is typically 10%. As we're only a couple of years into the mortgage, even overpaying by 50% we're not coming close to the limit. Maybe after 10 years we'll need to remortgage on a lower term in order to continue similar payment whilst avoiding any penalty for overpayment.

 

[Scam]

I think the government successfully proved to everyone last year with the stamp duty holiday etc. that they would do anything to continue propping up the market even during a pandemic when money could have been sent on saving lives. No doubt they'll be quick to come up with another hair brained scheme should bricks and mortar stop earning them all additional incomes

 

[haz_pro]

Shock horror that not everyone is financially able to mortgage two houses, and in fact need a 35 year mortgage to afford repayments.

You may want to sit down for this - some people can't afford to buy at all.

I wonder if the ultra rich find it shocking that people don't just buy houses outright? (I guess maybe they don't actually buy outright, if they financial advice).

 

[IvanDobskey]

I personally think we are due a couple of years of lull in the housing market. Last year was a bit of an anomaly with all that was going on. Certainly glad we bought ours in 2020 though. Won't be moving again any time soon, so just focussing on making the max overpayments each year and reducing the amount owed and monthly payments.

 

[alexakasloth]

Whilst rates are rising, banks and building societies are edging up on their loan multipliers. Nationwide at 5x, Halifax has 5.5x. Access to the market is becoming easier, demand increases so do prices.

 

[413x]

House price rises are quite frankly disgusting.
They only benefit the well off.

Next is going to be multi generation mortgages.. Just to prop up the prices.

It just increases the rich /poor divide.
It makes the house you are going to get next more expensive.

Only a benefit if you downsize. Not even really a benefit if you are passing down as if the house prices didn't go up you wouldn't need to pass down such a high amount.

I see how much my house has gone up in 1.5 years and its ridiculous. If I was buying now rather than 1.5 years ago I would be looking at a significant downgrade. To completely have to change your house type in such a short time is a broken system.

As to the future... Probably further growth unfortunately

 

[oggiet]

I can't see house prices falling any time soon, in fact it will only get worse. Demand will just increase, for example look at Hong Kong. Potentially up to 5 million people may move to UK due to ongoing situation there. Was just reading this article this morning....

https://news.sky.com/story/hong-kon...-find-jobs-housing-and-school-places-12491700

 

[HangTime]

Interest rates are ultra low, they won't rise fast enough to have a significant impact on house prices in 2022.

I'm just faced with a bit of regret that we haven't moved since 2008, so we have 'missed the boat' as it were in terms of missing out on an additional six-figure gain in home value.

 

[sja360]

I'm just faced with a bit of regret that we haven't moved since 2008, so we have 'missed the boat' as it were in terms of missing out on an additional six-figure gain in home value.

And? Should we all buy purely for gain? It used to be owning a house was enough now if we don't end up with it worth 2,3,4 times the purchase price we get upset or something has gone wrong.

This is why we're ending up with spiralling prices and a lack of bottom end properties to the market. As most of the bottom end is most likely buy to let purchases snapping them up. That said it seems some young 20-30 year olds don't seem to want to move out of the main house living with parents..

And some can't afford the bottom end of the market.
I'd say its 2-3x harder for someone young to go it alone on the property market. Maybe worse in some areas.

 

[HangTime]

The "And" part is And this then makes it harder to 'move up the ladder' as circumstances change if all around you houses are worth 2,3,4 times the purchase price of years ago. In other words, the higher rungs on the ladder are being pulled up out of reach. The house I want to live in in my 40s married with kids is different in some ways from the house I wanted to live in in my 20s before getting married and no kids.

That six-figure gain isn't simply about 'gain' it's about keeping pace with the market and being able to make the jump to the sort of property one aspires to.
Let me put it this way, I would be far happier with a completely flat housing market as that would have meant those higher rungs were much easier to reach. So it's kind of the opposite of what you are saying, I am upset or something has gone wrong that other more expensive houses are worth 2,3,4 times what they used to be and we did not grab hold of some of those higher rungs to pull us up with them.

To illustrate with numbers, say you buy a house for £250k. You now want to live in a house that would have cost £400k when you bought that house. The market has risen 60%. It now costs £240k to tradeup to the better house instead of £150k (even ignoring the stamp duty increase). However if you'd hopped to a house sometime in between then that delta of £90k in tradeup prices would likely be reduced.

 

[MissChief]

Shock horror that not everyone is financially able to mortgage two houses, and in fact need a 35 year mortgage to afford repayments.

You may want to sit down for this - some people can't afford to buy at all.

I wonder if the ultra rich find it shocking that people don't just buy houses outright? (I guess maybe they don't actually buy outright, if they financial advice).

Don't be silly. The ultra rich buy houses they've never even seen, never mind will live in for tax and investment reasons. The actual houses they live in they get designed for them.