Mortgage Rate Rises

jaybee said:
Said everyone in the 80s, 90s, 00s, 10s, 20s and yet here we are.
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There's been multiple corrections over that time frame, and each time they have taken around 2 years to unfold.

Why do some people seem to think that when others are discussing the likelihood of average house prices trending downwards for a short while, that they're suggesting that they believe there is going to be some kind of ultra black swan event, and a complete, catastrophic collapse in value? As far as I'm aware, absolutely no one thinks that.

I've laid out my personal position on this several times in this thread. I think the market has already turned and that they're coming slowly down over the next two years, but that doesn't mean that I don't think they'll go back up again, nor do I think that they're coming down to more affordable levels for average first time buyers any time soon.

But with that said....

jaybee said:
But it's been sustainable for 40 odd years. What's to say we don't keep going another 40 like this. If you happen to think there will come a date when the bubble will officially burst, let's have it then?
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Over larger periods of time, economies change dramatically; and over a large enough scale, absolutely everything changes.

Pointing to a 40 year trend as being evidence that the trend is likely to continue is fallacious; there's such a huge number of different factors in play here that it makes looking at price action in isolation, and using it as an indicator of future performance, extremely error prone. And as we begin to reach the extremes of average unaffordability versus average wages, I suspect that doing so will become even less reliable.

Back in the 1800's there was a 60 year straight period of declining house prices, had you been alive then perhaps you would have found yourself thinking that house prices only ever go down over time.

But anyway, no one is expecting some kind of dramatic full reversal of nominal house prices, but most peaks of unaffordability are historically followed by troughs.

The only question is where is the peak? Unfortunately that's something we can only ever answer retrospectively.


webimage-FBDD8628-43-B7-49-A3-9-E60205-B3-A1-F9411.png
 
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I've been living all over the place for the last 10 years, just never really managed to find my feet - but now I really wanna by a house (lol) now I'm back in the UK...

I've made the decision to move back home for 3 years, earn good money but little/zero bills, so I can save up a big wad of cash for a deposit, ready for 2025/26 when hopefully things will be a big more favourable.

Right now I just can't get out of the rent trap, the rent is expensive, everything else is expensive - so hopefully this will allow me to get in with a good chance of not getting scalped when prices and mortgages calm down a bit.
 
GordyR said:
I just thought I'd point out that you can't really put much weight in average sold prices from the large websites like Zoopla or Rightmove, they're incredibly warped and only a tiny sample size.

It's still far from perfect but as far as I'm aware, the best indication of actual transaction prices is the Land Registry, which puts the average UK house price at nearly £71,000 less than Zoopla's and only around £40,000 more than the average FTB price.
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Can you point me at the land registry data?

That's a large difference, and I'm wondering why that exists.

Edit: not trying to prove you wrong, I'm genuinely interested.
 
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Screeeech said:
I've been living all over the place for the last 10 years, just never really managed to find my feet - but now I really wanna by a house (lol) now I'm back in the UK...

I've made the decision to move back home for 3 years, earn good money but little/zero bills, so I can save up a big wad of cash for a deposit, ready for 2025/26 when hopefully things will be a big more favourable.

Right now I just can't get out of the rent trap, the rent is expensive, everything else is expensive - so hopefully this will allow me to get in with a good chance of not getting scalped when prices and mortgages calm down a bit.
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Usually trying to time the market when it comes to housing is a mugs game, but personally in this instance, and with your specific set of circumstance, I think that it's likely to be a wise decision.

Often people find themselves unable to save as fast as house prices are rising, but I don't think you'll have that problem over the next 2-3 years
 
potatolord said:
Can you point me at the land registry data?

That's a large difference, and I'm wondering why that exists.

Edit: not trying to prove you wrong, I'm genuinely interested.
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Of course no problem:

UK House Price Index

landregistry.data.gov.uk landregistry.data.gov.uk

The various indices only measure a small percentage of all transactions each, and crucially they all measure at different stages in the buying process.

For example, the Nationwide and Halifax indices both measure agreed prices, but they don't include cash purchases, whereas Rightmove's index only measures asking prices; which is of course, problematic for several reasons.

Not only does that make it just a measure of market sentiment, and tells us nothing about what buyers are actually willing to pay, but from what I've read, certain developers have been known to artificially inflate prices on their adverts while developments are still in the planning stages, in order to artificially inflate the average asking prices of the areas local to those upcoming developments.

Furthermore, these average numbers can obviously be quite easily skewed by a sudden influx of high valued properties, which is why it's not uncommon to see Rightmove's index show house prices rising even if the market has began to turn in the opposite direction. Sellers take a long time time to catch on and give in.

Anyway, I probably don't know enough about the specifics of Zooplas index to properly answer your question in full, but what I do know is that historically ,the disparity between the various indexes has always increased dramatically at significant market turning points. Make of that what you will.
 
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Zoopla and rightmove etc. also have land registry data. It’s a bit easier to navigate around and compare things. It’s directly connected to the gov data.
 
HangTime said:
Not in so many words, but they are using the argument that FTB aren't buying 1 bedroom flats any more and are in their 30s with kids, needing to spend over £400k on their first home etc in response to my suggestion that FTB spending above overall average is ambitious. Sure there might be some FTB spending over average (especially in London/SE) but they are the ones at the top of the food chain with good jobs or a wedge of cash from somewhere, for the typical FTB (in Wales which is the place in question here), I just think it's not happening, and I believe the data will support that in terms of FTB average being below overall average. That's why in parallel I'm asking about who is dragging down the overall average if the FTBs are buying expensive properties, there has to someone else buying the cheap stuff for that to be true.
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There's also fact that it's getting really hard to have a house on your own. Not for the deposit. But for the income multiplier.

So maybe (this does go for me) you wait until you get in a long term relationship. Then you can double you loan.

All sudden change of you are catapulted higher than you were before.

House prices are higher, long term relationships are coming later. All. Pushes life more into the future.


Often one income isn't enough for much. But 2 is enough for some more "average"

I own 80pc of our house. Simply as I had a big deposit. But at the time my wage wasn't high enough to allow me a 260k house.
 
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GordyR said:
Of course no problem:

UK House Price Index

landregistry.data.gov.uk landregistry.data.gov.uk

The various indices only measure a small percentage of all transactions each, and crucially they all measure at different stages in the buying process.

For example, the Nationwide and Halifax indices both measure agreed prices, but they don't include cash purchases, whereas Rightmove's index only measures asking prices; which is of course, problematic for several reasons.

Not only does that make it just a measure of market sentiment, and tells us nothing about what buyers are actually willing to pay, but from what I've read, certain developers have been known to artificially inflate prices on their adverts while developments are still in the planning stages, in order to artificially inflate the average asking prices of the areas local to those upcoming developments.

Furthermore, these average numbers can obviously be quite easily skewed by a sudden influx of high valued properties, which is why it's not uncommon to see Rightmove's index show house prices rising even if the market has began to turn in the opposite direction. Sellers take a long time time to catch on and give in.

Anyway, I probably don't know enough about the specifics of Zooplas index to properly answer your question in full, but what I do know is that historically ,the disparity between the various indexes has always increased dramatically at significant market turning points. Make of that what you will.
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Ta- will have a look.

I guessed rightmove mmightbgeon asking price- they have incentive to go big...

I paid 20% under asking, so my house will be way off.
 
Just got the new fixed rate sorted. Was originally on 5.9% with Precise at £575 a month the SVR was 7.8%! And bumped up to over £750 per month.
New 5 year fixed with Natwest 4.49% at £600 a month and reduced the term to 22 years instead of 26. Happy with that.
 
marcg868 said:
Just got the new fixed rate sorted. Was originally on 5.9% with Precise at £575 a month the SVR was 7.8%! And bumped up to over £750 per month.
New 5 year fixed with Natwest 4.49% at £600 a month and reduced the term to 22 years instead of 26. Happy with that.
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I'm guessing you were on a specialist lender before at those rates of 5.9%?
 
GordyR said:
There's been multiple corrections over that time frame, and each time they have taken around 2 years to unfold.

Why do some people seem to think that when others are discussing the likelihood of average house prices trending downwards for a short while, that they're suggesting that they believe there is going to be some kind of ultra black swan event, and a complete, catastrophic collapse in value? As far as I'm aware, absolutely no one thinks that.

I've laid out my personal position on this several times in this thread. I think the market has already turned and that they're coming slowly down over the next two years, but that doesn't mean that I don't think they'll go back up again, nor do I think that they're coming down to more affordable levels for average first time buyers any time soon.

But with that said....



Over larger periods of time, economies change dramatically; and over a large enough scale, absolutely everything changes.

Pointing to a 40 year trend as being evidence that the trend is likely to continue is fallacious; there's such a huge number of different factors in play here that it makes looking at price action in isolation, and using it as an indicator of future performance, extremely error prone. And as we begin to reach the extremes of average unaffordability versus average wages, I suspect that doing so will become even less reliable.

Back in the 1800's there was a 60 year straight period of declining house prices, had you been alive then perhaps you would have found yourself thinking that house prices only ever go down over time.

But anyway, no one is expecting some kind of dramatic full reversal of nominal house prices, but most peaks of unaffordability are historically followed by troughs.

The only question is where is the peak? Unfortunately that's something we can only ever answer retrospectively.


webimage-FBDD8628-43-B7-49-A3-9-E60205-B3-A1-F9411.png
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Man, from the 1960's it was mostly 4x wages with a few peaks to 6.

Now it is approaching 10x and people wonder why the latest generations are so angry about it.
 
It's nothing we don't already know, but Ed Conway summed things up with a few good tweets and charts yesterday.

I completely agree with MKW that there are many other factors to consider overall, and that intergenerational bickering about who had it better or worse is not only pointless but undoubtedly driven strongly by bias and probably a bit of cherry picking on either side; however, with that said, we're definitely at the extremes of unaffordability by historic standards.

The last time I checked there was around 1.4 million fixed mortgages coming to an end this year. Ouch.





 
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Richie said:
I'm guessing you were on a specialist lender before at those rates of 5.9%?
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Yeah Precise were a sub prime lender. We used Meridian Mortgages when we bought the house in 2018. £27k deposit on a £170,000 new build. And they still couldn't get us a decent mortgage.
Habito who we used this time were stumped as to why we were using precise. Took habito 2 weeks to change lender, no complaints whatsoever was too easy.

Think we got precise though as i had a default and low credit score (159) at that time and earnt £21,000 and wife £27k. Both have perfect credit scores now and she earns £50k me £37k now.
 
HangTime said:
there has to someone else buying the cheap stuff for that to be true.
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Certainly in the past twenty years, there has been someone else buying the cheap stuff. Property do-er-up-ers and buy to lets. In 2004 when I was looking for my first house with a budget of around £80k, we were constantly outbid by 'cash buyers', and the same was happening when I have been house hunting since divorce.

I think it is plausible that FTB couples, with two full time salaries and no family yet, will have been going after the best house they could get, well beyond what a typical FTB would have got before.

The reason for this is that there are now many younger people on very good salaries. When I started my job, the salary was low and I had to progress my way up. Now, younger people are going straight into jobs at very good salaries.

Obviously this doesn't apply to all young people, but enough that it has an impact. The ones on lower salaries just get left behind.
 
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danlightbulb said:
Certainly in the past twenty years, there has been someone else buying the cheap stuff. Property do-er-up-ers and buy to lets. In 2004 when I was looking for my first house with a budget of around £80k, we were constantly outbid by 'cash buyers', and the same was happening when I have been house hunting since divorce.

I think it is plausible that FTB couples, with two full time salaries and no family yet, will have been going after the best house they could get, well beyond what a typical FTB would have got before.

The reason for this is that there are now many younger people on very good salaries. When I started my job, the salary was low and I had to progress my way up. Now, younger people are going straight into jobs at very good salaries.

Obviously this doesn't apply to all young people, but enough that it has an impact. The ones on lower salaries just get left behind.
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Younger people aren't going into higher paid salaries, the average age of a FTB has increased dramatically and as a natural result their available salary for someone in their 30s is higher than someone in their 20s.
 
GordyR said:
It's nothing we don't already know, but Ed Conway summed things up with a few good tweets and charts yesterday.

I completely agree with MKW that there are many other factors to consider overall, and that intergenerational bickering about who had it better or worse is not only pointless but undoubtedly driven strongly by bias and probably a bit of cherry picking on either side; however, with that said, we're definitely at the extremes of unaffordability by historic standards.

The last time I checked there was around 1.4 million fixed mortgages coming to an end this year. Ouch.


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Good post Gordy, and it's this graph that shows perfectly the difference between high interest rates (10%+) in previous times and how that translates to affordability with todays interest rate/income/house values
 
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Where's the bottom, 2019 prices, or even lower?

One piece of news I thought was kind of disturbing was that the population of the UK has increased a great deal recently, but the GDP had shrunk or stagnated at best.
 
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