Tuesday, June 12, 2007

Time bomb

Mortgage affordability hits 15-year low

"Month on month we see affordability constraints for first-time buyers worsening, and with the impact of May's interest rate rise still to be felt, many borrowers face higher costs in the coming months. ... But with 2m fixed-rate loans coming to an end over the next year-and-a-half, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead."

Posted by confused76 @ 06:44 PM (2830 views)
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9 thoughts on “Time bomb

  • croc tears for first time buyers from the once leftist and now landlordist ‘Guardian’.

    Don’t worry about affordability, this will either be resolved by a crash, or by the political backlash resulting from the fact a crash is being artificiously avoided for the benefit of the already rich at the expense of the already poor.

    Or maybe this is what the Guardian is really scared of?

    It should be.

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  • “The vast majority of borrowers will be able to absorb higher mortgage payments. But with 2m fixed-rate loans coming to an end over the next year-and-a-half, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead.”

    Errrm …. yes ?

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  • Well, 15yrs ago, interest rates were at about 9.88%. Yes, thats right folks, we are in debt so much that 5.5% now is the equivalent of 9.8 then. We also had 9.8% rates in 1988. Property prices went on a last congratulatory tour, then plumetted once the 9.8% fed through to the market and rates overshot to 14.8%, the equivalent of about 7-8% at current debt levels. It is hard to say that the 14% rates triggered the crash, because it takes up to 2yrs for interest rates to feed through. Rates their current level, for long enough could be enough, and we know that they will go higher. Expect more relaxed attitude from the bank, a final leap of faith (another 5-10% rise in prices), then a last minute ratchet in interest rates and hey presto, we are exactly where we were before the last crash (25% fall in 1.5yrs) followed by a softer landing, correction of about 10% fall over about 6rs, i.e. homeowners just about treading water, whilst wages catch up.

    If the equivalent happened today, we would see prices go from about 200k to about 150k over 1.5yrs, then going down to about 135k over the following 5yrs, before going up again. But, then again, life is different now, so things could happen very differently. Any other predictions? Based on less than just my simple extrapolation?!

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  • The middle class is disappearing in the UK. In years to come, you will either be a master or a slave. It’s 1863 all over again, except now we have unwanted immigrants carrying automatic weapons and asbo scum on every corner.

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  • Did McGordy plan ahead or was he just looking for the empty throne of Tony?……..How can the young genertion plan when their general is akin to Haig?…….

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  • And MEW will no doubt come into those plans.

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  • Well they should be soon…

    In the Moneyweek article about BTL’rs selling up..

    “… If the Daily Telegraph is right in recently reporting that the UK housing market is over-valued by up to 20%, then the scale of down-side is very considerable because bubble-type prices always go too high, e.g. 20% over-valued, to then fall back too far. Based upon past experience, from current prices, a 40% downside is therefore feasible. Estate agents across the UK are seeing a substantial rise in the number of properties coming up for sale…”

    ************Well 20-40%? where did they get that idea from ? Perhaps they should be reading the Evening Standard and Mail that are obseesed with property (and they are bearish) …they both say 65% overvalued…does that mean a 65-130% meltdown then?

    BTL’rs aren’t even ready yet for a 6 – 7.5% UK interest rate, they don’t think it will happen but the city have factored in the former already!

    It is just a question of time and seing whether swerve has been prompt enough to avoid even higher interest rates!

    Watch this space! *****************

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  • Orwell,
    20% according to Lehman
    40% according to ABN Amro

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  • Ok

    Sorry,

    65% in London wasn’t it?

    apologies!

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