Mortgage Rate Rises

[danlightbulb]

If we ignore the risk and look at it purely from a numbers perspective then as mentioned, it isn’t all too different.

What is different is how we have got here and what the impact will be.

It is the low rates that have helped push up prices, because of the maths as you say. For the sake of argument it costs the same monthly amount now as it did 20 years ago.

--> High prices + low rates = low prices + high rates.

However, it is those low rates that have pushed up prices. So if rates rise now, the impact will be far far bigger than the impact of high rates back then.

And its not like buyers now have much of a choice do they. Either accept the prices or don't buy and rent for ever.

 

[krooton]

That's the thing, buying in at the low price + high rate period, which then changed to a high price + low rate period is a benefit.

Buying in at high price + low rate and moving to low price + high rate usually means you losing your house.

 

[Mercenary Keyboard Warrior]

What is different is how we have got here and what the impact will be.

It is the low rates that have helped push up prices, because of the maths as you say. For the sake of argument it costs the same monthly amount now as it did 20 years ago.

--> High prices + low rates = low prices + high rates.

However, it is those low rates that have pushed up prices. So if rates rise now, the impact will be far far bigger than the impact of high rates back then.

And its not like buyers now have much of a choice do they. Either accept the prices or don't buy and rent for ever.

No, the rates haven't pushed up prices
Supply and demand has pushed up prices, the rates just dictate where the cap is on what people can afford.

 

[danlightbulb]

No, the rates haven't pushed up prices
Supply and demand has pushed up prices, the rates just dictate where the cap is on what people can afford.

The low rates have enabled prices to keep rising by maintaining affordable monthlies yes.

They have allowed people to borrow more than would be the case if rates were higher, for the same income.

I know low supply of housing comes into it as well yeah.

 

[Mercenary Keyboard Warrior]

The low rates have enabled prices to keep rising by maintaining affordable monthlies yes.

They have allowed people to borrow more than would be the case if rates were higher, for the same income.

I know low supply of housing comes into it as well yeah.

The rate is irrelevant in that if there is a shortage of supply at any given demand point the the price will rise to where supply meets demand, the fact its a house is irrelevant.
Its person vs person at this point, which is where the rates come in as they limit what people can afford, so they control the demand curve to some extent, although lenders ultimately control that point.

You need more supply to limit prices, so they intersect with demand at a lower point, your never going to get away from that.

If rates go up significantly there will be a point houses have to start coming down in price, where that is however will depend on how much demand continues at current pricing.

 

[413x]

Also the cash rich will be licking their lips. And decent fall in house prices and they will be snapped up. So any fall is unlikely to be a cataclysmic fall. Although anyone FTB or with poor LTV buying now could be negative for a while

 

[danlightbulb]

I agree with you completely.

Im just saying that low rates have helped enable the increase in prices. You said it better than me totally.

They do go hand in hand though.

 

[Richie]

When I had a quick look at rates with Halifax, a 10 year fix was cheaper than 5 years, which would suggest they expect rates to drop again within that time?

I just renewed with Halifax and their 10 year fix is slightly higher than 5 years which, itself, is cheaper than the 2 year fix:

2yr - 3.4%
5yr - 3.29%
10yr - 3.49%

 

[Bald-Eagle22]

Just looked at my 3X BTL , will go from 2.39 to 4% in January on a 5 year fix , I’m suspecting it will be nearer to 5 .

Not that I’ll get any sympathy here but that will be £350 a mo th of my bottom line . Time to sell up now swallow the CGT bill and live happily ever after.

The EPC monster is looming and although mine are all grade B I just don’t want to get involved in it anymore. Only ones that suffer is tenants.

 

[Doobedoo]

What is different is how we have got here and what the impact will be.

It is the low rates that have helped push up prices, because of the maths as you say. For the sake of argument it costs the same monthly amount now as it did 20 years ago.

--> High prices + low rates = low prices + high rates.

However, it is those low rates that have pushed up prices. So if rates rise now, the impact will be far far bigger than the impact of high rates back then.

And its not like buyers now have much of a choice do they. Either accept the prices or don't buy and rent for ever.

The maths wasn’t quite right random numbers were used. We had a figure of £100,000 used yet house prices with at an average of less than £60k in the 90’s.

1990​

Spiralling interest rates led to the housing crash at the start of this decade[5]. Even though property prices dropped by 20%, the average cost of a home was still £58,153 – twice as much as just five years earlier.

And a pint of milk cost 30p, compared to 52p today[6].

1995​

Slowly but surely, house prices started to creep up again. You could now expect to pay, on average, £59,939 for your new pad.

In 1997, house prices were on average 3.6 times workers’ annual salaries[7].

2000​

New millennium, new increase in house prices. And at almost £30,000 in five years, it was quite a big one. The average cost of a home reached £89,597.

House prices today​

Home buying has never been that affordable. But it’s become less so in the last 40 years. In 1960s the average house price was just £2,530, compared to a staggering £281,161 today[13].

History of house prices in Britain | SunLife

Historic timeline of UK house prices from SunLife. See how much house prices (and other things) have risen since the 1950s and if our wages could keep up.

www.sunlife.co.uk

 

[Scam]

I’m only thinking out loud but it says in the 1990s the spiralling interest rates led to a crash. Do you think that there are so many fingers in the BTL and property pie now that government will still do anything they can to stop a crash? I think so, let’s remember the ridiculous stamp duty holiday which, during an unprecedented pandemic, with the NHS struggling, all workers losing jobs left right and centre.. they deemed it necessary to spend perfectly good money propping up a market that simply didn’t need it..

 

[chrcoluk]

Kind of off topic I know, but interestingly the 0% CC deals been thrown at me are not really getting worse.

Luckily my debt is less than my liquid cash, and will be fully paid of at the current rate I am paying it off by end of next year. So I dont think I will be exposed to the rates other than my rent going crazy. I am hoping the S21 reforms somehow still go through, which means the rent rise review/appeal law would then actually mean something and might protect me next year.

 

[BUDFORCE]

I highly doubt there will be any form of property crash.

Property has nothing to do with supply and demand in terms of people looking for homes. Property is the UK has now become an investment, and there are lots of rich people with lots of money. It literally doesnt matter if interest rates go up and Joe Peasant cannot afford his mortgage. I look at landlord portfolios where there own streets, literally hundreds of properties worth millions and millions and the only reason historically they have even been taking mortgages is because the interest rates have been so low they are making more money investing the capital, which sounds insane.

The demand for UK houses isnt going away. All that will happen, and one person hit the nail on the head earlier is the rich/poor divide will grow even further.

 

[_Jimlad_]

house prices wont drop, one thing god is not making any more of is land, and this country is still massively over populated.

agree rich poor divide will grow.

 

[CapitalOne]

house prices wont drop, one thing god is not making any more of is land, and this country is still massively over populated.

agree rich poor divide will grow.

Except in places like Singapore or Holland. There is plenty of land, it’s either locked away for speculation or there aren’t the people/materials available to build on it or the services to back that up. I think approx 90% of UK land is not built on which of course is not saying all that 90% can be built on but it’s still not full.

 

[413x]

Just looked at my 3X BTL , will go from 2.39 to 4% in January on a 5 year fix , I’m suspecting it will be nearer to 5 .

Not that I’ll get any sympathy here but that will be £350 a mo th of my bottom line . Time to sell up now swallow the CGT bill and live happily ever after.

The EPC monster is looming and although mine are all grade B I just don’t want to get involved in it anymore. Only ones that suffer is tenants.

So many people selling up. It's an issue.

 

[413x]

I highly doubt there will be any form of property crash.

Property has nothing to do with supply and demand in terms of people looking for homes. Property is the UK has now become an investment, and there are lots of rich people with lots of money. It literally doesnt matter if interest rates go up and Joe Peasant cannot afford his mortgage. I look at landlord portfolios where there own streets, literally hundreds of properties worth millions and millions and the only reason historically they have even been taking mortgages is because the interest rates have been so low they are making more money investing the capital, which sounds insane.

The demand for UK houses isnt going away. All that will happen, and one person hit the nail on the head earlier is the rich/poor divide will grow even further.

Yeah I said that.

Properly will dip a bit. But anyone hoping for a bargain will miss out.

Even small drops are interesting to big investors.

If you can get 10 houses with 10 percent off... You can now get 11.

 

[Greebo]

When I had a quick look at rates with Halifax, a 10 year fix was cheaper than 5 years, which would suggest they expect rates to drop again within that time?

They do. Same way inflation isnt expected to stay high or electric prices.

I have recently done the work's electric.

1 year fixed was the most expensive by miles and they got cheaper and cheaper the longer you fixed it. Manage to get 24p per kwH on a 5 year deal. Not great but not bad considering where we are.

10 years is a long time.

 

[200sols]

When I had a quick look at rates with Halifax, a 10 year fix was cheaper than 5 years, which would suggest they expect rates to drop again within that time?

 

[Haggisman]

So a 3 year fix would be the best option to renew when the rates have dropped again?