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€200 a month extra? - that's on a national typical mortgage of €300,000. Many in Dublin have borrowed a shed load more than that.

....but the penny is finally dropping here now.

http://www.unison.ie/irish_independent/fro.../2006/13864.pdf

INTEREST rates and mortgage costs are set to rise faster, economists say, with a total increase of more than 1pc likely by the end of the year. The next interest rate hike could come in May, after surprise new figures yesterday showed business conditions in Europe at their best level for years, while debt continues to mount. If the upsurge continues, the European Central Bank could hike the cost of money by three-quarters of a percent between now and Christmas, analysts say. That would bring the ECB rate to 3.25pc - compared

with 2pc at the beginning of December. And that would push mortgage rates to above 4pc, adding around ¤200 to the monthly cost of a typical ¤300,000 mortgage. Such a rise seems likely to cool the pace of house price inflation, which experts had said could reach 12pc this year. The ECB is worried that booming house prices and borrowing has spread from countries like Ireland and Spain to other euro zone economies.

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€200 a month extra? - that's on a national typical mortgage of €300,000. Many in Dublin have borrowed a shed load more than that.

....but the penny is finally dropping here now.

http://www.unison.ie/irish_independent/fro.../2006/13864.pdf

Home loan hikes to cost €200 a month

Interest rates to rise faster than expected, experts say

Brendan Keenan

Group Business Editor

INTEREST rates and mortgage costs are set to rise faster, economists say, with a total increase of more than 1pc likely by the end of the year.

The next interest rate hike could come in May, after surprise new figures yesterday showed business conditions in Europe at their best level for years, while debt continues to mount.

If the upsurge continues, the European Central Bank could hike the cost of money by three-quarters of a percent between now and Christmas, analysts say.

That would bring the ECB rate to 3.25pc - compared with 2pc at the beginning of December.

And that would push mortgage rates to above 4pc, adding around €200 to the monthly cost of a typical €300,000 mortgage.

Such a rise seems likely to cool the pace of house price inflation, which experts had said could reach 12pc this year.

The ECB is worried that booming house prices and borrowing has spread from countries like Ireland and Spain to other euro zone economies.

Figures from the ECB yesterday showed total euro area borrowing in February was 10pc higher than the same month last year.

Mortgage lending was up 12pc.

ECB President Jean-Claude Trichet said the housing market needs close watching.

"Euro area residential property prices are now in their sixth year of strong dynamism and at the same time growth in mortgage loans has increased substantially," he said.

"The hawks on the ECB governing council will be very concerned at the persistent strength of borrowing, while even the less hawkish will feel a little uncomfortable that rates are so low," said Austin Hughes, economist at IIB Bank.

The credit figures came on top of an unexpected surge in business confidence in Germany, Europe's biggest economy.

The most important business survey rose to a 15-year high in March, with firms reporting that current conditions had improved as well as their expectations for coming months.

"An ingrained pessimism has contributed to Germany's under-performance in the past decade," Mr Hughes said.

"So a turnaround in confidence may imply a stronger trend in investment by firms and spending by households."

Stronger economic growth would allow the ECB raise rates to a level which could reduce borrowing to more sustainable levels.

"It is now more likely that the next rise will come in May rather than June. They could then rise again in August, with a possible third increase by the end of the year," he said.

John Beggs, chief economist at AIB Global Treasury, has felt for some weeks that a May increase was on the cards.

"If they move in May, then they probably would be looking to two more hikes this year.

"But for that to actually happen, the economic data will have to confirm the upswing.

"There are a couple of things which could make the ECB pause, such as another rise in oil prices, or a fall in the dollar."

The outlook is for interest rates to continue rising, as the world economy moves away from the last few years of cheap credit.

The US Federal Reserve last night raised rates in a 15th consecutive hike, bringing them to 4.75pc, with no indication that they have yet reached their peak.

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Wow, that is scary stuff. :o

Question for those who are currently in Dublin: what do you perceive sentiment to be like at the moment?

Not there atm, but over and back quite a lot.

Sentiment is very bullish and will be for another 2-3 quarter point rises, I think.

People ignore any negative sentiment, theyve beenhearingthisforyears.......

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Not there atm, but over and back quite a lot.

Sentiment is very bullish and will be for another 2-3 quarter point rises, I think.

People ignore any negative sentiment, theyve beenhearingthisforyears.......

Thanks. Ireland is really the canary in the coal mine now.

If I could, I'd love to start making a documentary about the whole situation. It would be a fascinating piece of work.

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Wow, that is scary stuff. :o

Question for those who are currently in Dublin: what do you perceive sentiment to be like at the moment?

We are deliriously happy, after all we are rich! rich! RICH!....property only ever goes up after all. Why hasn't the rest of the world realised this yet?....See you at the Dodgy Bulgarian Sh1tehole Expo on Saturday!....Where do I sign? (SSIA burns humongous hole in pocket)

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Wow, that is scary stuff. :o

Question for those who are currently in Dublin: what do you perceive sentiment to be like at the moment?

People are buying houses like there's no tomorrow, two lots of close frieends who are in process of completing sales, several colleagues likewise. Because rent is dead money.

Lending institutions pushing mortgages like free samples in Tesco.

Big emphasis on overseas investing, ads on radio constantly for property expos.

People queuing overnight to buy developments off the plans.

Pretty bullish in general alright.

Sentiment in the media is changing noticeably though I think though.

We are deliriously happy, after all we are rich! rich! RICH!....property only ever goes up after all. Why hasn't the rest of the world realised this yet?....See you at the Dodgy Bulgarian Sh1tehole Expo on Saturday!....Where do I sign? (SSIA burns humongous hole in pocket)

:lol::lol::lol::lol:

200 a month though. That's a very big number. If you're a top rate tax payer, and I certainly hope anyone with a 300K mortgage is (it starts at €32K btw for the non Irishers), that equates to a 4.5K salary increase you'd need from work to cover the rate rise.

Over the life of a 25 year mortgage that's over 100K more of your gross income down the bog, or 3 years worth if you're on the average salary.

There's an answer to rent is dead money. I'll take my 3 years on a beach in Oz I think.

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The opportunity cost of not owning a home is forsaking the potential for a return on that investment.

You foresake more than that.

You also foresake the opportunity of owning a house outright at the end of the mortgage term. If you live to 85 (not unreasonable) that could be 25 years of living rent free if you do buy and if you pay off the mortgage.

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You foresake more than that.

You also foresake the opportunity of owning a house outright at the end of the mortgage term. If you live to 85 (not unreasonable) that could be 25 years of living rent free if you do buy and if you pay off the mortgage.

Yes, at the end of the term you do get something, but if you buy on a mortgage you will pay interest over the odds and if you buy at the peak of a bubble you will repay capital over the odds and in the long run you will lose out.

Here the formula for when it makes sense to buy:

(Cost of place on IO mortgage + cost of maintenance + cost of furnishing* + transaction costs of buying and selling* + cost of relevant insurances + management charges if applicable) < (cost of rent)

The costs with an asterisk beside can be amortized over the number of years you intend to stay in the property.

This formula excludes capital repayment and assumes that over the same period as you would repay your mortgage you can save what you'd spend on capital repayment and invest it in an asset that will beat the performance of property over that period, historically this has been piss easy to do over any given 25 year period.

Find me ONE property in Dublin that fits that criteria (even assuming you live there for the rest of your life) and I'll be amazed.

If you want to account for the effect of inflation on rent you could buy when it's slightly unfavourable to do so by that calculation, perhaps if you thought the costs of renting would exceed those of ownership after N years and you planned to stay in it longer.

However, bear in mind that many of the costs of ownership also experience inflation.

And of IRs are an unknown and over the life of a 25 year mortgage it is probably safest to assume they will average 5% at least, which historically has been true.

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Jaysus! I think Rossa White must have been overhearing me in The Barge pub last Friday, boring the pants of a colleague about P/E ratios on houses versus shares!

Rossa, were you that toothless old fella in the corner letching at the office girls?

Sorry Flash, great minds and all that, anyhow there`s a link direct to their pdf doc for more meat on bone ;)

http://firstrung.co.uk/articles.asp?pageid...articlekey=1575

Edited by Converted Lurker

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You foresake more than that.

You also foresake the opportunity of owning a house outright at the end of the mortgage term. If you live to 85 (not unreasonable) that could be 25 years of living rent free if you do buy and if you pay off the mortgage.

Demonstrating that you have clearly not understood the article, or basic economics as a whole.

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Sorry Flash, great minds and all that, anyhow there`s a link direct to their pdf doc for more meat on bone ;)

http://firstrung.co.uk/articles.asp?pageid...articlekey=1575

Thanks CL - It's good stuff. I can feel the planets moving into line now.

...and just to prove that the "earnings on houses" issue is an old fave of mine.

http://www.housepricecrash.co.uk/forum/ind...showtopic=22486

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Thanks CL - It's good stuff. I can feel the planets moving into line now.

...and just to prove that the "earnings on houses" issue is an old fave of mine.

http://www.housepricecrash.co.uk/forum/ind...showtopic=22486

Not to mention the vast pool of unoccupied properties we're told are sitting there empty, according to the discrepancies between the ESB connections dept and the completions rate. There are people out there sitting on properties that are earning nothing at all. And if they're not connected to the ESB then they're presumably not using them as a holiday house either.

Shows how little renting them out is worth that some owners don't even bother.

Incidentally I did some research on Daft yesterday to try and figure out how many rooms are available for letting (entire properties and house shares) in Dublin. I came up with a figure of about 8000 available rooms. Assume some would have multiple occupancy so - there's about 10,000 vacant person-spaces on Daft.

Number of people in city - 1,200,000 roughly. 80% in owner-occupied - leaving 240,000 renters.

That gives a vacancy rate of 4%. This is quite low actually, which is counterintuitive given the pressure on rents (though they are rising slightly after being flat for a long time, which may mean the vacancy rate has just dipped correspondingly).

Anyone any idea where I've gone wrong in my back of envelope calculations there?

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  • 302 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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