Jump to content
House Price Crash Forum
Realistbear

Experts: U K Housing Safe Unless I R Go To 8.25%

Recommended Posts

http://investing.reuters.co.uk/news/articl...RE-AL-RATES.xml

A&L says 8.25 percent the tipping point for homeowners

Thu Aug 16, 2007 10:44 AM BST
By David "Dave" Campbell
LONDON (Citywire) - The base rate of interest would need to rise to 8.25 percent to trigger a credit crunch similar to that which hit the housing market in 1990, Alliance & Leicester says.
Rates are currently sitting at 5.75 percent although many market observers expect a peak of 6 percent.
However, the point at which Alliance & Leicester thinks homebuyers will be tipped over the edge has dropped. When the company did its last survey of household borrowing in April it reckoned the crunch point would come at 8.5 percent.
But buyers are looking increasingly stretched. Mortgage payments rose to 19.1 percent of disposable income in July the latest mortgage lender figures have shown, their highest point since the recession of 1992.

Fancy, mortgage payments almost one fifth of income? How ever can people afford it? Tut, used to be that you could only borrow up to 3 times income...........hang on.............. :blink:

Share this post


Link to post
Share on other sites

Can someone explain why the US can have one at 5.25% with lower average house prices and higher averages incomes but we need to go to 8.25% for one with double the house prices and poorer incomes?

Share this post


Link to post
Share on other sites
Can someone explain why the US can have one at 5.25% with lower average house prices and higher averages incomes but we need to go to 8.25% for one with double the house prices and poorer incomes?

Eaxactly.

Subprime is more widespread here--that is the only way the multiples could go as high as 9.3:1 on average.

Share this post


Link to post
Share on other sites

How do AL explain away the fact that house prices are falling in the USA where people take home a much larger proportion of their pay? Base rates here are 5.25% and the typical mortgage is not a jumbo loan (<$417k~200k GBP).

Share this post


Link to post
Share on other sites
Guest vicmac64
http://investing.reuters.co.uk/news/articl...RE-AL-RATES.xml

A&L says 8.25 percent the tipping point for homeowners

Thu Aug 16, 2007 10:44 AM BST
By David "Dave" Campbell
LONDON (Citywire) - The base rate of interest would need to rise to 8.25 percent to trigger a credit crunch similar to that which hit the housing market in 1990, Alliance & Leicester says.
Rates are currently sitting at 5.75 percent although many market observers expect a peak of 6 percent.
However, the point at which Alliance & Leicester thinks homebuyers will be tipped over the edge has dropped. When the company did its last survey of household borrowing in April it reckoned the crunch point would come at 8.5 percent.
But buyers are looking increasingly stretched. Mortgage payments rose to 19.1 percent of disposable income in July the latest mortgage lender figures have shown, their highest point since the recession of 1992.

Fancy, mortgage payments almost one fifth of income? How ever can people afford it? Tut, used to be that you could only borrow up to 3 times income...........hang on.............. :blink:

What an utter pack of Wally's these so called experts are.. Would you trust one of them now after whats happening to the stock markets right now - all the 'experts' said 'nothing to fear' like fun.

Stock Market crash means rise in unemployment, a credit crunch which means an end to cheap credit which mens DUHHHHHHH Rising unemployemnt, less money coming in to the exchequer as a consequence of this and the highly profitable City Stock Markets.. I mean is this just another 'expert' without a brain, can he even add 1 + 1. Brains for mush if you ask me.

Share this post


Link to post
Share on other sites

hahha,

even if they dropped rates to 5.5% the market WILL crash.

they would have to drop rates to 5% just to steady the market!

Share this post


Link to post
Share on other sites
Can someone explain why the US can have one at 5.25% with lower average house prices and higher averages incomes but we need to go to 8.25% for one with double the house prices and poorer incomes?

Euroland will have HPC and the rates won't even need to get to current British rates.

A+L ceased to be a serious business when they demutualised years ago..........................

Share this post


Link to post
Share on other sites

With interest rates at 2% and mass unemployment houses will go pop so where do they get this rubish from.

during the last boom i remember rates as high as 12% and yet it was great and i could work 24/7 if i wanted but then jobs went, IR's came down and i could hardly get more than a few days work each weeks and longed for the good old days back.

Good job Lawson bumped us out the ERM because if he left IR's at 15% then the next day you would had seen blood on the streets as no one could aford 15% at the time.

8.25% yeah right, do they think it's that simple or just that we are stupid

Share this post


Link to post
Share on other sites

How about a competition, I can clearly remember a number of so called "experts", back when rates with in the 3% range, saying they would need to 6%-7% to cause a crisis. Whoever finds the most embarrassing quote for the expert involved wins, quotes from forum members do not apply, they need to be from published commentators....

Share this post


Link to post
Share on other sites

when the BTL investors are out of the market, it will crash.

For BTL to just break even with rents, we need a 15-20% fall in house prices, or a 15-20% fall in interest rates.

so the BOE IMO would have to drop the base rate to 4.75% (and then the banks would add their margin and offer some 5.25% mortgages). A base rate drop of 1% is huge, and would save the housing market from crashing.

i personally think that they can and might go this route. Especially if America starts cutting.

Share this post


Link to post
Share on other sites

ok average house price = 180k at 8.25% interest that works out at £1227.5 a month I/O.... right on the edge of affordablity for the average couple on 22k each (£1,394 each after tax and NI). at 8.25% one person pays the mortgage the other pays the bills. Its just affordable.

If the rates go to 9 and you break the phycological barrier as it takes more than the average salary to pay the interest on the average mortgage I/O (and if you look at the affordability graphs we have been at this level before)

the artical is right 8-9% is the edge of affodability, aslong as there are jobs, and aslong as you can sell that much debt...

Edited by moosetea

Share this post


Link to post
Share on other sites
ok average house price = 180k at 8.25% interest that works out at £1227.5 a month I/O.... right on the edge of affordablity for the average couple on 22k each (£1,394 each after tax and NI). at 8.25% one person pays the mortgage the other pays the bills. Its just affordable.

Not only is this scenario not buying but gambling with your house, it will devastate the economy as this couple can't afford to pay for anything except staying alive. The tipping point is therefore likely to be long before that.

Share this post


Link to post
Share on other sites
Good job Lawson bumped us out the ERM because if he left IR's at 15% then the next day you would had seen blood on the streets as no one could aford 15% at the time.

It was actually Mr Lamont, singing in the bath. And singing for good reason. End of ERM, start of recovery.

Share this post


Link to post
Share on other sites
ok average house price = 180k at 8.25% interest that works out at £1227.5 a month I/O.... right on the edge of affordablity for the average couple on 22k each (£1,394 each after tax and NI). at 8.25% one person pays the mortgage the other pays the bills. Its just affordable.

If the rates go to 9 and you break the phycological barrier as it takes more than the average salary to pay the interest on the average mortgage I/O (and if you look at the affordability graphs we have been at this level before)

the artical is right 8-9% is the edge of affodability, aslong as there are jobs, and aslong as you can sell that much debt...

You're missing several factors - other liabilities (loans, kids, transport, food). what happens if the missus falls pregnant or is ill, what about if you have to move? do you think a couple renting (who on a similar salary) would give up cheaper rents for a life of misery to buy off them?

Share this post


Link to post
Share on other sites

I think the key point here is that they felt the need to release this piece of 'analysis' today. I seem to remember this report doing the rounds a couple of years back when there was a wobble in the market. I think they just keep it in the filing cabinet for days when it looks like the ship is sinking. I expect the media will pick it up though and print it with glee like the good little doggies they are.

Share this post


Link to post
Share on other sites

I think everyone has taken this the wrong way.

If it was N.Rock who had said this it would have been a joke.

The fact is A&L would benifit from higher rates as they dont rely on gearing to such a degree and would see much of their overexposed competition go to the wall giving them easier and higher margins.

Did A&L poll the general public or take the easy route and ask their own customers?

The facts are A&L probably wouldnt have a problem with 8.5% base rates (would probably welcome it) and a sizable proportion of their customers would still be paying the mortgage. So what they are really saying is it wouldnt effect their business until rates were over 8%, which is all they are interested in right?

Dont expect the CML to come up with the same statement, they will be talking about another .25% hike killing the market.

It really is all vested interest.

Share this post


Link to post
Share on other sites
Can someone explain why the US can have one at 5.25% with lower average house prices and higher averages incomes but we need to go to 8.25% for one with double the house prices and poorer incomes?

The British Bullsh%t Factor........

Edited by eric pebble

Share this post


Link to post
Share on other sites

Don't be ridiculous

A&L make money by selling mortage loans to people and taking interest payments.

Interest rates at 8.5% would

  • kill the housing market so a much reduced demand for loans
  • Increase the number of repossessions leading to higher bad debt expense
  • Increase the cost of their ability to go to the market and raise debt

It would not be good for them.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 355 The Prime Minister stated that there were three Brexit options available to the UK:

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.