Mortgage Rate Rises

[Hagar]

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.

Yes we really want a bungalow so even in my seventies I am still perusing the property market. The trouble is that bungalows within easy walking distance of town are few and far between and usually have not been updated or maintained in the last twenty five years. Plus nobody builds them anymore.
Building bungalows would clear out the lone widow/widower or a couple from their big house which is difficult to heat or clean. There is obviously no profit in building them. However older is better, more garden and no stupid freehold charging or leaseholds rising by the year.
If I can get one, this house in prime catchment for primary and secondary schools will be back on the market

 

[tonys]

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?

Why do they have to buy a house for more than they can realistically afford is what you should be asking yourself.

 

[tonys]

Yes we really want a bungalow so even in my seventies I am still perusing the property market. The trouble is that bungalows within easy walking distance of town are few and far between and usually have not been updated or maintained in the last twenty five years. Plus nobody builds them anymore.
Building bungalows would clear out the lone widow/widower or a couple from their big house which is difficult to heat or clean. There is obviously no profit in building them. However older is better, more garden and no stupid freehold charging or leaseholds rising by the year.
If I can get one, this house in prime catchment for primary and secondary schools will be back on the market

We would like a bungalow and they are the same price as our house for the same bedrooms. As you say most are in areas not convenient for older people.

 

[danlightbulb]

Why do they have to buy a house for more than they can realistically afford is what you should be asking yourself.

Because the market rises to match the limit of what they can afford. People are not choosing to collectively overstretch themselves - the market forces that upon you.

The market is designed to absorb the maximum money it can from the market participants.

A lower interest rate means the market rises to extract that money from the economy, because it can and there is demand for houses. The interest rate and the level of borrowing reach a new, higher, equilibrium with prices.

 

[tonys]

Because the market rises to match the limit of what they can afford. People are not choosing to collectively overstretch themselves - the market forces that upon you.

The market is designed to absorb the maximum money it can from the market participants.

A lower interest rate means the market rises to extract that money from the economy, because it can and there is demand for houses. The interest rate and the level of borrowing reach a new, higher, equilibrium with prices.

Ok, does the price of a car dictate that you should buy it at £5,000 over what you can afford just because that's the market telling you that or do you make the decision to go under your budget?

 

[danlightbulb]

Ok, does the price of a car dictate that you should buy it at £5,000 over what you can afford just because that's the market telling you that or do you make the decision to go under your budget?

If you needed a car, then yes you would absolutely have to pay what the market dictated wouldn't you. If there were no suitable cars under your budget, you'd have to spend more.

If a family needs a 3 bed house, there is point saying that they should consider a 2 bed house to improve their affordability is there. They can (and do) look at cheaper areas but then when everyone does that what do you think happens to the prices and supply in the cheaper areas?

Or they can (and do) look at houses in not the best state. But again, when everyone does that (and you're also competing with landlords and splash and dash property flippers) then again, what do you think happens to prices for those types of houses?

And if all the people who would have bought a 500k house now decide to buy a 400k house, then what do you think happens to the supply of 400k houses? And so on down the price scale.

 

[tonys]

If you needed a car, then yes you would absolutely have to pay what the market dictated wouldn't you. If there were no suitable cars under your budget, you'd have to spend more.

If a family needs a 3 bed house, there is point saying that they should consider a 2 bed house to improve their affordability is there. They can (and do) look at cheaper areas but then when everyone does that what do you think happens to the prices and supply in the cheaper areas?

Or they can (and do) look at houses in not the best state. But again, when everyone does that (and you're also competing with landlords and splash and dash property flippers) then again, what do you think happens to prices for those types of houses?

And if all the people who would have bought a 500k house now decide to buy a 400k house, then what do you think happens to the supply of 400k houses? And so on down the price scale.

When I needed a car quickly, I didn't go for an expensive one I bought a cheap get me to work and back. If I had chosen a more expensive car I would have been putting myself up for debt.
Now the houses, I've been through this same scenario back in the 80's when commuters from London came here and started to bid prices up, so yes I know about that. I've bought two houses and remortgaged so I know about that. My two children have bought their own houses within the last 10yrs so guess what, I know about that. Yes I know how prices have gone up and it is frankly ridiculous now but the issue we are talking about is overstretching yourselves financially. Is it your choice or is it something making you take stupid decisions. Buying a house is the biggest debt you will ever take on so you really need to give yourself some leeway.
You said about buying a house with 3 children if they are all young you can get away with 2 bedrooms not ideal but you could manage for a few years and you have probably saved yourself 50k. It really is all about the choices you make not what other things you think are dictating your decisions.

 

[danlightbulb]

At the higher end of the market I can accept buyers perhaps have more discretion to not stretch themselves quite as much. Yes someone could choose to buy an 800k house instead of a million pound house.

But at the lower end of the market that discretion simply isn't there. Every semi-decent house (and some that are absolute trash and should be demolished) is priced at the limit of what the area will stand.

When you have the vast majority of people all on a similar scale of salary (say between 25k and 40k per individual) then everyone is competing for the houses in the same price bracket, and there really isn't much (decent) housing available for any cheaper.

Now in that situation, yes you are forced to stretch to your max more often than not.

 

[tonys]

At the higher end of the market I can accept buyers perhaps have more discretion to not stretch themselves quite as much. Yes someone could choose to buy an 800k house instead of a million pound house.

But at the lower end of the market that discretion simply isn't there. Every semi-decent house (and some that are absolute trash and should be demolished) is priced at the limit of what the area will stand.

When you have the vast majority of people all on a similar scale of salary (say between 25k and 40k per individual) then everyone is competing for the houses in the same price bracket, and there really isn't much (decent) housing available for any cheaper.

Now in that situation, yes you are forced to stretch to your max more often than not.

Again it's your choice, nobody is forcing you to buy, people just want to own their own home. Some houses although looking bad can be solid and good looking ones can be a money pit, it's up to you to make the decision in the long run, nobody else's.

 

[danlightbulb]

Again it's your choice, nobody is forcing you to buy, people just want to own their own home. Some houses although looking bad can be solid and good looking ones can be a money pit, it's up to you to make the decision in the long run, nobody else's.

Everyone needs a place to live. You have to either buy or rent. Renting you're just paying someone else's mortgage (and still exposed to even more risk). There's no social housing as a fall back any more. How many people in the 80s lived in social housing, absolutely loads.

 

[tonys]

Everyone needs a place to live. You have to either buy or rent. Renting you're just paying someone else's mortgage (and still exposed to even more risk).

Very true, the housing market really needs a shake up to bring it up to date with our lifestyle.

 

[danlightbulb]

Very true, the housing market really needs a shake up to bring it up to date with our lifestyle.

That we can agree on. It's a disastrous market for young people, and anyone else who happens to be first time buying later in life as I was.

Why don't we have full term fixed rate mortgages like in other countries? Then there would be no rate exposure and you have certainty for the term.

 

[tonys]

That we can agree on. It's a disastrous market for young people, and anyone else who happens to be first time buying later in life as I was.

Why don't we have full term fixed rate mortgages like in other countries? Then there would be no rate exposure and you have certainty for the term.

I'm still paying a variable mortgage at 66yrs old, another 3.5yrs to go.(lets just say we didn't have to remortgage but we did). My old boss said in the time he had his mortgage(1920 ish) the interest rates never went up, prices for most things were fairly stable, a world of difference from now.

 

[robj20]

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.

Don't you understand it's still the person that signs the mortgage agreements problem. If you can't afford something don't buy it it's irrelevant if you think it's fair or not life isn't fair.

I see loads of my younger friends whining about not being able to save for a deposit while renting.
These were the same people that spent every penny they had while some like me saved a bit as soon as they started earning. I have no sympathy for them they chose this lifestyle all those years ago.

These are the same petite that right now put the bare minimum into a pension because they have to have those fancy cars, they'll be complaining come retirement that they can't afford that as well while I'll be retiring early on more money than I am now.

 

[delta0]

I think it will. As AI etc take off there will be more and more redundancies. Companies will struggle as they lose customers.

My head can't process the end game of very few people having jobs. And very few companies existing. Who knows, may not even have capitalism.

It’s possible but also some companies may grow significantly in the sense they will be able to attract a lot more work. There’s a certain short term effect of people being replaced by AI but the long term I expect businesses adopting AI will grow far faster.

If we think of AI only as replacing jobs then we do it a disservice. If we think about the things we would love to do in society that we can’t because of cost then we can suddenly do those. Businesses can now charge less and there will be more work as a result.

 

[aaronyuri]

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.

We should always be aiming to make the next generation's lives a little easier. But maybe that's becoming less of a thought every day that goes by...

Houses are harder to buy now than they ever have been. They are outrageously more expensive to buy no matter what way you analyse it. That is an indisputable fact of modern life. Having a belief to the contrary makes no sense.

 

[matt100]

We should always be aiming to make the next generation's lives a little easier. But maybe that's becoming less of a thought every day that goes by...

Houses are harder to buy now than they ever have been. They are outrageously more expensive to buy no matter what way you analyse it. That is an indisputable fact of modern life. Having a belief to the contrary makes no sense.

You're absolutely right but you have incoming boomer nonsense of interest rates in the 80s/90s sadly.

 

[tonys]

You're absolutely right but you have incoming boomer nonsense of interest rates in the 80s/90s sadly.

You still don't see that today's market is different to the 80's and 90's because of what happened in those decades. As has been explained numerous times we had to pay the mortgage increase almost as soon as it went up, not 2, 3 or 5yrs down the line(a £20 increase on the mortgage over 6 months is the same as a £200 increase at the end of a fixed term mortgage and just as damaging to household finances, (figures are only for example) , we also had increases in house prices above what local FTB could in reality afford because of the wealthier commuters from London. Add in virtually no help with arrears from the banks, building societies or government ment that it was just as hard but in a different way. Also include high unemployment and inflation it becomes virtually no different to today except unemployment isn't that high, inflation isn't that high and the housing and mortgage market have been altered to stop the problems of arrears and repossessions.

 

[aaronyuri]

You still don't see that today's market is different to the 80's and 90's because of what happened in those decades. As has been explained numerous times we had to pay the mortgage increase almost as soon as it went up, not 2, 3 or 5yrs down the line(a £20 increase on the mortgage over 6 months is the same as a £200 increase at the end of a fixed term mortgage and just as damaging to household finances, (figures are only for example) , we also had increases in house prices above what local FTB could in reality afford because of the wealthier commuters from London. Add in virtually no help with arrears from the banks, building societies or government ment that it was just as hard but in a different way. Also include high unemployment and inflation it becomes virtually no different to today except unemployment isn't that high, inflation isn't that high and the housing and mortgage market have been altered to stop the problems of arrears and repossessions.

I acknowledge all of your points. That doesn't change that houses are astronomically more expensive today than they ever have been, and incomes haven't kept up with that. That is all that is relevant.

The house buying power of your average person today is the worst it has ever been.

 

[tonys]

I acknowledge all of your points. That doesn't change that houses are astronomically more expensive today than they ever have been, and incomes haven't kept up with that. That is all that is relevant.

The house buying power of your average person today is the worst it has ever been.

Nobody is denying that prices are through the roof but from my father in laws perspective what we paid for our first house was far to much, compared to what he paid for his (20yr difference)The point is the market has had to adapt to the problem and not implode. Take a look at the house price trend and it's almost always going up(houses are seen as an investment), that's the reality we have to live with. Historically we rented more than owning a property because the lower paid couldn't afford to buy, so this again is nothing new. The market both rental and owner need better supervision to regulate prices, but will that ever happen?