HPC crying, losing hoap

[Aidan Ap Word]

14 hours ago, A.steve said:

There are a lot of relevant factors... but I don't think 20% wage increases help those who aspire to buy a home.

• General 20% wage increases result in the things that wage-earners pay for being 20% more expensive than they otherwise could have been.
• Inflation arising from wage increases will drive upwards the cost of borrowing.
• While a purchase is deferred, awaiting accumulation of savings from increased wages, there's a real absence of stability which is likely to have (both direct and indirect) adverse affects.
• Mispricing of assets will result their misallocation - causing systemic adverse effects.

And also - a 20% decrease in the nomina price of housign means you pay less interest on the mortgage over time .. which is all the more important when you during the early parts of the term of the mortgsge the interest rate is NOT at 0.25% (etc).

That is: a house, when buying with a mortgage, that has a headline price of 20% more costs xsignificantly more than 20% extra over the lifetime of the mortgage ... and then there's the risk of skyrocketing interest rates *during* that term ... and, no, 4-6% interest rates are normal ... they are not "high" at this time.

 

[scottbeard]

On 04/11/2023 at 14:51, Aidan Ap Word said:

And also - a 20% decrease in the nomina price of housign means you pay less interest on the mortgage over time .. which is all the more important when you during the early parts of the term of the mortgsge the interest rate is NOT at 0.25% (etc).

That is: a house, when buying with a mortgage, that has a headline price of 20% more costs xsignificantly more than 20% extra over the lifetime of the mortgage ... and then there's the risk of skyrocketing interest rates *during* that term ... and, no, 4-6% interest rates are normal ... they are not "high" at this time.

 

That's not relevant... yes if prices decline 20% you pay 20% less interest, but if you get a pay rise you have 20% more money to pay interest with

Steve's point that wage increases might be indicative of offsetting inflation is fair, but then a house price fall as now might be driven by higher interest rates which are also offsetting for affordability.