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House Price Falls In Relation To Interest Rate Rises

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Can anyone work out how by much house prices will fall with each 0.25 per cent interest rate rise? I know other influences, like fear factor etc will affect the prices but I'd just like to see black and white figures. Thanks.

Near impossible to get even reasonably accurate by just isolating base rate and HPs.

Much more likely to see interest rates close to zero for medium-long term and see house prices remain stagnant or maybe gently fall.

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Near impossible to get even reasonably accurate by just isolating base rate and HPs.

Much more likely to see interest rates close to zero for medium-long term and see house prices remain stagnant or maybe gently fall.

Certainly but this assumes that the status-quo remain - all I see is to many variables for us to repeat Japan and have a lost decade with gentle drifts down. If enough have no job then no matter what multiplier they figure, 0 * anything is 0 even in a QE world.

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Can anyone work out how by much house prices will fall with each 0.25 per cent interest rate rise? I know other influences, like fear factor etc will affect the prices but I'd just like to see black and white figures. Thanks.

To quote my old economics prof:

If you say what will happen you get a 2.2

If you say "it depends you" get a 2.1

If you say "it depends on the elasticities" you get a first.

It depends on the elasticities.......

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It is possible to use some financial equations which are normally used to calculate the present value of an annuity. You would need to know the monthly rental value of the property in question, and also make an assumption about how rents would change in the future e.g. you might assume that they would increase by 2%. The future rents are converted into a present value using a discount factor which is related to the interest rate. The higher the interest rate, the lower the present value. I suspect that if you applied this calculation to the average property in the UK, it would give a value much lower than current market prices. I will have a go at it later.

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