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Interest Rate Rise V Falling House Price

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Hello All,

I've been reading the posts here for a long while and have finally decided to post a question.

If interest rates go up, the price of houses could come down, but as I see it, how does this help the first time buyer?

Surely if prices come down and the interest goes up, the monthly repayment for mortgages will be the same

House price interest rate monthly repayment

£200000 5 % £833

£160000 6 % £833

£143000 7 % £833

The example above is very simplistic, but demonstrates the point I'm trying to make.

How is a buyer better off buying at a lower price, but at a higher interest rate.

At what price/interest would be the ideal buying time?

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Hello All,

I've been reading the posts here for a long while and have finally decided to post a question.

If interest rates go up, the price of houses could come down, but as I see it, how does this help the first time buyer?

Surely if prices come down and the interest goes up, the monthly repayment for mortgages will be the same

House price interest rate monthly repayment

£200000 5 % £833

£160000 6 % £833

£143000 7 % £833

The example above is very simplistic, but demonstrates the point I'm trying to make.

How is a buyer better off buying at a lower price, but at a higher interest rate.

At what price/interest would be the ideal buying time?

Good question :) I'm no financial expert, but there are some advantages to having higher interest rates and lower prices, even if the monthly repayments initially look the same.

1) Debt erosion. Higher interest rates normally implies higher inflation. With higher inflation, the true value of your debt erodes much faster over time.

2) Less risk. When interest rates are higher, there is more scope for them to fall, reducing your payments. Of course, over time, sometimes they will be higher and sometimes lower - but if they are low to begin with, there's not much scope for lower payments, and a lot of scope for higher ones.

Hope I got that right - other people on this forum are better clued up than I am on these issues.

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Good question :) I'm no financial expert, but there are some advantages to having higher interest rates and lower prices, even if the monthly repayments initially look the same.

1) Debt erosion. Higher interest rates normally implies higher inflation. With higher inflation, the true value of your debt erodes much faster over time.

2) Less risk. When interest rates are higher, there is more scope for them to fall, reducing your payments. Of course, over time, sometimes they will be higher and sometimes lower - but if they are low to begin with, there's not much scope for lower payments, and a lot of scope for higher ones.

Hope I got that right - other people on this forum are better clued up than I am on these issues.

er....if you but cheaper at higher interest rates, you lose out less if rate rises and gain if they fall.

If you pay much much more at low interest rates, higher interest rates will kill you.

Remember moving from 8% to 10% aint so bad.

Moving from 4 to 8% when you can barely afford it is doomsday.

Edited by geneer

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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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