Friday, Aug 04, 2006

Why yesterday's rate rise helps the first time buyer

Firstrung: Is the first-rung now further out of reach for first time buyers after the 0.25% rate rise?

Lenders will still offer discounted rates and incentives to new borrowers, irrespective of rate rises. In fact the subsidised rates for FTBs are likely to increase in volume as lenders increasingly target the FTB market. This could result in the FTB having an advantage over and above current borrowers.

Posted by converted lurker @ 09:43 AM (500 views)
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1. Mattpascoe said...

Getting desperate arent they!!

Friday, August 4, 2006 10:00AM Report Comment

2. The Bald Man said...

To all FTB's. Do not be tempted. Wait for the fall in prices as the buy to lets unload when interest rates go over 5%.

Friday, August 4, 2006 11:29AM Report Comment

3. sebastian said...

Does anyone else think this logic seems to be the wrong way around? Surely high house prices put houses out of reach before the cost of borrowing. The whole thing is completely retarded. How can you blame the lender when it is the seller that sets the price in the first place.

Friday, August 4, 2006 11:37AM Report Comment

4. gruppenfuhrer said...

Bald man, I am a FTB listening loud and clear to what you say. Couldn't really do otherwise to be honest but was starting to despair. This at least seems to make a bit of sense.
My secretary has just taken on a 140,000 100 per cent interest only mortgage for a hovel. She and her fella have a combined income of 30,000. I just wouldn't want to be in that position. It makes me remember being a kid and hearing stories about megative equity and people stuck in places they can't leave and all of that. I know I am best out of it for the moment but can't help thinking a lot of people are going to be very miserable. Allround it's rubbish.

Friday, August 4, 2006 12:41PM Report Comment

5. Bfskinner said...

I agree Sebastian,

the cost of borrowing has little impact if what you are borrowing to buy is already out of reach. Interesting to see the VI's now attempting to play out their lamentations for the FTBers. It is not interest rates that stop me buying, its the over inflated prices. If you want 1st time buyers to return, cut prices. its as simple as that. Lower rates wont do it (this will just push prices up from investors). More houses wont do it either as new stock will enter the market at already inflated prices, or be snapped up by investors. It seems the VIs may be realising, that the bubble they have been blowing may now actually burst. This is a situation of their own making. Maybe the only way to a true recovery is for it all to bust and downturn. Those who have over invested go through hard times, those who waited will inevitably begin to invest ant the bottom of the coming trough and then the whole cycle will begin again.
"No more boom and Bust", hmmm no so sure about that one Gordo.


Friday, August 4, 2006 02:07PM Report Comment

6. Hard Cheese said...

Call me cynical but...................... If the amount to be borrowed is not enough to purchase and any interest rate rise will widen the gap between what you can afford and what is available to purchase.
Therefore It doesn't take a rocket scientist to work out that house prices have to fall, Problem is that the muppets with a vested interest in the property market cannot and will not except this.

Throw a ball in the air it will come down, through it higher, it takes longer and faster to fall............bring it on.

Friday, August 4, 2006 02:35PM Report Comment

7. harold said...

"More rises over the next twelve months, perhaps taking rates up to 5.5%, will put an end to speculation and perhaps kick start modest falls in prices"

5.5% kick-start modest falls in prices?! Dream on Firstrung. What is missing here is a proper acknowledgement of an interconnected economy. IR at 5.5% would have a myriad of effects - debt affordability, investment diversification away from high-risk assets, job creation etc. Under these circumstances just "modest falls", particularly given many people's highly leveraged positions, is unlike to say the least.

Friday, August 4, 2006 05:27PM Report Comment

8. sirgoogle said...

Unlike the last HPC (which took about 2 years to fall after the inital triggers), I believe that this one will be very fast once it starts - and actually behave as a crash.

The reason for the difference is availability of information. Just like the last Stock Market Crash, the availability of information on sites like Rightmove etc and reports by ODPM, Land Registry (reported by UpMyStreet), will show people clearly when house prices start to fall. Once this sinks in there will be few (except for those who have to move - or insane bulls) who will buy until they are convinced that the market is bottoming. In addition vendors will see much more quickly the prices that others are actually selling for and (if they are really serious about sellng) will lower their prices accordingly - probably much more quickly than in the past as they have sources other than the estate agents to listen to/watch.

Friday, August 4, 2006 06:19PM Report Comment

9. bidin'matime said...

When will you never-have-been-buyers realise that it's not the sellers who make prices high - it's the bl**dy buyers!!!!! I sold my house for silly money, not because I thought of a number and doubled it, but because someone silly offered me that much. I wasnt going to be even sillier and turn them down, now was I?!

The market is in the hands of the buyers - when they stop buying, prices will fall.

Friday, August 4, 2006 11:00PM Report Comment

10. sirgoogle said...

Bidin. Some of us have been homeowners and are not stupid. At the peak of a market, if you really do need a house, can't afford to rent and can't get a council house - then you will offer the going rate simply to ensure that you get the house. In addition Estate Agents frequently (always) advise a seller to wait when someone offers below the asking price as they know that if they let it slip then this adds to the trend in the area - and hurts their industry locally - and their comission. This advice is often not in the interest if the seller who is usually in a chain, desperate to move, has not sold many houses before and relies on the advice of the (manipulative) Estate Agent.

NB. If you thought EAs were bad in the UK you should come to the Netherlands !!

Saturday, August 5, 2006 02:40PM Report Comment

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