Will The Banks Raise Prices?

[Ash4781]

Companies seem to be exerting their dominance by raising prices. Will the banks follow suit? Mortgage demand looks weak and with potential for the mpc to change policy direction if fixed rates move up in anticipation should we look to arrange finance before the gates close? The telegraph has an article that the worry is mortgage demand will fall off a cliff!

[Bobajobbob]

Where are fixed mortgage rates today? Would a 50bp rise in the base rate affect the 5 or 10 year fixed mortgage rates? Not by much and certainly not for long if demand drops further.

Those on SVR and discount rates would be affected quite rightly but given how low these are right now anyone who complains can't afford their mortgage anyway.

[kilroy]

Where are fixed mortgage rates today? Would a 50bp rise in the base rate affect the 5 or 10 year fixed mortgage rates? Not by much and certainly not for long if demand drops further.

Those on SVR and discount rates would be affected quite rightly but given how low these are right now anyone who complains can't afford their mortgage anyway.

I think we will see steepening in the curve. By the time those on SVRs think "ooh, I tihnk i will fix" it will be too late. Long end is much more sensitive to inflation expectations than the short end

[SarahBell]

Free banking to end?

[longtomsilver]

I think we will see steepening in the curve. By the time those on SVRs think "ooh, I tihnk i will fix" it will be too late. Long end is much more sensitive to inflation expectations than the short end

+1

I know of lots of people who feel they are having it good now and can't see past their own noses. All say they will remortgage when rates start to climb and assume the mortgages on offer now will still be around in 2-3 years time.

2 Year fix - waste of time

5 Year fix - makes some sense

10 Year fix - makes lots of sense

20year+ fix - no chance, banks aren't stupid

[Pole]

+1

I know of lots of people who feel they are having it good now and can't see past their own noses. All say they will remortgage when rates start to climb and assume the mortgages on offer now will still be around in 2-3 years time.

2 Year fix - waste of time

5 Year fix - makes some sense

10 Year fix - makes lots of sense

20year+ fix - no chance, banks aren't stupid

that's what I was wondering. Which is better:

- buy now at higher price and fix for 10years on current low IRs

- wait for prices to come down but end up with the higher IRs mortgage?

Edited January 6, 2011 by Pole

[douggggy]

that's what I was wondering. Which is better:

- buy now at higher price and fix for 10years on current low IRs

- wait for prices to come down but end up with the higher IRs mortgage?

`the computer you want will always cost $1000`....

[longtomsilver]

that's what I was wondering. Which is better:

- buy now at higher price and fix for 10years on current low IRs

- wait for prices to come down but end up with the higher IRs mortgage?

It's a gamble and my hedge is 70s style inflation over the next 10 years. There will be alot more wierd stuff happening in the meantime including deflation/contraction of money supply etc etc this uncertainty will have to be priced in to mortgage rates offered as our dire situation becomes clearer. One friend has just borrowed £1million against his business (GP surgery) and bought a farm house with plenty of acres as the rate was so low and is expecting a similar outcome but being a bit more dramatic as he is hoping to become self sufficient.

[Sour Mash]

that's what I was wondering. Which is better:

- buy now at higher price and fix for 10years on current low IRs

- wait for prices to come down but end up with the higher IRs mortgage?

It's pretty bloody obvious that when you will be paying back over a couple of decades, you are better off borrowing a smaller amount of capital at a time of higher interest rates than a larger amount of capital at a time of lower interest rates even if the monthly payments work out the same at the time of borrowing.

It's also pretty damned obvious that it's better to buy a long-term asset which goes through price cycles when it's relatively cheap than when it's near all time highs.

[Lepista]

It's pretty bloody obvious that when you will be paying back over a couple of decades, you are better off borrowing a smaller amount of capital at a time of higher interest rates than a larger amount of capital at a time of lower interest rates even if the monthly payments work out the same at the time of borrowing.

It's also pretty damned obvious that it's better to buy a long-term asset which goes through price cycles when it's relatively cheap than when it's near all time highs.

Particularly when you consider over-payments.

[longtomsilver]

It's pretty bloody obvious that when you will be paying back over a couple of decades, you are better off borrowing a smaller amount of capital at a time of higher interest rates than a larger amount of capital at a time of lower interest rates even if the monthly payments work out the same at the time of borrowing.

It's also pretty damned obvious that it's better to buy a long-term asset which goes through price cycles when it's relatively cheap than when it's near all time highs.

+1

This time however I think the game has changed and we can't look to the past as a guide to future performance. It's blindingly obvious house properties are unaffordable and a correction (crash) would normally be on the cards. Labour got drunk on borrowed money as well and invested it in social engineering, non jobs, nothing tangible or of intrinsic value and have a mortgage so huge it will never be paid off legitimately and there are no assets in the case of national bankruptcy, unlikely to default as this will dent our pride. It doesn't matter where you buy in the cycle now as we are all fkucek and the banks don't take the base rate setters seriously anymore and will price to their own risk models.

I don't want to buy and am happy renting to be perfectly honest. It's the wife you see. I am unemployed as of today(house husband) and have the paper work in front of me. It is a joint mortgage and the paperwork is asking us to choose who owns what percentage of the home (equity) I was thinking of putting 1% for myself and 99% for the wife. I don't know ??

Edited January 6, 2011 by tomposh101

[easy2012]

+1

I know of lots of people who feel they are having it good now and can't see past their own noses. All say they will remortgage when rates start to climb and assume the mortgages on offer now will still be around in 2-3 years time.

2 Year fix - waste of time

5 Year fix - makes some sense

10 Year fix - makes lots of sense

20year+ fix - no chance, banks aren't stupid

Bank just go into the market to 'buy' the money from the market.

Pretty sure you can do 20 years fix if the sum is big enough as there is a 20+ years gilt market and the fix rate can be priced from there.

[winkie]

It's pretty bloody obvious that when you will be paying back over a couple of decades, you are better off borrowing a smaller amount of capital at a time of higher interest rates than a larger amount of capital at a time of lower interest rates even if the monthly payments work out the same at the time of borrowing.

It's also pretty damned obvious that it's better to buy a long-term asset which goes through price cycles when it's relatively cheap than when it's near all time highs.

Why do you always give good advise?

[Pauly_Boy]

Well If I was buying now, I'd get a 5yr fix at 3.9%, I hope it doesn't disappear anytime soon!

[scepticus]

Companies seem to be exerting their dominance by raising prices. Will the banks follow suit? Mortgage demand looks weak and with potential for the mpc to change policy direction if fixed rates move up in anticipation should we look to arrange finance before the gates close? The telegraph has an article that the worry is mortgage demand will fall off a cliff!

they will raise prices, but as much or more for savers (e.g. lower rates, fees) than they do for borrowers.

you can't raise prices in a market which is suffering from falling demand.

[neil324]

they will raise prices, but as much or more for savers (e.g. lower rates, fees) than they do for borrowers.

you can't raise prices in a market which is suffering from falling demand.

Trouble is certain turds are desperate for deposits thats why saving rates are higher than the BOE, the demand will always be there for it. BOE raises, saving rates probably won't rise, but it only takes one bank to break ranks. stay within the FSCS then the good banks/government pay for your insurance cover. Fee's for savings account's only , the bank might as well close it doors at the same time, because the depositor's will just move banks.

[non frog]

Free banking to end?

Banks have tried to end free banking for years now. Most banks try to get you onto a fee paying account with marketing crap, free travel insurance and the like. The issue for the banks is one of first mover market share loss - everyone will move account to a free account with a competitor. They need to all introduce fees at the same time. Nearly all banks outside the UK charge fees. UK banks charge fees to corporate customers. My account charges 68p to cash a cheque.

[Democorruptcy]

Free banking to end?

Someone has to pay for the bank levy.

The banker's henchmen at the FSA are already say free banking damages customers!

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8155331/Free-banking-damages-competition-and-customers-says-FSA-chairman-Lord-Turner.html

[Sour Mash]

they will raise prices, but as much or more for savers (e.g. lower rates, fees) than they do for borrowers.

you can't raise prices in a market which is suffering from falling demand.

You seem to forget that there are two sides to the price equation. Supply as well as demand.

A producer certainly can't keep making/selling a product at a loss, irrespective of whether demand is falling or not.

So they stop selling it, or sell to another market where people will pay.

This results in supply falling, which counteracts the falling demand. Result: Prices can rise.

In the case of the banks, I very much doubt that demand for current accounts is in any way linked to the economy or falling. They are pretty much a necessity. The fact that all banks are offering free current accounts tells me that they are making money on them. The reason they don't charge and make even more money is because their competitors will be happy to hoover up profit making customers from them.

The only way they could get away with charging is if they all agreed to do it together - an illegal price fixing cartel. I doubt such an action would go unnoticed and unopposed, even by our pathetic regulators and generally fiscally retarded public. It's nothing to do with 'falling demand'.

[Ash4781]

If you always have the state to back you up and bail out your equity do you need to make a profit ?