Prof

2-3 years ago, when banks offered very low fixed rates, with tie-ins, they knew what they were doing. Like drug dealers, they were getting people hooked. When rates are low, there is really only one way they will go, and that`s up. They dangled the carott to tempt people. Those who are coming off a fixed deal at around 4% (or even lower) may well be facing 8% SVRs for 12 months, or more. It`s payback time for the lenders. These discounted deals may have been OK if base rates had stayed at 3.5-4%, but how likely was that ? The lenders are like bookmakers, they stack the odds in their favour. IMO, 6.5% base rate will be the new 15%. We seem to have had a prolonged period of HPI at 10%+, so more people will have jumped on the bandwagon, and more people will have grabbed handfulls of "free" money. We live in a world were "long term" has become an ever shorter period of time, people only think of the next few years, or even months. I believe that when base rates were below 4%, a lot of people thought that it was going to last forever, so took on ever larger debts. Many will get their fingers burnt, but will the next generation learn from their mistakes ?

Indeed. They`ve had the "gain", now`s the time to feel the pain. Funny how a lot of people are so short sighted when it comes to finance. Looks like the gravy train is close to hitting the buffers.

Dear Mr Wallbank, From what you have told us, it seems that you have spent tomorrow`s wages today. Is it any suprise that you are now feeling the pinch ? You stated that you had unsecured debt, so you took out a second mortgage to pay off that debt and do some home improvements. Well, that`s a bit dumb, isn`t it ? Why did you not simply pay off your some, or all of your debts, before taking on the second mortgage? Unless there was something seriously wrong with your house, I suggest it would have been better to wait, before you bought that new kitchen, with money that you had not yet earned. Also, you are complaining about increasing household bills. I`m no economist, but even I realise that the cheap money you, and millions of others have borrowed, would eventually lead to increased inflation. You have contributed to your own financial problems. Nevermind, at least you have a nice kitchen, and a house that is worth loads more than it was 3 years ago. Meanwhile a few of us have been trying to save a bit of money, instead of enjoying the boom of the past few years. We look forward to slightly higher interest rates, as it will give us a little more interest that will help pay for our new kitchens.

What about the environmental impact of a higher population ?

She`s removed the her OP, due to the stick she was getting !

I don`t have a degree, but I do have to spend most of my working life going up and down ladders to fit TV aerials. A lot of my customers tell me that they wouldn`t do what I do. Looks like having a couple of kids and not working much, pays around the same salary as my work (without the personal risk). Still, it gives me a warm feeling to know that the tax I pay helps others to populate our planet with offspring that are likey to follow in their parents footsteps.

People can afford to be apathetic - their houses are worth loads more every month !

If people haven`t been caving, they are likely to end up living in one.

Amazing ! The current situation, perfectly described in one paragraph.

I predicted a crash a year or two ago. I admit that I got that completely wrong. I predicted problems for some of those with cheap 2-3 year mortgages a couple of years ago. Bingo ! Maybe my first prediction will be proved correct (but a bit later than expected), helped by this scenario.

How how do IRs have to be before it affects house prices ? 6%, 8%, 10% ? I believe that it may be lower than we think. We have had a fairly long period of relatively low base rates, around 4%. Humans, being humans, will start to feel "comfortable" with a sustained period of low IRs. I suspect that there are quite a few people out there with fixed rates at around 4.5-5%. The longer rates stay low, the more people will borrow and believe that rates never go up. A rise in base rates from 4%-6% is a 50% increase. When this filters through people`s monthly payments, it must make a difference. Even if a mortgage payer hasn`t MEWed, they may have taken on extra credit card debt, or not bothered to save any money. If this is the case, a sudden rise in mortgage payments can`t be good. I have a feeling that 6.5%+ base rates will almost certainly have an big impact on house prices, maybe even a crash. Having said that, I`m one of those that predicted that prices couldn`t carry on increasing, and that was a couple of years ago ! I`m beginning to doubt my own predictions. As every month goes by, I`m saying that it`s all going to implode, but then Nationwide come out with "House prices have gone up 1.1%" ! The only thing that I do feel confident in predicting is that as this "boom" carries on, the probability and severity of a crash increases.

Typical of Nationwide. "Buying Frenzy" Around where I live/work (South Birmingham) the people who put "SOLD" on the For Sale signs must be having a long summer holiday. I can`t type "Buying Frenzy" without laughing. I`ve just noticed that it was RB that used the word "Frenzy", not Nationwide. Having said that, I`ve read the Nationwide report, and I`m laughing even more. To sum up the article - "Buyers - Everything is fine ! Carry on borrowing. BoE/Chancellor - We know that it`s all getting a bit silly, but please don`t stop the party."

Why would the vendors expect to get asking price ? A fairly sensible offer has been made. The vendors need to sell soon. Do the vendors not know that IRs are on the way up, and the last few rises will soon be filtering through to people`s monthly payments? All the REAL indicators point towards lowering prices, but the mentality is still "house prices only go up". Either withdraw the offer, or reduce it further, IMO.

Affordable by a few. A postman and his partner (who is a sales assistant in a department store), for example, might find that affording a property, virtually any property, is unaffordable. Many people in low(ish) paid work will be in the same sitaution. While the banks are relaxing lending rules to accomodate high house prices, then houses will be "affordable". As you say, "what matters is that prices are affordable now". If you only live for today, that`s fine, but most mortages are 25+ year loans that need to be paid back. If Postie and his other half do manage to take on a mortgage and get themselves a property, surely they are going to find their finances stretched and vulnerable to interest rate rises, increases in household bills and council tax. Listening to some bulls, the only way is up, up, up. A crash won`t happen, buy a property at all costs. I would advise caution, now more than ever. Booms have a nasty habit of turning to bust.

At the expense of virtually everything else ? Perhaps it won`t take a large increase in unemployment, or a rise in interest rates to bring house prices down. Maybe, just maybe, a large proportion of the population will "see the light" and refuse to pay ever increasing property prices. Real money is made by working for it. It seems that many people in this country think that they can make money out of property. To a degree, this is true, but when you remove all the VI spin, it`s money earned that actually pays for property, not a 10 x salary mortgage.

Excellent post. Why spend tomorrow`s wages today, then have to pay back more than you spent ? I`d rather save today`s wages, then spend it tomorrow when it is worth a little more (and I know that all of the bills are paid).

The failure of endowment policies has been brushed aside by lenders, they now offer interest only mortgages - no need to worry about an endowment performing poorly. I think that the stock market crash in the early 2000`s helped to push up property prices, in a way. As people stopped investing in the markets (either directly or throught pensions/endowments), their money had to go somewhere - property.

A landlord telling a tenant that he should buy ! While she was making money out of her tenant, there is no way she would have been so "helpful" and encouraged him to buy. So much for her wise investment. It is quite enjoyable to read stories like this. A lot of fools have jumped on the BTL bandwagon, when they should have invested elsewhere for their retirement. When will people learn that any "scheme" that seems to offer good returns will usually come with a degree of risk ? Anyone who takes on a mortgage for a BTL property is usually taking on a 25 year investment. It isn`t going to be plain sailing all the way, as many probably expect. In my opinion, her tenant should be as "wise" as his landlord was when she bought her BTL properties. He should sit tight and wait for his opportunity. If she is losing money, and the property market in the area is slowing, he should soon be able to buy a home at a reasonable price.

The lenders know what they are doing, if you try to "beat the system", chances are you`ll end up being worse off. Ultimately, the best mortgage to take on is one that you can afford, and preferably pay off early. Unfortunately, it seems to me that people are mainly bothered about their property value going up, the mortgage being a slight inconvenience. As interest rates have increased, people seem to focus more on their mortgage deal. When house prices start to fall, that monthly mortgage payment will be less appealing. Rather than take on more debt when rates have been low, I have been concentrating on paying off my mortgage early. During the housing boom I have felt (or made to feel) that I`m missing out, or financially naive. 6%+ base rates don`t worry me, I wonder why ?

If they took the first option, why didn`t they just take on a "normal" 2 or 3 year deal at around 4.5%, without the nasty tie-in ? I`ll answer my own question - because they wanted to buy "something nice" with the money "saved" by the low rate. This deal is crazy. Who would take on a deal like that with a base rate + 2% tie-in ? It`s obvious that a lender who offers a really low rate is going to get their money back somehow or other. I bet that the majority of people that took this kind of deal were those that would struggle to afford repayments at "normal" rates, so how are they going to manage when it goes to 7.5%+ ? I spoke to a few people about these ridiculously low rates when they were offered around 2-3 years ago. I did predict that they could be bad news for those who took them on. Obviously it probably won`t be disasterous for all that are on this deal, but I expect some will end up in financial trouble.

Let`s not forget that it`s all about affordability ! 2.29% is affordable, so go for it ! It`s deals like this that help to fuel HPI. Portman may claim that they look at the borrower`s ability to pay at the higher rate, but how do they know what the rate will be in 2 years time ? Better to start someone on a more realistic rate, then there`ll be less chance of a nasty suprise in the future. After paying a mortgage at 2.29% for a while, most people will adjust their spending/lifestyle to this low rate. It will come as a big shock to many with this deal when the 2 years are up. If they haven`t taken on extra debt, or had a cut in income then they will be OK, otherwise it`s bad news. There is no such thing as a free lunch.

Yes, Amy, haven`t you done well ? Please could you give us an update on your situation in a year or two. I would be interested to see how things are going. You had better hope that the economy doesn`t take a downturn, as not only will it affect the value of your home, but I would have thought that if finances get tight, your customers won`t be bothered if their skin isn`t. A bit early to assume that your gamble has payed off.

True. The secret to making money out of any investment is to sell when you are in profit. Your signature says it all. No point feeling smug while you are sitting in a pile of equity, as that equity may well disappear more quickly than it appeared. A pound in the bank is worth two in the property ? That may become the truth in the near future.

I also see a lot of houses/flats for sale in the Midlands area. It`s been said many times before (by myself, I must admit), but it does feel like things are changing. At best, I think prices may struggle to stay where they are. The next rate rise will be the one that starts to produce some real results.

If my predictions prove to be correct, then I must admit that it might bring a small smile to my face. If there is any justice, the crash will only burn the fingers of those who "invested" in property or have spent the "profit" in their property (MEWed). Oh, and I won`t mind if the odd estate agent or landlord "feels the pinch". It is not different this time. In the words from a song by my favourite band - "We can go from boom to bust, from dreams to a bowl of dust".