What's that go to do with the price of fish, what would you rather pay:
12% on £35,000 or 3% on £280,000
we've never paid so much interest as we are now, rates might be low but prices are through the roof!
Im calling it.....
- Thread starter Dr House
- Start date
What's that go to do with the price of fish, what would you rather pay:
12% on £35,000 or 3% on £280,000
we've never paid so much interest as we are now, rates might be low but prices are through the roof!
Man of Honour
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I agree with what you are saying but it's not just the banks fault.. They just supply a means to an end. In fact they ar taking some responsibility by reducing risk by asking for a higher deposit.. not that helps anyone.. Housing shortages, consumer greed, commuter belts, accessibility, schools, hospitals all having a bearing on the pricing..
A recession would put the brakes on the the economy as there simply wouldn't be the money to lend or pay back.. it would hurt like hell.. job losses, unemployment.. just like it did the the late 80's early 90's to combat hyper inflation.. but the government and the BoE work hard to make sure this won't happen.
Interest rates need to rise but there's no chance of that happening any time soon.. The opposite in fact .. maybe.
This is why rates need to rise.. Not just for savers and investors but it would curtail, as you said, this exact effect.
the price of houses you mean
and the answer is: a lot...
one of the main reasons why prices have been able to rise so much is due to the low cost of borrowing
whether prices need to rise or not is more related to inflation targets and the state of the wider economy not just housing
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What are you talking about, we've never paid so much interest, rates might be low but we're having to borrow ££££.
Example 1
Mortgage amount £35,000
Interest rate 12%
Mortgage period 25 years
Total cost of mortgage £110,589
Example 2
Mortgage amount £235,000
Interest rate 4%
Mortgage period 25 years
Total cost of mortgage £372,125
The Banks have allowed us to borrow more and more which has pushed up house prices, they "LOVE IT"!
Low cost of borrowing my bottom
Agreed, if they raised interest rates by any meaningful amount the economy would implode!
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I'm not quite sure what you're trying to illustrate, you can make up a bunch of figures there what about a 150k mortgage at 12% vs a 250k mortgage at 1.75%? etc..etc..
mortgages are currently based on affordability, do you not understand that with significantly higher interest rates the amount you can afford to borrow changes?
mortgages are currently based on affordability, do you not understand that with significantly higher interest rates the amount you can afford to borrow changes?
Good, if rates went back up then that will put a brake house price inflation
The way it going people will borrow more and more, continue to push up house prices and in real terms pay ££££ in "total cost" of their mortgage.
Then banks will continue unless government puts the brakes on "hard".
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but by picking random figures it doesn't illustrate much at all... try again with the figures I just gave you for example
well it doesn't really matter, the demand is still there and the competition for houses won't change much it is just the headline figure you pay for the house goes down and the monthly payment for your mortgage goes up... London homes will still be unaffordable for plenty of people who can't buy now if rates rise significantly
Do you know many younger buyers/first time buyers that can afford 2x salary for a reasonable sized house?
Unfortunately back then salaries were more in line with houses, now housing is many times higher
Nope, but it's normal for the example I was providing - investment banking at Senior Associate level. In that particular area of industry 100% or 200% wouldn't be uncommon now. Several years ago a decent trader or salesperson could get paid out 10% of their book/PnL, resulting in many multiples of base salary paid as bonus.
Across most other industries 50% would be regarded as a very good bonus. Most people I know working in other fields (media, print, research, etc.) tend to get 5%-10% as a bonus if they're fortunate.
I'm looking at this historically back in the 1980s when the interest was 12% +/- the average UK house price were £35K, nobody could afford a £150K mortgage!
The only reason people can currently afford houses is that the interest rate is at a historically low levels but they've never paid more in interest.
If that's all you could borrow then houses wouldn't have increased so much.
HEADRAT
Mainstream banks will not lend at anything above 85% LTV for new build properties worth 500k+. 95% is impossible.
HTB does not apply to a large proportion of London new builds.
Finally, people earning £100k+/£150k+ a year are at ages where they have families. They do not buy 2 bed flats in a high rise flat. They buy houses, or already own houses.
These flats were almost exclusively bought by foreign investors.
HTB does not apply to a large proportion of London new builds.
Finally, people earning £100k+/£150k+ a year are at ages where they have families. They do not buy 2 bed flats in a high rise flat. They buy houses, or already own houses.
These flats were almost exclusively bought by foreign investors.
How does that apply to my post?
People are claiming that £800k+ new build properties are affordable to first time buyers in London. They quite simply aren't.
Very few if any of these properties are bought with mortgages.
Banks are very careful when lending for new build properties and have underwriting criteria to take into account that new build properties depreciate immediately when they become used. Tell me which bank would let me buy at 95% LTV an £800k new build in London.
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because mortgages are available at 95% for that much and I got it slightly wrong. its any home and doesn't even have to be ftb, just your only home.
average wages were a fair bit lower back then too!
that isn't the only reason but yes, that is the point, low interest rates, easier availability of credit have driven the prices up... there is still competition for houses, there will still be competition for houses even if rates go up...
the fact that people can't afford houses now isn't so much because the number assigned to the value of that house is bigger than it used to be but because there is a limited supply of them and competition for that limited supply - if that doesn't change then it doesn't matter if rates go up, the numerical value of the house goes down but the amount you pay in interest goes up... the competition for that limited supply is still there
Soldato
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Yeah those first time buyers are lining up to buy 600k 2 bedroom flats.
I think that's the point. Your example doesn't really apply to the average person. Not everyone in London is going to be an investment banker and therefore won't have that amount of money.
No one I know gets more than 10% bonus, if any.
he wasn't making a point about the average person, look back at the posts it was in reference to - it was a comment about 'well paid' Londoners and 800k homes that started that chain of posts
well paid londoners can afford 800k homes otherwise those 800k homes wouldn't be 800k... the market is based on what people can afford/what people are prepared to pay
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