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Guardian: If Gordon Hikes Affordability Will Be Worst For 15 Years

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http://www.guardian.co.uk/uklatest/story/0,,-5960616,00.html

Interest rate rise hits home buyers

Press Association

Wednesday July 19, 2006 8:38 AM

Housing affordability is set to plunge to its worst level for 15 years by the end of 2006 if interest rates are increased, figures have shown.
Someone on average earnings buying an averaged priced property with a 20% deposit can expect to spend nearly half of their take-home pay on mortgage interest repayments if the cost of borrowing rises.
Lender Cheltenham & Gloucester said a rise 0.25% in interest rates to 4.75% before the end of the year, would mean a typical buyer had to spend 49.78% of their salary on interest repayments alone - the highest level since 1991.
The widely predicted hike in rates would push average monthly mortgage payments up to £854 from £795.

Now we know why Gordon is going to have to be dragged kicking a screaming to the IR hiking table. One hike and its over. Can he hang on after this week's terrible inflation news? Can he ignore Mr. Fukui's hiking action? Can he stand alone against the world as rates rise allaround him? Can he stand another set of bad inflation news and still do nothing?

Can you feel it now? I hear the rumblings of the crash getting closer and closer. The overgeared BTLers must be feeling very queasy indeed. No wonder my local property paoper is full of "no upwarad chain" cheop BTL-type properties.

Big HPC celebration bash coming up?

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I personally think this period of a "platea" could drag on for some time yet.

They are scared senseless of increasing rates just .25%, thats how big this bubble has become, very scary :(

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"please don't raise interest rates Mr Brownie, please *whimper*

f*** 'em. Shouldn't be so irresponsible borrowing so much! :angry:

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http://www.guardian.co.uk/uklatest/story/0,,-5960616,00.html

Interest rate rise hits home buyers

Press Association

Wednesday July 19, 2006 8:38 AM

Housing affordability is set to plunge to its worst level for 15 years by the end of 2006 if interest rates are increased, figures have shown.
Someone on average earnings buying an averaged priced property with a 20% deposit can expect to spend nearly half of their take-home pay on mortgage interest repayments if the cost of borrowing rises.
Lender Cheltenham & Gloucester said a rise 0.25% in interest rates to 4.75% before the end of the year, would mean a typical buyer had to spend 49.78% of their salary on interest repayments alone - the highest level since 1991.
The widely predicted hike in rates would push average monthly mortgage payments up to £854 from £795.

Now we know why Gordon is going to have to be dragged kicking a screaming to the IR hiking table. One hike and its over. Can he hang on after this week's terrible inflation news? Can he ignore Mr. Fukui's hiking action? Can he stand alone against the world as rates rise allaround him? Can he stand another set of bad inflation news and still do nothing?

Can you feel it now? I hear the rumblings of the crash getting closer and closer. The overgeared BTLers must be feeling very queasy indeed. No wonder my local property paoper is full of "no upwarad chain" cheop BTL-type properties.

Big HPC celebration bash coming up?

There is no way that a single .25% increase is going to cause this market to tumble, especially when you consider that it is likely that the Middle-East situation will come off the boil at some point which could well let Oil fall back into the $65 region and then all of a sudden the inflation threat (as per published figures anyway) will look like it has gone away.

Plus we have X amount of people on Fixed Rate deals still so they will not see any change in the % of disposal income being used to pay the mortgage etc etc.

AFP

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It will be fascinating to see what GB/BOE do this month. With this many reasons to put rates up, if they don't then get very scared. Very few people really relish a massive 30s style depression, with friends and family hitting the wall, made redundant etc.

If they don't put rates up then the situation must be very fragile.

Edited by bearwithaconscience

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I personally think this period of a "platea" could drag on for some time yet.

They are scared senseless of increasing rates just .25%, thats how big this bubble has become, very scary :(

Friend of mine who has been a huge bull - last night said to me --- "it's crazy out there, it's going to crash, maybe next year, maybe year after, but it is unsustainable - and it is going to be a bloodbath - the oil price is probably going to do it.!

This guy has been an A1 300% bull up until now -- but he told me he now sees how bad it is........

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This guy has been an A1 300% bull up until now -- but he told me he now sees how bad it is........

Slowly but surely. The more people that start thinking like this, the more that will head for the exit sign!!!

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Hmmm, what happened 15 years ago?!

Last time, fairly sharp and sudden increases led to a crisis in affordability and resultant crash.

This time, the interest rates are actually quite low - if an affordability crisis is potentially being triggered by a 0.25% increase on fairly low historic interest rates, then it tells us just how deep in the sh1t we really are.

This could be a very long and painful lesson for some.

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Hmmm, what happened 15 years ago?!

Actually, the answer I have written down is there was a rather large crash!

Looking at the graph on this site of price to earnings ratio we are already well past that point:

http://www.housepricecrash.co.uk/graphs-av...nings-ratio.php

For the record, some figures from my neck of the woods have put this ratio at up to 11X

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Friend of mine who has been a huge bull - last night said to me --- "it's crazy out there, it's going to crash, maybe next year, maybe year after, but it is unsustainable - and it is going to be a bloodbath - the oil price is probably going to do it.!

This guy has been an A1 300% bull up until now -- but he told me he now sees how bad it is........

http://213.225.136.206/mfsd/iadb/Repo.asp?Travel=NIxIRx

Wed, 04 Sep 1991 10.38

Fri, 12 Jul 1991 10.88

Fri, 24 May 1991 11.38

Fri, 12 Apr 1991 11.88

Fri, 22 Mar 1991 12.38

Wed, 27 Feb 1991 12.88

Wed, 13 Feb 1991 13.38

incase you thought that 1991 was not high on the old rates there. ..:)

4.75,,, :)

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Guest Bart of Darkness
Lender Cheltenham & Gloucester said a rise 0.25% in interest rates to 4.75% before the end of the year, would mean a typical buyer had to spend 49.78% of their salary on interest repayments alone

Just what on earth is a "typical buyer" borrowing these days to get in this kind of a bind?

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It's great to hear this sort of thing in main stream press.

I so want it to be true... Not that I wish financial pain on anyone. I just want a house of my own - purchased at a fair price.

I don't think the rates will rise until the £ has started to weaken.

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There is no way that a single .25% increase is going to cause this market to tumble, especially when you consider that it is likely that the Middle-East situation will come off the boil at some point which could well let Oil fall back into the $65 region and then all of a sudden the inflation threat (as per published figures anyway) will look like it has gone away.

Plus we have X amount of people on Fixed Rate deals still so they will not see any change in the % of disposal income being used to pay the mortgage etc etc.

AFP

I don't share your optimism regarding the oil price. $65 is still a high price to pay. It's feeding through to everything now. I travel across to the USA a lot and the air fares are rocketing, so I'll moderate my travelling. Does it matter if people are on fixed deals. If you move you'll have to renegotiate a new deal, possibly at a higher rate. There's no escaping it. All these economists were predicting $40 a barrel but look at it now! Who's to say how long Iraq and Lebanon will remain problematic and that's without any problems with the N.Koreans.

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...especially when you consider that it is likely that the Middle-East situation will come off the boil at some point which could well let Oil fall back into the $65 region

They were saying that at $40/bl

They were saying that at $50/bl

They were saying that at $60/bl

They were saying that at $70/bl

to be continued...

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Just what on earth is a "typical buyer" borrowing these days to get in this kind of a bind?

THAT is truly scary..... Everyone in complete shadow of the moneylenders..... REALLY scary.

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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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