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gasket37

Higher Interest Rates By August?

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I think IMuppetNorth had a bet with me that interest rates wouldn't go up by the year end.

Anyone care to find that post?

The permabulls are being found out for what they are.

They talk absolute rubbish, their brief encounter with property made them some money, but it was all serendipitous - right place, right time, just by accident.

Their attitude is: look at me, I made some money, therefore I always call markets correctly. Quite simply they're making the wrong call now. Back in 2000 being a property bull was a bit contrarian, but I heard rumours from bright people that it was a good investment. Now those same people are saying get the h*** out.

Property does not always go up. It has been propped up by historically low interest rates and to some extent financial stupidity. As long as that existed we were sure to see the value of property inflate. That is all coming to an end now, rather dramatically and a lot of unwinding has to occur. Some people are going to get into serious trouble.

Banks will tighten their lending. People who thought property was a one way bet or bought into risky financial instruments will get their finger burnt. Finallym property will fall back (and probably overshoot) to a level that can be sustained - by people's incomes.

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Anyone care to guess where the support level lies below?

My own broad formula is that prices will reflect a net yield of 6-7% on real or potential rental income.

Low by comparison to historic yields of 8-10% but almost half of current net yields in the market.

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Anyone care to guess where the support level lies below?

My own broad formula is that prices will reflect a net yield of 6-7% on real or potential rental income.

Low by comparison to historic yields of 8-10% but almost half of current net yields in the market.

Problem is trying to calculate the median rent in a country where 30% of the people are bankrupt.

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Problem is trying to calculate the median rent in a country where 30% of the people are bankrupt.

True. :)

However rents and incomes are inextricably linked, incomes and productivity also. The UK and most bubble economies are currently witnessing the falling productivity associated with a burgoning service sector dominated economy.

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UK Banks are already pricing in some IR hikes by raising medium term savings bond rates:

http://money.independent.co.uk/personal_fi...ticle362446.ece

Fixed-rate bonds cheer up savers

By Esther Shaw

Published: 07 May 2006

Savers have had little to shout about in 2006, with a succession of cuts in the interest paid on their accounts, despite a static Bank of England base rate.
However, provided they are happy to put their money away for a minimum of 12 months without access, some brighter news could be on its way.
The fixed-rate savings bond market - where you leave your money with a provider for between one and five years - has benefited from
a flurry of industry activity over the past week,
and interest rates have now edged over the 5 per cent mark.

A flurry of activity over the past week? A heads up that the BoE will be moving faster than Gordon would like?

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The permabulls are being found out for what they are.

They talk absolute rubbish, their brief encounter with property made them some money, but it was all serendipitous - right place, right time, just by accident.

Their attitude is: look at me, I made some money, therefore I always call markets correctly. Quite simply they're making the wrong call now.

I didn't know DrBubb was a permabull. :)

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Indeed, a quick glance at the prices of financial futures contracts shows that traders expect the Bank of England base rate to rise to 5 per cent by the end of this year, with the first increase in late summer or early autumn.

Fantastic, I'd love to see that come through. Many BTL idiots will be seriously underwater, and unable to get out of their positions. They're going to learn some very tough financial lessons the hard way.

Roll on summer...

Edited by BandWagon

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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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