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I Told You So

Tipping Point

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Will last weeks rise in IR be enough to tip the market or will it take another 1, 2, 3 or 4 more?

Personally I think it will make people a bit edgy but not have a massive effect on prices, one more on the other hand in my view will seal the deal;

BTLers will start off loading, many more HPC media panic stories, and when will these rises stop questions.

Yep one more with the promise of more to come should do it. :D

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Will last weeks rise in IR be enough to tip the market or will it take another 1, 2, 3 or 4 more?

Personally I think it will make people a bit edgy but not have a massive effect on prices, one more on the other hand in my view will seal the deal;

BTLers will start off loading, many more HPC media panic stories, and when will these rises stop questions.

Yep one more with the promise of more to come should do it. :D

I think that 4.75% will cap house prices and in the next few months we will see evidence of that and perhaps even the evidence of some small falls.

4.75% in August 2004 had the effect of capping the market, many areas saw stagnation and even minor falls in prices.

Back then our debt was about £1Trn and now it's about £1.3Trn so we are even less able to afford rates at 4.75% as before.

Interest rates above 4.75% will cause prices to fall, how high interest rates go will determine how much prices fall.

However I would predict that when house prices do start to fall we should see the usual pattern of unemployment going up and eventually a resulting recession as the link between consumption and house prices will be proved to be as strong as it ever was and Gordon Brown will have run out of money to create more public sector jobs.

The perception since last August has been that the crash didn't arrive so there isn't going to be one. Also that interest rates are going to remain low, even to stay at 4.5% or move lower as a lot of talk was about interest rates going down (?). This is what has driven the market up this year. The belief that as there hasn't been a crash, there isn't going to be one is about to be well and trully shattered. And the perception that the direction in interest rates is up will be enough to put off enough buyers to shift the buyer-seller ratio in the favour of the buyer and bring prices down.

In 2004-2005 the market was nowhere near as bouyant as it is now. In my area properties sat on the market for months. I think we will go straight back to this kind of market now but it will take 6-12 months as it did last time for people to realise that things have changed and accept lower prices for their properties.

Edited by munimula

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Will last weeks rise in IR be enough to tip the market or will it take another 1, 2, 3 or 4 more?

Personally I think it will make people a bit edgy but not have a massive effect on prices, one more on the other hand in my view will seal the deal;

BTLers will start off loading, many more HPC media panic stories, and when will these rises stop questions.

Yep one more with the promise of more to come should do it. :D

Its another ingredient into the pot. IMO, we will see a sudden change in the direction of the market due to a combination of:

1. IR hikes

2. Bearish sentiment exacerbated by the press' delight in doom and gloom

3. Unemployment numbers worseneing. Headline factory closures--e.g. if Jag goes this Autumn.

4. Inability to pay mortgage payments due to resetting rates from cheap intro loans.

5. Inability to pay increased fuel and council bills.

6. Feel good factor lost along with a weaker stock market.

7. Japanese credit tightening.

8. Reversal in Government policy to flood country with immigrants to bouy up house prices. (Electability for NuLabour is eroding fast).

9. Sense that the Miracle Econmy was a scam causing people to be more cautious on the borrow and spend front.

10. Recession caused by record oil prices finally being [passed on to the consumer.

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In 2004 - 2005 IR hikes to 4.75% had the effect of knocking HPI very quickly from 20%+ to about 2-3%

Most of us here followed it closely and expected HPI to go negative.

The cut in IRs last august has had the effect of taking HPI back upto 5-8% now (depending on measures)

It could be reasonable to expect that a hike of IRs back to 4.75% and even fractionally above could knock this HPI figure back below 0% (i.e. crash) in a very short period.

The IR cut in Aug 2005 should never have happened and it has postponed the crash, it's added a further 12 months to the process but now we have even more debt as can be seen by the bankruptcy figures and we've had even more cost hikes which haven't been met by wage increases.

To sum it up, we are in a much worse position now, crash even more likely now at 4.75% than it was in Aug 2004 at 4.75% and we are pretty sure that interest rates are going higher. If 4.75% in Aug 2004 stalled the market then we can be almost 100% certain that 5% now will bring the market down - how much remains to be seen and will be effected by other factors

Edited by munimula

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Will last weeks rise in IR be enough to tip the market or will it take another 1, 2, 3 or 4 more?

Personally I think it will make people a bit edgy but not have a massive effect on prices, one more on the other hand in my view will seal the deal;

BTLers will start off loading, many more HPC media panic stories, and when will these rises stop questions.

Yep one more with the promise of more to come should do it. :D

I think its a difficult issue. People adjust to price pressue in their lives and 'find-a-way' type mentality will ensure that many people fight against any erosion of their lifestyles.

I'm not sure of the economic mechanics, but the M4 growth almost seems like a catch-22 now. If people want to maintain their lifestyles they need to lend, MEW, use overdrafts, credit cards, use HP etc and this increases M4 doesn't it? At the same time this will increase debt and consumer spending which then feedsback to higher M4 and fuel inflation and then create the need for talk of increaseing IR's. Is this correct. Seems like a dangerous self-perpertuating situation?????? Will rises in IR actually truly help the economy?????

AFP

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Its easy to get distracted with all the "its different this time" twoddle thats churned out on a daily basis, but I think you have to take a step back and look at the bigger picture, which is in my view;

Prices to earnings ratio now huge, at record levels

IR's are going to continue to rise

Rental yields are now shockingly low

Repos already on the increase

And to me the most important of all, UK rates are always 1% to 2% higher than the US (there has been a few exceptions but never lasted very long), which by my ready reckoner means that eventually our rates will hit at least 6.25% in the next 18 to 24 months, maybe sooner.

Edited by I Told You So

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I listened to Merv being asked questions by Journos at the recent inflation conference at the BoE. His comments on house prices were very restricted--you could sense he was scared to say what he thought. Merv simply said that, in the long term, house prices always adjust relative to earnings.

In other words, expect a crash anytime.

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I think tipping point is being reached. I expect a few more months of more HPI, once the rate change filters through sentiment will start to change. Just like in 04!

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I think its a difficult issue. People adjust to price pressue in their lives and 'find-a-way' type mentality will ensure that many people fight against any erosion of their lifestyles.

I'm not sure of the economic mechanics, but the M4 growth almost seems like a catch-22 now. If people want to maintain their lifestyles they need to lend, MEW, use overdrafts, credit cards, use HP etc and this increases M4 doesn't it? At the same time this will increase debt and consumer spending which then feedsback to higher M4 and fuel inflation and then create the need for talk of increaseing IR's. Is this correct. Seems like a dangerous self-perpertuating situation?????? Will rises in IR actually truly help the economy?????

AFP

Exactly. Its not sustainable!

Though dont forget about the banks paying for some of the bad debts :lol::lol:

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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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