Caporegime
This. Plus any savings you have are a bigger % of the value
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
Caporegime
Don
On lower priced house it might not even be a 20% drop either, house price downturns tend to hit more expensive houses harder as people look to downsize when their affordability is challenged.No because 20% of my house is a lot less than 20% of the house I want.
Soldato
No because 20% of my house is a lot less than 20% of the house I want.
You're assuming 20% across the board which is not necessarily the case.
Your current 200k home may drop 20% and the 350k home you want may drop 10%...
Factors like house style, size and location affects demand and thereby price changes.
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I'm surprised this had to be explained.
Caporegime
I know, but as others have suggested, expensive houses tend to drop a bit more than affordable ones. We are looking at expensive houses.
I think that this effect could be even more pronounced than in previous downturns.
There was such a rush for larger, more expensive homes suited to prolonged lockdowns and working from home during covid, that prices in that range saw the largest increases over the last three years.
As a result they might very well see by far the largest decreases in any downturn.
There was such a rush for larger, more expensive homes suited to prolonged lockdowns and working from home during covid, that prices in that range saw the largest increases over the last three years.
As a result they might very well see by far the largest decreases in any downturn.
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I think the fact that a lot of employers are still maintaining a level of home working means that the demand factors remain high for those types of property. If we had a proper reset and the majority were working away from home 4-5 days a week then a reversal of the trend would be more likely.
I also think there is an element of larger homes not necessarily meaning more expensive in the sense that people may have moved to locations further away from working hubs such as London. So instead of a small £750k commuter belt home people have a £750k country pile. I wrote a thread about my expectations here a few years ago: https://forums.overclockers.co.uk/t...ends-on-housing-market.18889738/post-33670341.
What I think would be 'interesting' (bad word) is if there was a proper recession with high unemployment meaning the people who were earning London wages but living in the sticks lose their jobs. In this scenario I could see it having a more profound impact because the nice houses in more rural areas that have been snaffled up by these types in recent years would come back on the market and could be more akin to the scenario you are describing whereby these larger homes fall in price a lot because their high price growth hasn't been driven by people employed locally.
Lol so do problems happen rapidly.
I can’t disagree with any of that.
However, what little data we have at the moment would seem to suggest that both London as well as exactly the kind of larger country properties we’re both describing have seen the biggest drops so far.
Regardless, it’s far too early to say, we’re only speculating at this point.
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People need to look at how much rent they will burn to how much the value drops.
Some people are burning 36k a year on renting. After two years they lose 72k a 20% to 10% drop of property price.
Best time to buy is to catch it at the right inflationary moment.
Properties drop and wages rise a lot faster.
Your personally inflation and your wage rise are pretty important factor towards servicing the debt speed.
I know an area were by 1 bed flats are selling between 900k to 1.2million.
Btw mortgage advisors are crap, you are better off doing yourself.
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And what if you're not burning rent you're living without any other options?
We all know that area btw, it's city centres in the south.
Caporegime
That depends. If there are a lot of people who can't afford their houses then why would there suddenly be loads of other people with the money to buy them at 95% of their peak value.
As an example, we were looking at houses around £1.1m. With a £400k deposit at our current rate the monthly payment would be just under £3k. At the rate we would be getting now that would be about £4200/month. Thats a lot of extra money to be finding every month and thats with a large deposit. If you had a £200k deposit you would be looking at paying about £1750 more a month purely on extra interest.
A lot of people even on decent salaries would struggle to find an extra £1500 month long term.
Who knows what will happen. The market is a weird thing.
Soldato
I’m on a fixed rate until February 2025, and even now I’m bricking it, and that’s with me going from £48k to £84k since we signed a 5 year fixed in 2020. The only light at the tunnel we have is that as long as house prices don’t utterly crash between now and then, we’ll be at about 50% or so LTV.
I know it sounds like I’m worrying over nothing, but things are getting utterly out of control it seems.
I know it sounds like I’m worrying over nothing, but things are getting utterly out of control it seems.
Soldato
To go from 48k to 84k (circa £1500/month increase after tax) and be worried about rate increases, you either have stretched yourself considerably or there is plenty of stuff that can be cut back (unless you also had 1-2 kids during that period?)
Suspended
Interesting listening to Blunkett on QT tonight.
He said that whilst the Labour government he served in did target the BOE with the rate setting linked to inflation they did not view it as holding the bank responsible to use the only tool that they had in isolation.
Which is pretty much the opposite of what I think most of us believe is happening right now.
Of course that government never had the same issues and never had to deal with what is going on now and hence its difficult to say what they would have done in order to assist the BOE.
He said that whilst the Labour government he served in did target the BOE with the rate setting linked to inflation they did not view it as holding the bank responsible to use the only tool that they had in isolation.
Which is pretty much the opposite of what I think most of us believe is happening right now.
Of course that government never had the same issues and never had to deal with what is going on now and hence its difficult to say what they would have done in order to assist the BOE.