Mortgage Rate Rises

[tonys]

Ok. But the apparent lack of sympathy if it does happen, "because a previous generation has to go through it", I'm not sure what that adds to anything.

It's not lack of sympathy, just real life. People who took out fixed mortgages at very low interest rates are surprised when the interests rates go up. With no financial planning for the inevitable rise they were stupid.
When we took out our mortgage in 1981 I think it was at 8% so we had more leeway

 

[jonneymendoza]

It's not lack of sympathy, just real life. People who took out fixed mortgages at very low interest rates are surprised when the interests rates go up. With no financial planning for the inevitable rise they were stupid.
When we took out our mortgage in 1981 I think it was at 8% so we had more leeway

Yes but I 1981,2 to 3 bedroom semi detached houses did not cost half a million at average

 

[Hagar]

Yes but I 1981,2 to 3 bedroom semi detached houses did not cost half a million at average

Nor do they now on average.

 

[tonys]

Yes but I 1981,2 to 3 bedroom semi detached houses did not cost half a million at average

True, but you are trying to equate two different periods, where those houses are situated etc.
In 1981 we bought our first house (2 bed terrace) for £9000. Sold to a young couple from London(commuters) for £36000. Price now probably £200,000
In London that same size house would be £700,000+ nodoubt.

 

[jonneymendoza]

Nor do they now on average.

They do. And people's wages hasn't been increased with the inflation of house costs

 

[tonys]

They do. And people's wages hasn't been increased with the inflation of house costs

Around here now they would be £300,000-£500,000(older-newer properties )only because we are now the commuter belt into London, which distorts the local market and has done since the early 80's.

 

[danlightbulb]

It's not lack of sympathy, just real life. People who took out fixed mortgages at very low interest rates are surprised when the interests rates go up. With no financial planning for the inevitable rise they were stupid.

This is suggesting it's an individuals fault if rates rise and they can't afford the mortgage any more

The interest rates were low compared to history. History is irrelevant. The interest rates were what they were because of lower growth in the economy - the purpose of low rates is to encourage spending.

If interest rates are set low to encourage spending, people spend and asset prices rise. That was the whole point.

This is a vicious circle - if you want a house (to live in) you have to participate in this market, you have no choice. You are pulled along by the tide like it or not.

It's not reasonable to then chastise people for getting screwed over when the rates go the other way.

You blame people for taking on too much debt "it's their own fault". That's nonsense. People have no say in this. "The invisible hand" of the market drives it.

This is the fault of policymakers. It was their fault the interest rates went too low, it's their fault again that they are now rising.

 

[robj20]

This is suggesting it's an individuals fault if rates rise and they can't afford the mortgage any more

The interest rates were low compared to history. History is irrelevant. The interest rates were what they were because of lower growth in the economy - the purpose of low rates is to encourage spending.

If interest rates are set low to encourage spending, people spend and asset prices rise. That was the whole point.

This is a vicious circle - if you want a house (to live in) you have to participate in this market, you have no choice. You are pulled along by the tide like it or not.

It's not reasonable to then chastise people for getting screwed over when the rates go the other way.

You blame people for taking on too much debt "it's their own fault". That's nonsense. People have no say in this. "The invisible hand" of the market drives it.

This is the fault of policymakers. It was their fault the interest rates went too low, it's their fault again that they are now rising.

It's not their fault rates rise, it is their fault for choosing a mortgage they potentially can't afford should rates increase, they haven't even gone up all that high in the grand scheme of things.

 

[danlightbulb]

It's not their fault rates rise, it is their fault for choosing a mortgage they potentially can't afford should rates increase, they haven't even gone up all that high in the grand scheme of things.

Don't you understand that house prices rise to the point where it's at the limit of affordability, no matter what?

If you're on 25k, you can afford say 100k house. The market at that end will rise so that the minimum house price is 100k. If you're on 50k and can afford a 200k house, then that section of the market will rise to the limit of affordability too. A shortage of supply will always push the market to the limit of affordability across all segments.

What do you think would happen if all the people earning 50k started going for the 100k houses? The demand would outstrip supply and the 100k houses wouldnt be 100k any more.

 

[tonys]

This is suggesting it's an individuals fault if rates rise and they can't afford the mortgage any more

The interest rates were low compared to history. History is irrelevant. The interest rates were what they were because of lower growth in the economy - the purpose of low rates is to encourage spending.

If interest rates are set low to encourage spending, people spend and asset prices rise. That was the whole point.

This is a vicious circle - if you want a house (to live in) you have to participate in this market, you have no choice. You are pulled along by the tide like it or not.

It's not reasonable to then chastise people for getting screwed over when the rates go the other way.

You blame people for taking on too much debt "it's their own fault". That's nonsense. People have no say in this. "The invisible hand" of the market drives it.

This is the fault of policymakers. It was their fault the interest rates went too low, it's their fault again that they are now rising.

It is the fault of someone who takes out their maximum on an extremely low interest rate when rates can only go up and put no rainy day backup inplace. Policymakers are not telling people to buy this or that house are they?

 

[danlightbulb]

It is the fault of someone who takes out their maximum on an extremely low interest rate when rates can only go up and put no rainy day backup inplace. Policymakers are not telling people to buy this or that house are they?

See above.

 

[tonys]

See above.

A bit behind

 

[tonys]

Don't you understand that house prices rise to the point where it's at the limit of affordability, no matter what?

If you're on 25k, you can afford say 100k house. The market at that end will rise so that the minimum house price is 100k. If you're on 50k and can afford a 200k house, then that section of the market will rise to the limit of affordability too. A shortage of supply will always push the market to the limit of affordability across all segments.

What do you think would happen if all the people earning 50k started going for the 100k houses? The demand would outstrip supply and the 100k houses wouldnt be 100k any more.

We've known about higher earners going for cheaper houses since the 80's nothing new there, we are talking about people taking out more than they can comfortably afford if and when the rates go up.

 

[Hagar]

What do you think would happen if all the people earning 50k started going for the 100k houses? The demand would outstrip supply and the 100k houses wouldnt be 100k any more.

I am on your downward trend, four bed three bath detached to three bed one bath semi detached. It is downsizing as the family goes.

 

[tonys]

I am on your downward trend, four bed three bath detached to three bed one bath semi detached. It is downsizing as the family goes.

With me the kids have gone but still need the bedrooms now for the grandkids.

 

[BUDFORCE]

What's your point here? That there should just be unrelenting repossessions, sod the consequences?

No not at all I have no real opinion either way.

Someone mentioned earlier about the volume of repossessions in the late 80/90's and the more recent financial struggles, just saying that will be a contributing factor.

 

[danlightbulb]

We've known about higher earners going for cheaper houses since the 80's nothing new there, we are talking about people taking out more than they can comfortably afford if and when the rates go up.

You just don't get it Tony I'm sorry.

If buyers try to aim down when buying property what do you think happens to the bottom of the market?

People take out mortgages typically at close to their limit because the market pushes people to do that. When taken as a collective group of people, there is a tide which pulls you along as an individual, making it extremely difficult to aim lower. Of course at some points in recent history you're also competing with buy to let's and property do-er-uppers who've watched a few episodes of Homes under the hammer, which tends to create demand at the lower end of the market as well.

If enough people try to aim lower, the bottom of the market will rise to meet you so you're not better off.

 

[danlightbulb]

. It is downsizing as the family goes.

Which very few people do, and even if they did, with a growing population, more single people, and more property speculators, demand still outstrips supply.

Downsizing also increases demand for lower end houses, pulling the bottom of the market up.

 

[tonys]

You just don't get it Tony I'm sorry.

If buyers try to aim down when buying property what do you think happens to the bottom of the market?

People take out mortgages typically at close to their limit because the market pushes people to do that. When taken as a collective group of people, there is a tide which pulls you along as an individual, making it extremely difficult to aim lower. Of course at some points in recent history you're also competing with buy to let's and property do-er-uppers who've watched a few episodes of Homes under the hammer, which tends to create demand at the lower end of the market as well.

If enough people try to aim lower, the bottom of the market will rise to meet you so you're not better off.

I'm well aware of what you are saying but you don't seem to want to acknowledge that it's their own choice to take out the mortgage to buy the house, nobody is pushing them, and they need to be aware of that interest rates rise. The market is always going up, so that isn't what we are talking about.

 

[danlightbulb]

I'm well aware of what you are saying but you don't seem to want to acknowledge that it's their own choice to take out the mortgage to buy the house, nobody is pushing them, and they need to be aware of that interest rates rise. The market is always going up, so that isn't what we are talking about.

It's not their own choice. That's the point you're not getting.

What should people do about a place to live if not buying a house? Rent? Live with parents? Tent on the street?