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The Masked Tulip

Why Tight Credit Could Be Good For First-Time Buyers

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How much better then for first-time buyers to rent for a few years - a decade even - and to enter the market for their dream home when prices have normalised a little and when they are better able to afford it.

http://www.moneyweek.com/blog/why-tight-credit-could-be-good-for-first-time-buyers-00241.aspx

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When I bought my first house interest rates were around 15%

Was this a bad thing for me as a first time buyer? - No.

Because it meant house prices were affordable and if I could pay my mortgage when rates were 15% I could afford my mortgage for life.

I would be terrified taking on a mortgage when interest rates were historically low because I would have to pay more for the house and when interest rates inevitably went up I might not be able to afford the repayments and be trapped in negative equity.

Yet another myth about how times were hard under Mrs Thatcher - it was actually the best time ordinary working people will ever have in my lifetime.

:blink:

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Yet another myth about how times were hard under Mrs Thatcher - it was actually the best time ordinary working people will ever have in my lifetime.

:blink:

If you said that in Wales, Scotland or the North of England I suspect your life would be suddenly cut short.

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If you said that in Wales, Scotland or the North of England I suspect your life would be suddenly cut short.

I live in the North West of England.

The Scots are obviously going to hate Cameron also

because if one party gives you sh*t loads of other people's money you are going to think they are brilliant

And if another party says you can't have it any more because its not fair and its unaffordable you are going to think they are b*stards

Simples.

:blink:

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Another fkn decade?!!

un_to_head.jpg[/img]

Get this party started already. I've waited long enough.

Another decade, and I can access my pension. Tax-free lump sum to buy me a house B)

Edited by porca misèria

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Another decade, and I can access my pension. Tax-free lump sum to buy me a house B)

Great post indeed. Why don't people think?

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When I bought my first house interest rates were around 15%

Was this a bad thing for me as a first time buyer? - No.

Because it meant house prices were affordable and if I could pay my mortgage when rates were 15% I could afford my mortgage for life.

I would be terrified taking on a mortgage when interest rates were historically low because I would have to pay more for the house and when interest rates inevitably went up I might not be able to afford the repayments and be trapped in negative equity.

Yet another myth about how times were hard under Mrs Thatcher - it was actually the best time ordinary working people will ever have in my lifetime.

:blink:

And the long term result of her housing policies have been what exactly?

The lessons from the housing bust of the early 90's was a even bigger possible housing collapse...

Do you seriously think a Tory govt would have stopped the wealth creation that was house prices?

Not enough new social housing has been built as a direct consequence of Thatcher policies don't forget the social housing stock sale was nothing more than a political manoeuvre to try and ensure more people voted Tory.

Rates only peaked at 15% momentarily when the ERM farce was unravelling, although looking at the historical base rates clearly the past 17 years there has been a policy of reducing interest rates I would argue to fund growth via debt.

They've increased debt to such huge levels now that it's impossible to put rates back at 10%+ without crashing the entire economy.

Edited by interestrateripoff

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Do you seriously think a Tory govt would have stopped the wealth creation that was house prices?

Actually I do. The continuity of government would have done that.

After that? New labour promised no government, we got total government.

Edited by Tonkers

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The base rate will remain low. Until it doesn't.

I speak to alot of CAB/LA people in the housing area. They all say, Wait till the rates rise - tsunami! And they're expecting it soon.

I say, Nah - give it ten years.

Chat today with a mid-'30s single woman who advises on housing for the borough council. She still didn't look happy when she heard that - bought in 2007 on variable rate, not tracker: "I'll be there for the rest of my life". Either way - rates up or stagnant - I have to agree. That elegant dress is beginning to look a bit tight on her.

CBs have managed this very well, and I can't see them being pushed off course. It's not right. It's pernicious. But whachagonnado?

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Do you seriously think a Tory govt would have stopped the wealth creation that was house prices?

Mrs Thatcher knew the importance of money supply.

So the credit bubble wouldn't've happened. Rising credit would've taken interest rates up, thus self-regulating to a far, far smaller boom.

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Mrs Thatcher knew the importance of money supply.

So the credit bubble wouldn't've happened. Rising credit would've taken interest rates up, thus self-regulating to a far, far smaller boom.

Greenspan was a monetarist tell me how did that work out?

http://en.wikipedia.org/wiki/Monetarism

In the late 1980s, Paul Volcker was succeeded by Alan Greenspan, a leading monetarist.

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Guest Elephant_In_The_Room

If you said that in Wales, Scotland or the North of England I suspect your life would be suddenly cut short.

as opposed to having your life put on hold by New Labour.

I wonder how long it will be before the average FTB is a f***ng pensioner.

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Guest Elephant_In_The_Room

Rates only peaked at 15% momentarily when the ERM farce was unravelling, although looking at the historical base rates clearly the past 17 years there has been a policy of reducing interest rates I would argue to fund growth via debt.

Something that your average Labour voter and Trade Union jackass conveniently forgets

Edited by Elephant_In_The_Room

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I'm hoping the majority of the drops will end before then, say 3-5 years. Then again, I have thought that for a couple of years. Wish they'd stop meddling (thanks Merv...) and just let nature take it's course. Then again, I'm not looking to settle down - love the freedom of renting right now tbh. Certainly ten years you will have wanted to have bought if you've been planning to but waiting for sanity for the last few years. The rise may well be underway again in ten years time - who knows. Though obviously these cycles take many years - one generation's worth. I'm happy with the timing of this boom tbh, by the time I'm looking to settle it will serendipitously at the bottom of the cycle after all! I'm already saving thanks to stupidly low rent B)

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If you said that in Wales, Scotland or the North of England I suspect your life would be suddenly cut short.

Thing is a lot of 'ordinary' people did very well in these times. Not as well as how they thought they were doing under Labour of course. But that was just one big scam really.

As for would Maggie have followed in the same steps as Labour did ? Who knows.

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I would be terrified taking on a mortgage when interest rates were historically low because I would have to pay more for the house and when interest rates inevitably went up I might not be able to afford the repayments and be trapped in negative equity.

I am thinking of buying just now - possibly madness yes but just been to view a place that ticks all the boxes and I could live in for years.

The big down side is that even with low rates my repayments would be in the region of £800 (repayment) assuming a rate of ~6% from the lender - if rates just go up a couple of percentages and the repayments get quite scary very quickly.

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Interest rates were at 15% for a whole year between October 1989 untill October 1990 , they did peak again at 15% for a day in 1992 before John Major was forced to pull out of the ERM.

However going back to the late 80's miras on the first £30,000 of mortgage ( quite a fair size mortgage back then ) bought the rate back down to 12% , people having only borrowed 3x salary and large annual pay rises made it possible for many people to ride the storm. It was only those who bought at the very top of the boom and maxed out of earnings ratios that got really hurt.

Today just a 1% rise in rates from lets say a 5% mortgage to a 6% rate would have a 20% increase in interest payments. People who borrowed 5x salary with no or little pay rises are going to be sitting on a bomb for much much longer that anyone at the end of the 80's was.

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And the long term result of her housing policies have been what exactly?

The lessons from the housing bust of the early 90's was a even bigger possible housing collapse...

Do you seriously think a Tory govt would have stopped the wealth creation that was house prices?

Not enough new social housing has been built as a direct consequence of Thatcher policies don't forget the social housing stock sale was nothing more than a political manoeuvre to try and ensure more people voted Tory.

Rates only peaked at 15% momentarily when the ERM farce was unravelling, although looking at the historical base rates clearly the past 17 years there has been a policy of reducing interest rates I would argue to fund growth via debt.

They've increased debt to such huge levels now that it's impossible to put rates back at 10%+ without crashing the entire economy.

My point was that high interest rates are a good thing for FTB's - which is what the thread is about.

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Four years ago, I owned a house with my ex for a little over a year and sold just before the troubles started due to an amicable break up. We didn't make anything to speak of on the house, and I paid off the remainder my car loan with the split proceeds leaving me debt free, age 30, no assets to speak of.

Since then, I've moved and now rent and share and have managed to put away a total of £43K in 3 1/2 years on a £30K-36K salary. The whole point of my saving was originally to build up a deposit, to be in a position to get a mortgage.

The point of the story is this:

I can't see myself buying for the foreseeable future, and plan to continue to make my capital work for me in other ways for at least the next 10 years. I can remain flexible, continue to rent, continue to save and invest, and buy I house outright should I wish much much later in life.

As a single fella, whilst owning a house has many positives, being flexible, renting and saving/investing far outweigh any of the advantages of home ownership in the current. I can leave my job tomorrow, and take a year out. Move anywhere, any time. I feel in control and have choices.

Buying a property makes no sense at all for me at the moment, on any level.

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I am thinking of buying just now - possibly madness yes but just been to view a place that ticks all the boxes and I could live in for years.

The big down side is that even with low rates my repayments would be in the region of £800 (repayment) assuming a rate of ~6% from the lender - if rates just go up a couple of percentages and the repayments get quite scary very quickly.

It's a very difficult decision and a very uncertain time to buy

At the end of the day, if you desperately need somewhere to live then it is easy for someone not in this position to say you should wait.

Negative equity only becomes a problem if you are forced to sell - if you buy a house as a home and can afford the mortgage payments then in the long run you are certain to ok.

These are tough times for young people - much tougher than they were in the 80's IMO.

:unsure:

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My point was that high interest rates are a good thing for FTB's - which is what the thread is about.

I was in the bank a few months ago and was asking about mortgages as part of a general review of my finances.

I made a glib comment about how I wished rates would rise so it would be easier for me to buy a house. The guy in the bank was quite taken aback and said something along the lines of - you do mean your repayments would rise, to which I responded it would not matter because any increase in rates would lead to reduced competition for buyers and also a few more sellers being more keen to sell as there would not be the same demand. He didn't disagree, but then said him and his girlfriend were looking to move abroad (NZ or Canada) as they were priced out too.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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