Soldato
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
They haven't, in real terms prices are down. But mortgage rates have also fallen from their peak now so it'll probably pick up this year.
UK house prices drop 13.4% from peak in real terms
Inflation masks extent of decline from March 2022 record level
www.ft.com
Caporegime
What you have to remember is that money isn't just money. Imagine house prices if you couldn't borrow money. What would they be?
Decades ago many households had 1 or 1.5x income rather than the 2 incomes most homes need to survive. You can take out a mortgage over 30 years if you want, making a very expensive house feel cheaper every month. Yes you will pay back insane amounts in interest over the decades but you can still afford it.
More and more people are living at home longer or moving back home to save.
More and more people are getting money from family to buy.
Interest rates were at historic lows for a long time.
Rent is more expensive than a mortgage so people will do whatever it takes to own.
All of these things mean that house prices have been able to keep going up for a long time now.
Its also now at the point where if there was enough of a burst of the bubble, the government would almost certainly step in and tell the banks to give people payment holidays and guarantee their exposure.
I think the prices will climb at a slower rate for a while but they will keep going up for a long time.
They haven't, in real terms prices are down. But mortgage rates have also fallen from their peak now so it'll probably pick up this year.
UK house prices drop 13.4% from peak in real terms
Inflation masks extent of decline from March 2022 record level
Going by these figures is silly.
In "real terms" prices are not down over a reasonable period of time at all.
Real facts:
Median UK salary in 1999 - £17,803
Average House prices end of 1999 - £82,000
Median UK salary in 2023 - £34,963
Average UK house price in 2023 - £284,691
So wages have only doubled/gone up 100%, yet house prices have gone up 3.5 times/250%
Even looking at it since the housing crash in 2008 is bad.
Median salary was £25k and now it is only £35k so only a 40% increase.
However average uk price dropped to about £155k during that time/the crash and is now £284k so an increase of 83%
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Its not silly, just facts.
We have massive demand and limited supply, its not going to change anytime soon.
Caporegime
They haven't, in real terms prices are down. But mortgage rates have also fallen from their peak now so it'll probably pick up this year.
UK house prices drop 13.4% from peak in real terms
Inflation masks extent of decline from March 2022 record level
Thats lovely but how many people have had inflation busting pay rises? I don't believe for a second that is true. Thats just pushing numbers around on a page to prove something you are trying to prove. I haven't had a pay rise for a few years. My mortgage payment has shot up from £850 to £1250. Everything else has gone up by around 30-50% I reckon. How on earth are prices on houses down in real terms. Yes if you look at inflation in isolation against house prices you can come to that figure but thats not the reality for pretty much anyone.
The houses I am looking to buy have dropped about 5% whilst the mortgage payments have gone up by about 40%. Nothing about that suggests that house prices have dropped in real terms. Thats just a weird way to look at the reality that for a lot of people they are probably 20% or more worse off than they were a few years ago and their purchasing power has fallen off a cliff. If anything, I would say that in real terms, house prices have increased dramatically.
On a £600k mortgage over 25 years at 1.5% I would have paid back £720k. On that same amount and term now I would be paying them back £1,030k. So that 5% discount is costing me £300k extra on a £600k mortgage... thats not a real term price drop in any sane persons book.
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It is silly. I never said house prices haven't dropped a bit from their peak of last year. Clearly they have.
However as demonstrated, over the last 25 odd years, house prices have MASSIVELY outpaced wage growth.
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Why not? Find a new job then because most people are getting pay rises and while during the peak of inflation they lagged behind now they are outstripping it.
They have though and its demonstrably true, what you are talking about is affordability. Of course rate rises impact that significantly.
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I can't wait to grab my ankles next year once my 1.7% rate ends.
We're in the very early process of looking for a bigger house and it seems the biggest variable right now isn't what we could afford deposit wise but it's just whatever bonkers number the interest rates at the time will be.
We're in the very early process of looking for a bigger house and it seems the biggest variable right now isn't what we could afford deposit wise but it's just whatever bonkers number the interest rates at the time will be.
Yes, but you said how can it keep on outpacing during rising rates - answer, it hasn't. But people conflate house prices with affordability and here we are.
e.g https://www.lloydsbankinggroup.com/...gher-rates-offset-affordability-benefits.html
At the end of the day this is the case.
Prices won't drop off a cliff as there are too many people/institutions waiting to jump in.
You can't suddenly add millions on homes.
These interest rates will toy with the median house price. But our population is still growing (only due to immigration) so housing is still in short supply.
Add in endless meddling by the government (99pc mortgages, help to buy etc) and you'll only push prices up.
Every one of these schemes only helps the people using it but makes it harder for the next cohort.
Huge mortgage debt is crippling. But in a supply/demand scenario with limited supply I don't see how huge house costs can be avoided.
I'm sure if you suddenly doubled the average salary houses would jump in price and you'd still be left with the same take home.. Just a bigger mortgage.
Unless regulation is brought in to stop BTL and also cap mortgages at 3x salary (as an example) you'll never get a hold on prices. So many people (me included) borrowed the maximum the bank would allow.
If the bank allowed 6x..I, and almost everyone else, would be using that to buy the next rung up. Except it wouldn't be the next rung up. Prices would just increase
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I think you've slightly got the wrong end of the stick in relation to what you quoted from me.
I was replying to someone who said that people on 99% mortgages will be relying on houses prices going up, and asking "will appreciation rates for houses raise faster than interest rates for this to work"
The question i asked which you quoted was more rhetorical, as i do not think it is possible for house price rises to keep the trend that they were increasing at, with the rate rises and such meagre wage growth. Things like 99% mortgages etc however might keep the bubble going for longer, but it will still just end up in it popping like it has done before.
But banks just handing out massive mortgages like they were candy to anyone and everyone is what ultimately led to the 2008 crash and colossal amounts of foreclosures etc.
If governments try and counter interest rate rises with offering silly 99% mortgages and 6x salary mortgages etc, it will just lead to ruin again as the absurd house price growth difference between wage growth will continue.
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Man of Honour
I fixed at 1.39%, which ends in July. Also fixed for 2 years at the time as the plan was always to move this year as we've outgrown this house
Ours is looking to go from about £900 to £1300. Sucks but not quite as bad as that guy! Ouch indeed
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Personally I think 99pc mortgages are a step to far and it shouldn't go ahead.
The multiplier definitely shouldn't be raised either.
These things just push prices up and hurt the people following.
Caporegime
Whats the relevance of "real term price drops" when they have no actual significance in the real world though. As I said, its just pushing numbers around in a vacuum and saying "house prices are 13% lower in real terms". I can guarantee you that not a single person in the country has looked at getting a mortgage on a bigger house and said "thank god for that real term price drop on the house I want". No, they are saying "I can't move because the real world price increase on that house I want is about 30-40%".
So what is the relevance of it?
Yeah this is why I don't think the salary multiplier should be raised. If anything it's a bit high.
Ours would jump from 900 to 1300-1400 I think.
Although not a death sentence, add in energy, council tax, food etc and it would be life changing.
That's my issue with the stress tests. I suspect they were done on thier own "can they handle 8pc"...not "can they handle 8pc + every other cost going up".
My salary has increased too. if I maxed out now at 100k more mortgage I'd be living not hand to mouth, but nice holidays etc would be long gone.