I specifically referred to deluded people as to those who believe there will be a crash and reduction of prices (large scale country wide I mean) of 50% or more in our life times. That won't happen even as a very short term blip, or over a long period of time either. There is zero chance in a fully functional UK economy. You seem to have confused that I am referring to delusional people as those that think there will be a smaller "correction" of the likes which you suggest.
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
I specifically referred to deluded people as to those who believe there will be a crash and reduction of prices (large scale country wide I mean) of 50% or more in our life times. That won't happen even as a very short term blip, or over a long period of time either. There is zero chance in a fully functional UK economy. You seem to have confused that I am referring to delusional people as those that think there will be a smaller "correction" of the likes which you suggest.
Fair enough, I completely misread your post. Sorry if my response was on the prickly side.
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Soldato
I think houses may drop to pre-covid levels but I can't see a "real" crash that a lot of people seem to be expecting.. stagnation or a small drop is more real.
Caporegime
The house i bought in 2015 was £187k, it's now worth, according to Zoopla. £306-£338k. That's crazy in 8 years. When i checked 12 months ago it was saying like £297k to £315.
Interest rates were raised from 0.1%, which is completely unprecedented as a baseline. You could read into what it tells them both ways, e.g. perhaps it tells them that interest rates are still too low (4.25% is pretty low by historical standards) or that they did not raise them quickly enough. I'm not saying it should, but just highlighting if you went back 15+ years and said you expected interest rates in the 0.1-4% range to be suppressing inflation, you'd probably be met with some raised eyebrows.
In any event, there is an inherent partial lag in terms of the impact of monetary policy, i.e. if I put interest rates up today that doesn't instantly reduce inflation today. Inflation is an annualised metric so even if interest rate rises keep a lid on inflationary pressures, you need to wait months for the smoothing effect to be properly visible as older months drop off and new ones come in.
Additionally one could make a case that inflation would be even higher had rates been kept at historic lows. Even reading this thread there's anecdotal examples of people deferring spending due to mortgage costs.
Caporegime
It is a little nuts though. Yes house prices have been and always will be increasing but the sharp rise in the last 3-4 years has been nuts and surely it cannot continue.
It might not be allowed , but not being allowed does not mean it will not happen.
High house prices don't help the average population.
People need to take into account, erosions to their income. As wages rise more people will pay higher tax, with IHT not linked to inflation, more beneficiaries will need to sell up. This is where it is going.
People tax breaks are becoming less while corporate tax breaks are not.
Money is being funneling in private wealth hands
The system is being designed to hand over individual own property to corporations. Just like council homes were handed over to H.A, this has caused indirect consequences for all.
I agree (and also with GordyR that it's semantics). A "correction" is all relative to what your baseline is. If you are comparing to 3 years ago then yes a 15% drop might qualify as a correction. If you are comparing to 10 years ago, then it's not even close.
A lot of people considered housing unaffordable before the pandemic so returning to the level of 3 years ago would barely qualify for those people, it's like saying to an average guy on the street they no longer need to run 280 miles today they now only need to run 230 miles or whatever.
Zoopla says ours is worth 7-18% more than we bought our first house for 2 years ago. At the time people around me were telling me I was buying right at the peak and that COVID could cause a massive downturn in prices.
My argument for buying then was simple... a) We need a house as were losing our current rental b) We finally have the ability to just about get on the ladder c) When you can, you get on the ladder regardless
One of the reasons I chose a 5 year fix back then was in case we went into negative equity over the first few years due to COVID, so I didn't have to worry about re-mortgaging for a while.
The higher the price the lower the mortgage rates will have a bigger effect on prices if wages are lagging.
I see more and more properties being put on the market, and reading about the difficulty people getting mortgages after their fix rate finishes.
A correction is just technically speak for slowing down to rest ie recalibrating market demand.
Soldato
Crazy isn't it. I bought at the same time for £287k, now £470-511, a nice cool £200k
But everywhere else has gone up the same so you never see that gain unless you:
a) Downsize
b) Change location to somewhere cheaper
c) Leave the UK
d) Go back to renting
Even both sets of our parents don't want to downsize, despite living in 4 and 3 bed houses. They just can never imagine moving our of their "forever home". People are very reluctant to downsizing but it is something we will have to consider one day. I personally would be quite happy doing both a downsize and moving somewhere cheaper in the distant future, to get more land and a nicer detached house, all be it with less bedrooms.
The real gain comes when you manage to pay off your mortgage in full but then still keep working and earning well for many years. Then you can accumulate some wealth to upgrade your house if that appeals to you. Unfortunately a lot of people now will be paying off mortgages into retirement. I know I will.
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Soldato
And here comes the next big monster , downsize or equity release . The majority of generation X have been saving monster deposits and huge mortgage costs to save for a pension .
I think people are forgetting about the law of supply and demand those expecting an average 15-20% drop in house prices, what is this based on?
There will not be a 20% drop in house prices unless their is sudden mass unemployment over the next 12-18 months.
What I would like to know is what are wealthy people doing with their money at the moment? Storing it in the bank for now? Acquiring assets for example art or watches? Re-investing into their business? Would be interesting to know
There will not be a 20% drop in house prices unless their is sudden mass unemployment over the next 12-18 months.
What I would like to know is what are wealthy people doing with their money at the moment? Storing it in the bank for now? Acquiring assets for example art or watches? Re-investing into their business? Would be interesting to know
For the last year or so my friend has been suggesting to put cash into bricks and mortar as it'll outperform the stock market.
Caporegime
Right but wages have gone up by ~40% in that time as well... right??
The stupid thing is that house prices will continue to rise well above inflation and it will make 0 sense. I remember my early 20s thinking "house prices are nuts, they have to crash" and they never did for more than a few years and they just kept on rising. You keep thinking something has to give but it doesn't because people will always find a way.
Something does have to give but it won't be a catastrophe until a large proportion of an entire generation gets to retirement age without any money because they have paid a lifetime of sky high rent amid stagnant wages. Its not sustainable but like most economics it doesn't matter. Who cares about the future. Thats someone elses problem and if you play the system well enough you will always be OK unless we truly cook the planet properly and society breaks down.
Its bloody depressing to be honest.
I can see the thought process- if you can afford the monthly payment at the current interest rate then you should be fine in the long term.
Personally I would love for house and car prices to plummet as it would suit me very well but as I have mentioned it's probably not going to tank.
We did option b in late '19 before covid surfaced, buying a large 6 bedroom house with 3 acres of woodland in the Highlands for £345k, I kid you not. A cheaper location doesn't always mean worse, but there's usually a caveat. There were a lot of compromises made in making such a move including no longer being mortgage free by the time I was 50. Despite the size of the house we don't want to downsize any time soon or at all, but I suppose it's inevitable.
Paid off our mortgage a while back but are worse off than had we taken out a new mortgage and bought a bigger place as our house has appreciated less in value than a bigger house would've done, after allowing for the cost of borrowing. We were looking at moving back in 2015-16, £500k house would be worth £750k now.