Mortgage Rate Rises

[Martini1991]

It’s about a savings mentality. It’s amazing how little you can live on if everything gets cut back. A mindset of would I rather have this or have something else, can help people save a lot of money. It’s not meant to be easy and life is full of temptations.

Yeah I'd be able to save loads if I just rented an empty box room with a bed.

Wake up, get washed at gym, go to work
Go to gym to get washed, go home, look at wall, go to bed.

Rinse repeat.

 

[413x]

I have a friend who could have bought 6-7 years ago, and he's been waiting for this to happen since.... don't think people realise that in big crashes, ability to obtain credit falls so the people who win are those who have access to cash...

That's crazy.
That person will never get an opportunity like 6 years ago.
And if they do.. Its probably due to ww3.


Houses still aren't being built fast enough and that isn't going to change in the near future.
Even if population declines UK is still a migration hot spot.

 

[413x]

Which is fine, unless the mortgage interest rates have taken your mortgage from £1k/month to over £2k/month when wages haven't risen anywhere near as fast.

This was in the context of having free money.
If your costs have gone up too much you're stuck with living pay day to pay day

 

[GordyR]

That's crazy.
That person will never get an opportunity like 6 years ago.
And if they do.. Its probably due to ww3.

I'm being a little bit tongue in cheek here, but maybe things will work out in his favour afterall:

Column B uses the ONS Retail Price Index (RPI) to convert nominal prices to current prices. For example, a typical property in 2005 Q1 would, on average, have cost £152,790 at the time.

Column C has a smoothing curve applied in order to filter out market price corrections from the overall trend, so for the purposes of this post can be ignored.

When adjusted in this fashion, average house prices are already around 10% lower than they were 6 years ago and around 16% lower than their highs of 2022.

I don't know his personal situation, but if he's lucky enough to have had his wage growth keep pace with inflation during this time, then his buying power right now may actually be greater than it was 6 years ago; and this time next year, perhaps significantly more so.

With that said, as @M1k3H rightly says, during these downturns lending is more restricted, so whether or not he would be in a position to capitalise on this is anyone's guess.

 

[413x]

I'm being a little bit tongue in cheek here, but maybe things will work out in his favour afterall:

Column B uses the ONS Retail Price Index (RPI) to convert nominal prices to current prices. For example, a typical property in 2005 Q1 would, on average, have cost £152,790 at the time.

Column C has a smoothing curve applied in order to filter out market price correction from the overall trend, so for the purposes of this post can be ignored.

When adjusted in this fashion, average house prices are already around 10% lower than they were 6 years ago and around 16% lower than their highs of 2022.

I don't know his personal situation, but if he's lucky enough to have had his wage growth keep pace with inflation during this time, then his buying power right now may actually be greater than it was 6 years ago.

With that said, as @M1k3H rightly says, during these downturns lending is more restricted, so whether or not he would be in a position to capitalise on this is anyone's guess.

Seems hard to believe that our house (for example) has gone down in real terms by 20k.

If you were asking me to imagine... I wouldn't not have said that.


I guess you have to consider the person has probably been renting for that time which has also risen.

In 6 years you could have 25pc of your mortgage paid off easily

 

[Richie]

Why do people always gravitate to smartphones, netflix and avocados about this?

A lot is a generational thing - who are the main protagonists of the view above? Older people who "sacrificed a lot to get my home". The very same people who fail or refuse to accept that house ownership costs were far far lower when they were buying their home.

 

[GordyR]

Seems hard to believe that our house (for example) has gone down in real terms by 20k.

If you were asking me to imagine... I wouldn't not have said that.

Yep, it certainly doesn't feel that way does it?

I can't remember the exact numbers now, but last time I checked I was flabberghasted to find that following the last significant market correction in 2008/2009, it took nearly 7 years for house prices to recover nominally, and when adjusted for inflation it wasn't until something like 2019 that house prices matched their pre-crash value in real-terms.

 

[Richie]

House prices are going to crash big time at some point, they will have to.

Crash is quite subjective I guess... Some people would consider 20% a crash whereas others would see this as a "correction" and a crash needs to be 30%+

 

[EvilRob]

Just sold my flat for maybe 5-7% below peak. Totally happy with that, I wasn't anchored in to the peak.
Managed to complete just before my mortgage 5x'd. The downside of the current market was I couldn't be picky on buyer and it took much longer from offer accepted to completed than I would have liked. But I did get full asking.

 

[413x]

Crash is quite subjective I guess... Some people would consider 20% a crash whereas others would see this as a "correction" and a crash needs to be 30%+

Very much so.

If you're mortgage free you probably don't care unless downsizing.

If you bought 6 months ago.. Even 10pc can be brutal.

At least if the absolute numerical value doesn't drop too much you won't be negative. That's (in this case) more important than real terms.

 

[IvanDobskey]

It's certainly tough to get a foot on the ladder, but far from impossible. You just have to want it enough. You have to make a lot of sacrifices and start at the bottom rung though. Obviously what part of the country you are in is the real killer. I've not exactly been a mega earner, and I have been able to get to a point where I have nearly paid off my 4 bed detached at 50.

 

[Jono8]

I'm being a little bit tongue in cheek here, but maybe things will work out in his favour afterall:

Column B uses the ONS Retail Price Index (RPI) to convert nominal prices to current prices. For example, a typical property in 2005 Q1 would, on average, have cost £152,790 at the time.

Column C has a smoothing curve applied in order to filter out market price corrections from the overall trend, so for the purposes of this post can be ignored.

When adjusted in this fashion, average house prices are already around 10% lower than they were 6 years ago and around 16% lower than their highs of 2022.

I don't know his personal situation, but if he's lucky enough to have had his wage growth keep pace with inflation during this time, then his buying power right now may actually be greater than it was 6 years ago; and this time next year, perhaps significantly more so.

With that said, as @M1k3H rightly says, during these downturns lending is more restricted, so whether or not he would be in a position to capitalise on this is anyone's guess.

This is a bit tricky though as for anyone who wants to get onto the ladder/is young , you have to factor in the mortgage interest rates to get a realistic affordability measure.

For those people it doesn't matter if the adjusted for inflation house prices are lower than 6 years ago, because they will be paying massively more per month on a mortgage.

It would have still been more affordable from a lending perspective/getting a mortgage 6 years ago.

 

[GordyR]

This is a bit tricky though as for anyone who wants to get onto the ladder/is young , you have to factor in the mortgage interest rates to get a realistic affordability measure.

Absolutely, hence my "tongue-in-cheek" preface.

Actual affordability can only be determined based upon a multitude of factors; all of which we know are undoubtedly worse today.

Still interesting data regardless.

 

[Jono8]

It's certainly tough to get a foot on the ladder, but far from impossible. You just have to want it enough. You have to make a lot of sacrifices and start at the bottom rung though. Obviously what part of the country you are in is the real killer. I've not exactly been a mega earner, and I have been able to get to a point where I have nearly paid off my 4 bed detached at 50.

Yeh. It is massively hard, and no doubt even harder now with interest rates as they are.

However some people do only have themselves to blame. A longtime work colleague who earned the same as me for ages always complained about not being able to get on the ladder, and they started around the same time as me too.

I never got given any deposit money from my parents/never had a headstart or help, but I've got a average sized 3 bed detached in nice part of the South East now (after starting off with a small 1 bed flat). They are still renting...

Now I don't know everything about their personal circumstances so I don't want to be overly judgemental. Luck is always a factor in life too. However, I do wonder if a large part of the reason is their own money mismanagement/bad choices.

 

[413x]

Yeh. It is massively hard, and no doubt even harder now with interest rates as they are.

However some people do only have themselves to blame. A longtime work colleague who earned the same as me for ages always complained about not being able to get on the ladder, and they started around the same time as me too.

I never got given any deposit money from my parents/never had a headstart or help, but I've got a average sized 3 bed detached in nice part of the South East now (after starting off with a small 1 bed flat). They are still renting...

Now I don't know everything about their personal circumstances so I don't want to be overly judgemental. However, I do wonder if alarge part of the reason is their own money mismanagement/bad choices.

If you can but you mentally give up you'll never get there.

But as you say, you never know what circumstances someone is dealing with

 

[kevman]

Can the good doctor predict the mortgage rates this time next year?

 

[BUDFORCE]

Can the good doctor predict the mortgage rates this time next year?

No lottery wins only I am afraid.

 

[matt100]

An intelligent, sensible and driven person does not think they have no chance and then frivolously spend money for no reason, that is what we call an idiot.

Or it is a mental health issue, such a defeatist attitude will infact guarantee they will never be able to achieve anything.

With almost no respect I'd back them against you pretty much any day of the week.

I could take issue and unpack the meaning (and subjective nature) of words like frivolous and the idea of "no reason" but I'd take a flying bet you're part of the "I managed it why can't everyone" brigade mentioned earlier.

 

[platinum87]

With almost no respect I'd back them against you pretty much any day of the week.

I could take issue and unpack the meaning (and subjective nature) of words like frivolous and the idea of "no reason" but I'd take a flying bet you're part of the "I managed it why can't everyone" brigade mentioned earlier.

The brigade you mention is people who are positive, and say it can be done, and your stance is, no, its impossible, so just give up.

Great stance to have.

 

[fez]

A lot is a generational thing - who are the main protagonists of the view above? Older people who "sacrificed a lot to get my home". The very same people who fail or refuse to accept that house ownership costs were far far lower when they were buying their home.

There are 2 sides here, both of whom have very good points and neither of which is willing to accept the others opinion at all.

• Yes, my parents generation had far cheaper housing. - well done current house buyers you are correct
• Yes my parents generation didn't waste money they didn't have and scrimped and saved for these things - well done boomers, you are correct that far too many people now expect to be able to buy a house, eat takeaway twice a week, go out at the weekends and have a nice car, all on an average salary.

My parents are set up reasonably well in their retirement now but dear lord did they earn it. Never spent a penny they didn't have and anything they bought was almost certainly a necessity. People living on benefits now would expect a far higher quality of life and my dad worked full time for the tax office and my mum looked after us and was a hair dresser.

Boomers struggle to relate to people complaining about housing costs when they see such a disconnect between when they were trying to buy and house and how they see people behave now who are trying to do the same.