When Will The Bottom Of The Housing Market Be?

[HAMISH_MCTAVISH]

After the 50% fall that in effect has already happened, average loan to income ratios at peak just under 6'x's (HBOS / Halifax figures), loan to income ratios 2009 confirmed by Council for Mortgage lenders 3x's.

2+2= eleventy......

You are utterly incorrect. I'll let you figure out why. (hint, check the CMLloan/income ratio stats for 2005 until today, then check the national average income, then check the average income of actual house buyers)

Fsa have said they will cap at 3xs to stop prices going back up if lenders start to lend irresponsibly again.

They said no such thing.

So with loan to income ratios 50% under what they were in 2007 , and historically property prices rising 1 - 2 % above inflation , its going to be 15 years minimum before prices are back up to 2007 levels.

The fallacious reasoning is compounding the more you type. Please stop, it's making my head hurt with the epic scale of your wrongness.

2+2 does NOT equal Eleventy, unless you're from Royston Vasey.

But PLEASE don't believe that is "bumping along the bottom" a 50% property price fall only take prices back to about 2000 - 2002 levels, and nobody believed that prices were "bumping along the bottom" . This is about getting the market back to something that is potentially sustainable. Now the average property price has gone from £200000 (at just under 6x's loan to income ) to £99000 ish at 3x's loan to income, that is NOT A BARGAIN PROPERTY that is a property that would have been valued at £99000 if not for a few short years of HUGELY irresponsible lending that broke the banks and has left 6 1/2 million with negative equity they will never see the back of for 2 decades or more.

Tubbs!!!!!! Is that you?

[threesixty]

From what I see, everything that was fake is being unwound. The money from 2001 - 2007 is not real. It has no basis, no backing, no product that underpins it's value. When all that "funny money" has been unwound then prices will stablize. The problem is the Government have borrowed money to try and avoid a major crash but that's just going to make the "purge" take longer.

So realistically, whether they let the world crash now, or crash in slow motion (like it's doing now), prices will get back to the place they were before the artficially cheap money was flooding the market after 2001. That means a 1 bedroom flat in Walthamstow should cost about £80-100k, and a house about £170K + etc.. When prices reach those levels I think the bottom will have been reached. It looks like jumping in before that could mean you lose a lot of money.

The bottom line is there is just not the money around to support these inflated prices, no matter what the sellers think their properties are worth. Too many high earners have lost their jobs for ever. I've just heard that they are going to shut down the tax havens like monaco etc.. That means even LESS money available to buy these homes.

2001 prices dude...

[renterbob]

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."

- President F.D. Roosevelt, 1933

Do you have valuable items?

Hide 'em.

[Sybil13]

Post #26

HPC Veteran

Group: Members

Posts: 1,226

Joined: 9-December 08

Member No.: 18,022

Bull or Bear? Neither

QUOTE (Sybil13 @ Mar 30 2009, 10:03 PM)

After the 50% fall that in effect has already happened, average loan to income ratios at peak just under 6'x's (HBOS / Halifax figures), loan to income ratios 2009 confirmed by Council for Mortgage lenders 3x's.

You reply:

2+2= eleventy......

You are utterly incorrect. I'll let you figure out why. (hint, check the CMLloan/income ratio stats for 2005 until today, then check the national average income, then check the average income of actual house buyers)

Ans: Not sure what you are saying, are you saying that just because lenders are lending 50% lower than in 2007 it does not effect property prices?

I am just going on what the CML was quoted as saying in reply to the FSA's threatened cap of 3x's income and how it would effect the market. This was in the Telegraph:

Q. How much are people borrowing at present?

A: Mortgage brokers claim that the regulators are overreacting, to a problem that is largely no longer there, as more banks and building societies have already radically restricted access to mortgage finance. According to the latest Council of Mortgage Lender figures, the average first-time buyer was borrowing exactly three times their income last month – the lowest lending multiple since April 2005. Those securing a property for a house move borrowed on average even less.

Q. Will these changes have any affect on house prices?

A: Melanie Bien, a director of independent mortgage brokers Savills Private Finance says: "'If borrowers are unable to obtain mortgages greater than three times their salary, property prices could potentially fall considerably further than the 10 per cent or so forecast for this year. Borrowers simply won't be able to obtain a big-enough mortgage to get the property they want, particularly as they will also need to put down a sizeable deposit as lenders remain unwilling to lend at higher loan-to-value. Sellers will have to drop prices further if they are to achieve a sale."

Ray Boulger of the mortgage brokers John Charcol added: "It seems inevitable that this will have a negative impact on house prices particularly as the average house price is more than three time the average salary." According to the Halifax the average house price is £160,327, with the average income being £26,000. end quote

I said:

Fsa have said they will cap at 3xs to stop prices going back up if lenders start to lend irresponsibly again.

You said:

They said no such thing.

I answer: It was in ALL the papers after the FSA report, just done a quick search found this link not got time to find original one I read "Times " I think

http://www.economonkey.com/2009/03/16/mort...es-your-salary/

I said:

So with loan to income ratios 50% under what they were in 2007 , and historically property prices rising 1 - 2 % above inflation , its going to be 15 years minimum before prices are back up to 2007 levels.

You replied:

The fallacious reasoning is compounding the more you type. Please stop, it's making my head hurt with the epic scale of your wrongness.

2+2 does NOT equal Eleventy, unless you're from Royston Vasey.

I reply : I was just quoting: Martin Weale, Director of the National Institute of Economic and Social Research when he recently said there may well be 50% falls also said that after the market bottomed:

He said " The normal growth rate for houses ought to be 1pc or 2pc above inflation. So if inflation is 2pc or so we should see house prices rising by at the most 4pc each year end quote

I said:

But PLEASE don't believe that is "bumping along the bottom" a 50% property price fall only take prices back to about 2000 - 2002 levels, and nobody believed that prices were "bumping along the bottom" . This is about getting the market back to something that is potentially sustainable. Now the average property price has gone from £200000 (at just under 6x's loan to income ) to £99000 ish at 3x's loan to income, that is NOT A BARGAIN PROPERTY that is a property that would have been valued at £99000 if not for a few short years of HUGELY irresponsible lending that broke the banks and has left 6 1/2 million with negative equity they will never see the back of for 2 decades or more.

You asked:

Tubbs!!!!!! Is that you?

I answer : Not this is not Tubbs just someone quoting what she read and seemed to be confirmed at:

http://www.lovemoney.com/news/the-property...uoofolrf0010002

TODAY

[jackofalltrades]

Nice one, that's what im hoping for , the place we have just rented we got down

from £995 to £825pcm , the place would be on the market at the moment for

around £300k-£260k ,well out of our price range.

But what about the inflation issue ,i've read some of the threads and have a basic

understanding ,will my £25k depreciate as fast as houseprices?

Are any of us immune from greed? Untill we are life will favour the energetic and the mathematicians.The answer is to become European and not Anglo Americans.75 years tops and we have to cope with all this shit!

[HAMISH_MCTAVISH]

Post #26

HPC Veteran

Group: Members

Posts: 1,226

Joined: 9-December 08

Member No.: 18,022

Bull or Bear? Neither

QUOTE (Sybil13 @ Mar 30 2009, 10:03 PM)

After the 50% fall that in effect has already happened, average loan to income ratios at peak just under 6'x's (HBOS / Halifax figures), loan to income ratios 2009 confirmed by Council for Mortgage lenders 3x's.

You reply:

2+2= eleventy......

You are utterly incorrect. I'll let you figure out why. (hint, check the CMLloan/income ratio stats for 2005 until today, then check the national average income, then check the average income of actual house buyers)

Ans: Not sure what you are saying, are you saying that just because lenders are lending 50% lower than in 2007 it does not effect property prices?

I am just going on what the CML was quoted as saying in reply to the FSA's threatened cap of 3x's income and how it would effect the market. This was in the Telegraph:

Q. How much are people borrowing at present?

A: Mortgage brokers claim that the regulators are overreacting, to a problem that is largely no longer there, as more banks and building societies have already radically restricted access to mortgage finance. According to the latest Council of Mortgage Lender figures, the average first-time buyer was borrowing exactly three times their income last month – the lowest lending multiple since April 2005. Those securing a property for a house move borrowed on average even less.

Q. Will these changes have any affect on house prices?

A: Melanie Bien, a director of independent mortgage brokers Savills Private Finance says: "'If borrowers are unable to obtain mortgages greater than three times their salary, property prices could potentially fall considerably further than the 10 per cent or so forecast for this year. Borrowers simply won't be able to obtain a big-enough mortgage to get the property they want, particularly as they will also need to put down a sizeable deposit as lenders remain unwilling to lend at higher loan-to-value. Sellers will have to drop prices further if they are to achieve a sale."

Ray Boulger of the mortgage brokers John Charcol added: "It seems inevitable that this will have a negative impact on house prices particularly as the average house price is more than three time the average salary." According to the Halifax the average house price is £160,327, with the average income being £26,000. end quote

I said:

Fsa have said they will cap at 3xs to stop prices going back up if lenders start to lend irresponsibly again.

You said:

They said no such thing.

I answer: It was in ALL the papers after the FSA report, just done a quick search found this link not got time to find original one I read "Times " I think

http://www.economonkey.com/2009/03/16/mort...es-your-salary/

I said:

So with loan to income ratios 50% under what they were in 2007 , and historically property prices rising 1 - 2 % above inflation , its going to be 15 years minimum before prices are back up to 2007 levels.

You replied:

The fallacious reasoning is compounding the more you type. Please stop, it's making my head hurt with the epic scale of your wrongness.

2+2 does NOT equal Eleventy, unless you're from Royston Vasey.

I reply : I was just quoting: Martin Weale, Director of the National Institute of Economic and Social Research when he recently said there may well be 50% falls also said that after the market bottomed:

He said " The normal growth rate for houses ought to be 1pc or 2pc above inflation. So if inflation is 2pc or so we should see house prices rising by at the most 4pc each year end quote

I said:

But PLEASE don't believe that is "bumping along the bottom" a 50% property price fall only take prices back to about 2000 - 2002 levels, and nobody believed that prices were "bumping along the bottom" . This is about getting the market back to something that is potentially sustainable. Now the average property price has gone from £200000 (at just under 6x's loan to income ) to £99000 ish at 3x's loan to income, that is NOT A BARGAIN PROPERTY that is a property that would have been valued at £99000 if not for a few short years of HUGELY irresponsible lending that broke the banks and has left 6 1/2 million with negative equity they will never see the back of for 2 decades or more.

You asked:

Tubbs!!!!!! Is that you?

I answer : Not this is not Tubbs just someone quoting what she read and seemed to be confirmed at:

http://www.lovemoney.com/news/the-property...uoofolrf0010002

TODAY

You're making my head hurt again. Please learn how to use the quote and /quote within tags []......

Lets start at the beginning.

Average salary is somewhere around 25K. Average house prices at peak were around 7 or 8 times that amount.

Average salary of actual house buyers is markedly higher than average salary among the general population. Effectively, it is an average salary of only the top 70% or so of earners, not the total 100% of people.

Therefore the average loan to income ratio's of actual house buyers (as reported by CML) was never 6-1, or 7-1 etc. It was somewhere in the 4-ish to 1 ratio at peak, and has now dropped to closer to 3 - 1. (I don't have the numbers to hand, but look them up)

The FSA did not say they will cap lending. The press speculated they would. What they actually said was that they would go away and think about it, as there were pro's and cons to capping and not capping. So maybe, in 6 months or so, they might possibly come back and cap either LTV or LTI, at some unknown level, if they think it is needed.

In the meantime, and back to reality, we now have councils offering 100% LTV mortgages, and a Government owned bank offering 4 times joint income mortgages. Which way do you think the government is leaning......

House prices have not fallen 50% from peak. They have fallen an average of 20% to 25% from peak. Every indicator, both haliwide surveys and land registry confirm this.

[jonb]

Nice one, that's what im hoping for , the place we have just rented we got down

from £995 to £825pcm , the place would be on the market at the moment for

around £300k-£260k ,well out of our price range.

But what about the inflation issue ,i've read some of the threads and have a basic

understanding ,will my £25k depreciate as fast as houseprices?

£260k-£300k is way overpriced, even by 2007 standards. Based on rental yields it would have sold for £200k back then. You should be looking at between £120k to £160k if you were to buy it today.

The best time to buy is definitely not now, because there is a supply shortage, caused by people asking for silly amounts of money for their properties, and very little available for prices people are prepared to pay.

[LettingsLady]

In answer to your question I think the bottom of the market will be late spring 2010. I then believe that prices will remain low for several years to allow the market to adjust to the dangerous and ridiculously over-inflated prices of the last few years that have forced people in to a false sense of security. I have been telling people for years to be careful but do they listen? No - and I've been in the business for 25 years. Do you know why they don't listen - because they only hear what they want to hear.

That goes for some people on here too that only seem to consider the views that agree with what they want to happen.

I apologise to the die hard, often eccentric but loveable (renterbob - I love the mouse) and majority posters on here - but sometimes I have to read things twice or three times 'cos I think I'm in the Twilight Zone. I know I'm still a newbie but the head hurting goes for me too.

I'm not a bear but in this bear market why would anyone be a bull? I wouldn't buy now unless at 20-30% under value (not asking price) but I don't want people to be repossessed or lose their jobs either. It's a disaster and it's not getting 'fixed' anytime soon. And for all those that keep asking what happens at the end of the fixed rate if they're in negative equity just because they can't remortgage doesn't mean their own lender won't help them. Either go on to the low variable rate or if you're not prepared to gamble on this then take a new product with your existing lender.

[renterbob]

In answer to your question I think the bottom of the market will be late spring 2010. I then believe that prices will remain low for several years to allow the market to adjust to the dangerous and ridiculously over-inflated prices of the last few years that have forced people in to a false sense of security. I have been telling people for years to be careful but do they listen? No - and I've been in the business for 25 years. Do you know why they don't listen - because they only hear what they want to hear.

That goes for some people on here too that only seem to consider the views that agree with what they want to happen.

I apologise to the die hard, often eccentric but loveable (renterbob - I love the mouse) and majority posters on here - but sometimes I have to read things twice or three times 'cos I think I'm in the Twilight Zone. I know I'm still a newbie but the head hurting goes for me too.

I'm not a bear but in this bear market why would anyone be a bull? I wouldn't buy now unless at 20-30% under value (not asking price) but I don't want people to be repossessed or lose their jobs either. It's a disaster and it's not getting 'fixed' anytime soon. And for all those that keep asking what happens at the end of the fixed rate if they're in negative equity just because they can't remortgage doesn't mean their own lender won't help them. Either go on to the low variable rate or if you're not prepared to gamble on this then take a new product with your existing lender.

Yes, but the rates are high.

Lettingslady, I appreciate your posts are very sensible and moderate.

May I therefore nominate you for HPC estate agent of the year 2009.

I hope you still in business through this mess, and sincerely hope you plan for the worst...the HPC is gonna be very bad. You don't have to say it, but please prepare for it, just in case. If it doesn't happen - hey, fine, all is well.

You seem like a lovely lass so please - prepare.

[HAMISH_MCTAVISH]

Yes, but the rates are high.

Actually, they're not that high, for most mainstream lenders.

Lloyds and C&G have a CAP on their SVR rates at BOEBR+ 2% for example. To put that in perspective, someone that got a tracker back in 2007 would be paying just 1% today (BOE 0.5% plus tracker of 0.5%), and if the deal ended today would be paying just 2.5%. WHen they first took out the mortgage they would have been paying around 6%.

People coming off 2 year fixes today are literally counting down the days til their "special" deal ends, as they'll save a fortune on SVR.

Given the number of banks offering low and reasonably long term fixes at the moment, 3.99% for 5 years for example, they are certainly not expecting rates to rise more than a few points for several years at least.

[HAMISH_MCTAVISH]

In answer to your question I think the bottom of the market will be late spring 2010. I then believe that prices will remain low for several years to allow the market to adjust to the dangerous and ridiculously over-inflated prices of the last few years that have forced people in to a false sense of security. I have been telling people for years to be careful but do they listen? No - and I've been in the business for 25 years. Do you know why they don't listen - because they only hear what they want to hear.

That goes for some people on here too that only seem to consider the views that agree with what they want to happen.

I apologise to the die hard, often eccentric but loveable (renterbob - I love the mouse) and majority posters on here - but sometimes I have to read things twice or three times 'cos I think I'm in the Twilight Zone. I know I'm still a newbie but the head hurting goes for me too.

I'm not a bear but in this bear market why would anyone be a bull? I wouldn't buy now unless at 20-30% under value (not asking price) but I don't want people to be repossessed or lose their jobs either. It's a disaster and it's not getting 'fixed' anytime soon. And for all those that keep asking what happens at the end of the fixed rate if they're in negative equity just because they can't remortgage doesn't mean their own lender won't help them. Either go on to the low variable rate or if you're not prepared to gamble on this then take a new product with your existing lender.

Great post.

[Emy74]

Anyone telling you they know roughly when the bottom will be is lying. It could be in 6 months as well as could be in 20 years. The bottom could be 25% from peak or it could be 70% nobody knows.

If I was you I would keep an eye on the market and decide for yourself. Anything is possible over the next few years.

[HAMISH_MCTAVISH]

I think we will be in for a very distinct two phase crash.

The first one is now, where prices have fallen back and aided further by shortage of finance.

Then there will be the lull/partial come back that McTavish explains will happen as a result of stimulus measures.

Unfortunately, if that does happen, it will be combined with a surge in inflation requiring interest rates to rise which will put housing back in the doldrums for another perhaps more protracted but slower phase.

Yes, what you're discussing there is called a recovery....

In seriousness though, I would agree that obviously rates will increase as soon as the wider economy and the housing market start to recover. They'll have to, otherwise inflation will become a problem.

To answer the OP, it's probably wise to sit things out for another few months or so, but be prepared to re-evaluate. Trying to time the bottom of the market is not the biggest worry, getting into a long term fix at low rates will more than compensate for missing the bottom by a few percent as rates will certainly rise over the mid term, but be aware that getting a good mortgage deal (in terms of lowest possible rates) will become less likely after the market has turned than before it.

As an example, missing out on 2% of mortgage rate discounts would cost you an extra £30,000 on a 150K I/O mortgage in the first ten years alone. That is equivalent to a 20% fall on a 150K property. Now whilst it would be slightly less on a repayment mortgage, it is obvious that interest rates make a really big difference to the real, lifetime, cost of a house.

So I'd stay out for now in the reasonable expectation prices will be lower in 9-12 months, but be prepared to move very quickly when the broader economy starts to turn. It's not the final few percent of prices you should worry about, it's the interest rates, and they'll swing up much faster than prices do.

Edited March 31, 2009 by HAMISH_MCTAVISH

[libspero]

Unfortunately, if that does happen, it will be combined with a surge in inflation requiring interest rates to rise which will put housing back in the doldrums for another perhaps more protracted but slower phase.

Yes, what you're discussing there is called a recovery....

So I'd stay out for now in the reasonable expectation prices will be lower in 9-12 months, but be prepared to move very quickly when the broader economy starts to turn. It's not the final few percent of prices you should worry about, it's the interest rates, and they'll swing up much faster than prices do.

It really is the twilight zone today

Edit: Clarity

Edited March 31, 2009 by libspero

[Bloo Loo]

Actually, they're not that high, for most mainstream lenders.

Lloyds and C&G have a CAP on their SVR rates at BOEBR+ 2% for example. To put that in perspective, someone that got a tracker back in 2007 would be paying just 1% today (BOE 0.5% plus tracker of 0.5%), and if the deal ended today would be paying just 2.5%. WHen they first took out the mortgage they would have been paying around 6%.

People coming off 2 year fixes today are literally counting down the days til their "special" deal ends, as they'll save a fortune on SVR.

Given the number of banks offering low and reasonably long term fixes at the moment, 3.99% for 5 years for example, they are certainly not expecting rates to rise more than a few points for several years at least.

C+G have a rang of mortgages eg 85% LTV 2 year fix currently 5.89% +fee.

it is silly to assume that at the end of the fix the price will drop to SVR currently 2.5%, as one would have to say? why pay 5.89% now when I can have 2.5% SVR......the reason...rates are extremely likely to go up.

or you could go for a 7 year fix, providing you have a 40% deposit. and a £995 fee

I cant see any of this giving the vital FTBs any real hand up in the coming year, unless the price of the house falls to meet the long term wages/lending critieria.

[HAMISH_MCTAVISH]

It could be - but the need to raise rates explains why house price rises will lag economic recovery. That was certainly true of the 90's recession which I'm sure you are using your personal experience to extrapolate. That time was different in that it wasn't a debt deflation scenario so you perhaps need to open your mind beyond your own ken.

Well, inflation, which would be the only reason rates rise, would preclude the possibility of debt increasing through deflation occurring. Whilst wage inflation will lag price inflation, there will not be a widespread wage deflation if there is broader economic and price inflation.

The main difference between now and the 90's is interest rates. We have a reasonable expectation of being able to control inflation with interest rates in the range of 3% to 7% this time. Last time rates briefly touched 15%, and were in double digits for years, because they started from a much higher level, in fact they were so high, they probably caused the recession to begin with. Thats why the recovery this time should be much quicker than last time, and why I don't expect housing to bump along the bottom for a decade. It was high rates that killed a housing recovery last time, we don't have that problem this time.

[Caveat Mortgagor]

But what about the inflation issue ,i've read some of the threads and have a basic

understanding ,will my £25k depreciate as fast as houseprices?

Whether you should worry about inflations depends on what you intend to spend your £25k on.

If you are thinking of spending it on tvs, dvd players and other essential items food energy etc that will go up in price then you have a dilemma.

If you intend to use it as a deposit on a house and the purchase cost of that house is falling, does the price of fish really matter? Remember, house prices are not determined by inflation.

[ccc]

Whether you should worry about inflations depends on what you intend to spend your £25k on.

If you are thinking of spending it on tvs, dvd players and other essential items food energy etc that will go up in price then you have a dilemma.

If you intend to use it as a deposit on a house and the purchase cost of that house is falling, does the price of fish really matter? Remember, house prices are not determined by inflation.

Of course. But interest rates are - or according to the BoE's mandate - should be.

And interest rates have a rather large impact on house prices. So they are linked.

Nobody knows what is going to happen. However to give people an insight I would recommend having a look at what has happened to interest rates since 1971. In my opinion this period has shown one thing. A truly FIAT World currency system cannot be controlled with long term low interest rates. The only time the two have been combined has led to the system collapsing.

Too much temptation to simply increase the money supply in this sort of system, with such low interest rates - leads to disaster. That has been shown pretty clearly.

Anyone getting a mortgage today should be budgeting for double digit interest rates. Contingency. Whether they happen or not is questionable. However considering most mortgage are over 25 years ? I think the likelyhood of them NOT happening is about 1000-1.

Unless of course you believe Broon.

[HAMISH_MCTAVISH]

Remember, house prices are not determined by inflation.

Correct, but house prices are generally determined by consumer confidence. Which will increase dramatically when the wider economy recovers to the point that any kind of serious inflation kicks in.

Also by availability of mortgage funding, which is increasing now and will increase still further when the wider economy picks up and a house price recovery looks on the cards.

And finally by supply and demand, and whilst there is not an overall shortage of housing, there is a big shortgage of housing in many of the areas where people actually want to live, and where the employment exists to support them. WHilst the housing charity states there are a million empty homes, even they admit that half of them are returned to occupancy within 6 months as they are only empty for refurbishment, sale or probate. And most of the remaining are either derelict, or just in places where they are not needed. Having 1600 empty homes in Caithness and Sutherland (as The Times reported) does no good to the Teachers or Policemen in London who need a place to live, they're 500 miles away!!!!!!

[porca misèria]

They have, and the rate of acceleration is increasing.

Yow! A third derivative!

[Bloo Loo]

Well, inflation, which would be the only reason rates rise, would preclude the possibility of debt increasing through deflation occurring. Whilst wage inflation will lag price inflation, there will not be a widespread wage deflation if there is broader economic and price inflation.

The main difference between now and the 90's is interest rates. We have a reasonable expectation of being able to control inflation with interest rates in the range of 3% to 7% this time. Last time rates briefly touched 15%, and were in double digits for years, because they started from a much higher level, in fact they were so high, they probably caused the recession to begin with. Thats why the recovery this time should be much quicker than last time, and why I don't expect housing to bump along the bottom for a decade. It was high rates that killed a housing recovery last time, we don't have that problem this time.

the main difference between now and GC1 was that we have milions of extremely leveraged homeowners.

smal rises in interest rates are very painful....in GC1, large rises were "needed" to curb borrowing....large rises will be needed to protect the pound and ward of import induced price inflation.

[i wanna house]

I wouldn't buy now unless at 20-30% under value (not asking price)

Would you mind explaining the difference between asking price and value. Round my way if I could be confident of getting 30% off asking price there would be a whole load more to choose from, but would'nt 30% off just be a more realistic value ?

[Caveat Mortgagor]

Of course. But interest rates are - or according to the BoE's mandate - should be.

And interest rates have a rather large impact on house prices. So they are linked.

Nobody knows what is going to happen. However to give people an insight I would recommend having a look at what has happened to interest rates since 1971. In my opinion this period has shown one thing. A truly FIAT World currency system cannot be controlled with long term low interest rates. The only time the two have been combined has led to the system collapsing.

Too much temptation to simply increase the money supply in this sort of system, with such low interest rates - leads to disaster. That has been shown pretty clearly.

Anyone getting a mortgage today should be budgeting for double digit interest rates. Contingency. Whether they happen or not is questionable. However considering most mortgage are over 25 years ? I think the likelyhood of them NOT happening is about 1000-1.

Unless of course you believe Broon.

My response was directed at the OP. The OP was worried that the £25k savings would be eroded by inflation.

The answer is simple. Inflation means his/her money will buy fewer chocolate bars, units of gas/electricity, tv's etc, but will not have any bearing on size of deposit for a future house purchase. The price of houses is what the OP needs to concentrate on. If they increase then the deposit is eroding. If house prices fall then the deposit is strengthening.

There are of course many other factors to consider over the term of a mortgage, but on this occasion the OP was woreried about deposit erosion - my response was a direct answer on this subject.

Edited March 31, 2009 by Nick Dastardly

[Godley]

Nice one, that's what im hoping for , the place we have just rented we got down

from £995 to £825pcm , the place would be on the market at the moment for

around £300k-£260k ,well out of our price range.

But what about the inflation issue ,i've read some of the threads and have a basic

understanding ,will my £25k depreciate as fast as houseprices?

Nobody really knows.

The only thing you really have to worry about is the apocolyptic scenario and really if that happened house buying would be the last thing on your mind.

I think we are going to see high inflation not hyper (zim, arge style hyper). If you are concerned and you are not going to buy for some time go and look at NSnI RPI linked bonds.

I am really not concerned, I was in January but I have rebalanced my rational.

Soon we will have the gold rampers on and the doomsters on this thread. You pay your money you takes your chances.

[getdoon_weebobby]

Well, inflation, which would be the only reason rates rise, would preclude the possibility of debt increasing through deflation occurring. Whilst wage inflation will lag price inflation, there will not be a widespread wage deflation if there is broader economic and price inflation.

The main difference between now and the 90's is interest rates. We have a reasonable expectation of being able to control inflation with interest rates in the range of 3% to 7% this time. Last time rates briefly touched 15%, and were in double digits for years, because they started from a much higher level, in fact they were so high, they probably caused the recession to begin with. Thats why the recovery this time should be much quicker than last time, and why I don't expect housing to bump along the bottom for a decade. It was high rates that killed a housing recovery last time, we don't have that problem this time.

inflation in iceland 20%

nominal house prices faliing 5% (falling 20%+ in real terms)

dont think 20% inflation year on year will lift house price.

well not immediately anyway

even if we get the same we will still have time to jump into property

weimer republic - 1000% over 8 years/10 years =3% month on month

still time to jump in

people will be to worried where this inflation came from at first to consider buying property.

obviously at some point inflation will lift nominal house prices but we will all of jumped in by then ;-)