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Should you sell

Uk Housing

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I don't often post here but have been a member for a loooong time!

This article sums up the housing market incredibly well. Prices currently being forced up by cash rich and equity rich buyers who want to lock in long-term cheap financing and perceive the 15% drop in prices to be good value.

This type of buyer will soon run out and the fundamentals will once again take hold.

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I don't often post here but have been a member for a loooong time!

This article sums up the housing market incredibly well. Prices currently being forced up by cash rich and equity rich buyers who want to lock in long-term cheap financing and perceive the 15% drop in prices to be good value.

This type of buyer will soon run out and the fundamentals will once again take hold.

Article

A cursory glance at major UK mortgage lenders' websites reveals some dramatic changes: let's look at the widespread and popular 2 year fixed rate mortgage (which then turns to standard variable rates). 2 year gilt yields are at 1.15%, and 2 year swap rates, the rate at which banks should be able to borrow, are at 2.21%. So let's say you are a customer who's looking to refinance and either have 15% equity remaining in your property after recent falls, or you are a new buyer with a 15% deposit: such clients can probably take a 2 year fixed mortgage at 5.5% to 5.75%. So the banks are taking at least 3% in margin on a mortgage loan (assuming banks can fund at or near swaps). What if you only have a 10% deposit, one of the most popular products in the UK in recent years? You will probably have to pay between 6.5% and 7%. This means banks are charging between 4% and 4.5% of margin for these mortgages with less equity in them. BUT: if you are someone with a healthy balance sheet and a good deposit of 25%, then you can get the above mortgage for between 3.5% and 4%, at an affordable margin of 1% to 1.5%.

I wonder how much money is being drained by the margins to be placed into building up capital requirements, money that should not enter the real world.

If that moves into the wider economy through reduced spending it could deepen the recession.

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