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Levy process

Hypothesis

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Here's a hypothesis:

Interest rates go up.

=> House prices come down.

=> People have to save less money to afford housing.

=> People have more money free to spend on other things

=> High street spending increases

Result:

The result is that the general economy gets a boost, as people free up money they were having to set aside for deposits and partial cash purchases of houses, and start spending on other things. At the same time, house prices fall. So the economy gains, and the cost of living falls. A true win-win. This is counter to the usual bull mantra that to perk the economy up, what is required is an interest rate cut, (and the associated boost in the value of their buy-to-let stock, and the resulting avoidance of having to get a real job).

Discuss.

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Here's a hypothesis:

Interest rates go up.

=> House prices come down.

=> People have to save less money to afford housing.

=> People have more money free to spend on other things

=> High street spending increases

Result:

The result is that the general economy gets a boost, as people free up money they were having to set aside for deposits and partial cash purchases of houses, and start spending on other things. At the same time, house prices fall. So the economy gains, and the cost of living falls. A true win-win. This is counter to the usual bull mantra that to perk the economy up, what is required is an interest rate cut, (and the associated boost in the value of their buy-to-let stock, and the resulting avoidance of having to get a real job).

Discuss.

Only problem with that is that the only people who will be better off are those people who are saving for housing and they are the minority who will be countered with those people who aren't who will be paying more interest on their mortgages and spending less.

Overall, there will be less high street spending which will have an adverse effect on retail which is already suffering. Retailers will go bust or squeeze suppliers further - suppliers go bust - RECESSION

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Levy, you are right.

If IRs go up, I get a better return on my savings (assuming the banks follow suit). Houses also reduce meaning If I eventually buy, I have more disposable income to spend on "other things" than paying money back to the banks!

Edit: assuming the increase in mortgage payments doesn't make me worse of due to house prices not dropping enough.

Either way, overpaying reduces the term of the mortgage more than it would with lower IRs

Edited by OzzMosiz

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I reckon that as house prices fall, savers will save ever harder to target the house they want once prices get to reasonable levels (average house 3x average wage) rather than spending more on the high street. Plus they will want as much cash in high interest accounts to take advantage of the higher %.

Plus, once prices are accepted to be dropping people will hang back, as they would not want to immediately be in negative equity once the ink on the contract is dry. Unless of course they can get an absolute steal, which would further depress prices...

Thats what I'll be doing anyway, so no VI there! :P

Apologies if this has been espoused about 10'000 times here already. It just feels nice to say it!

Edited by tahoma

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Only problem with that is that the only people who will be better off are those people who are saving for housing and they are the minority who will be countered with those people who aren't who will be paying more interest on their mortgages and spending less.

Overall, there will be less high street spending which will have an adverse effect on retail which is already suffering. Retailers will go bust or squeeze suppliers further - suppliers go bust - RECESSION

No, only the gullable "must get on the ladder" tribe and BTL scum who have fuelled the market over the last 5-10 years will suffer.

Darwins in action again.

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  • 301 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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