Plenty people rent homes in retirement it’s not a new concept
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Obviously not. You have to think about this from a market liquidity and social justice point of view - not a selfish one.
Where is your hard evidence for this? I do not see how “houses might not be what people want” as a subjective statement is useful. An excess of houses have been built, and even in London there is no supply problem - it’s just that the media perpetuate the myth. If you have specific, quantitive responses to the points outlined in the above referenced articles, then feel free to provide those.
- Higher interest rates don’t lead to higher inflation; higher interest rates have historically been used to control higher inflation.
- People wanting to save rather than spend doesn’t mean that people will want to move less; it will make people want to spend less on disposable stuff. Assets != disposable spending.
- It will definitely be less expensive to buy because people will have access to less credit. The Bank of England itself admits that low interest rates have driven house price inflation; it’s not controversial. It’s just not discussed a lot in the common-man’s media.
- So therefore people will buy more than they do now; not rent.
It’s not a lack of homes per se that’s the problem, it’s a lack of affordable homes.
Part of the problem there is that developers have no appetite for building cheap homes, because that reduces their potential profit.
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But that’s all your rants in this topic are built on it seems. Everyone else has a house, but you don’t, so you want them to come crashing down.
I do sympathise if you live in somewhere that’s expensive and you earn good money and can’t buy where you want. But life isn’t fair. All expensive areas have local less-expensive areas, but they are like that for a reason and sometimes people don’t want to live there for that reason. That’s understandable but you can’t have it all ways.
Property prices in popular areas are always going to be expensive because that’s where people want to live. You can try and justify any sort of reason they should be cheaper or clutch your lucky coin and hope they are 50% less next month, but it’s incredibly unlikely.
I’d argue the opposite, that in fact this thread reveals your somewhat selfish worldview: “I have a house and so I don’t want my house price to come down”. But who’s right here? Is it selfish to want house prices to come down or is it selfish to want them to stay high? The problem is that this is a zero-sum game; if they come down then one large segment of the population benefits, whereas if they stay up a different segment of the population benefits.
So to anchor this discussion to something outside of two groups shouting that they should gain at the other’s expense, let’s take one simple graph:
In my opinion house prices should fall - precipitously - back in line with earnings. Quite simple. Nothing to do with all that shallow moralising, and instead everything to do with macroeconomic trends. And an interest rate rise - not unlikely in a post-covid environment with rising inflation - would cause that to snap back in short order.
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Your opinion that they should fall and the likelihood of that couldn’t be further apart.
2008 was a financial crisis and it dips below 4000 (no idea what the axises are, can’t be weekly wage, certainly not in £) and it’s now over 50% more for an average house.
We’ve been through this though haven’t we.
Borrowing is cheaper and therefore affordability is not as different as that graph makes it out to be. There are a lot more factors to what makes a house affordable than just ‘what do I earn vs what is the total value of the house’. Very few people actually pay that full ‘house price’, most will pay a deposit monthly mortgage fee - so it’s the affordability of those two things that matters more.
Nor are prices set just by wages long term. There’s also the status and growth of other assets, the worldwide market for property investment, and rental ROI.
Essentially this one graph is a very small part of a very big picture on house prices. Which is why economists all disagree with each other about what will happen next. Ultimately, the market is unpredictable.
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It’s data from the ONS, via this article. It’s only the proportions that matter for this argument though.
The problem is funding the deposit + stamp duty + fees. And a house that costs 2x what it used to in real terms will take twice as long to pay off.
That’s my entire argument! Prices are dominated by prevailing interest rates.
Let’s break that down. rental ROI is yield on a property asset. The worldwide market for property investment is the same thing, just worldwide. So together we have “property assets”. You then also list “other assets”. Low interest rates have driven investors into the property market in the (famous) “hunt for yield”. Rising interest rates would make other assets more attractive, removing demand from the housing market. It would simultaneously decrease the amount of capital that people could access via mortgages. The combination? Plummeting prices.
No, this one graph is the absolute beating heart of the affordability problem that currently plagues the housing market. If houses are 2x less affordable, then they are… 2x less affordable. And while low interest rates have driven prices up for a variety of reasons (easy access to capital, hunt for yield), a reversal would have the inverse effect.
So fingers crossed for some 8% interest rates!
That’s… not how mortgages work?
The amount you pay off is based on the interest rate. And they don’t double the mortgage period because the price is higher! lol
that’s why the graph doesn’t represent the affordability of a house to a non-cash buyer
If the base rate was 8% then mortgage rates would be 9.5% upwards for a £200,000 property. In that case you’d be paying £1500 a month towards a total of £540,000 on a 30 year mortgage. That’s more than you’d pay now on a house that’s 400k property.
Not sure how that will help anyone get on the property ladder tbh. The deposit is less, but in that environment banks would be more cautious so you’d probably need 15 a 20%, as you did when there were 7% rates in the 80s.
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You’re, um, answering things I’m not saying. Mortgage payments are part interest and part principal repayment. As house prices have doubled with respect to wages, 2x more as a proportion of wages is required to pay off the principal. That’s quite radically obvious…?
I think it was kind of obvious that 8% was a little facetious 
. But back to normal long-run interest rates at ~5% would be welcome, and counter to your argument would actually be much better for the homeowner. Just shove it in a spreadsheet and it’s obvious:
Couldn’t be clearer!
I mean we can all make up crazy scenarios to match our point of view.
You’ve halved the price of the house. That isn’t happening. Never. The end.
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Yes exactly.
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To reiterate the context from previous messages:
- House prices have doubled with respect to wages (ONS data)
- @breville_monkey asserts higher interest rates would be worse for total repayment amount
I’m not showing a halving of house prices; I’m showing the difference between a low-price-high-rate environment to a high-price-low-rate environment. The 2X factor is not a halving of housing prices, it’s the doubling factor of house prices to wages. Notice that the lower house price is on the left, is in “before”, and the higher house price is on the right, as in “after”. The left is the beginning of the ONS data chart above, the right is the end.
So, quite clearly, it’s both better for people’s ability to save deposits, and better for overall repayment total.
You are showing the difference in a world where property prices half.
They aren’t going to do that so your workings are meaningless
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You’re conflating “what is going to happen to house prices” with “is low-price-high-rate or high-price-low-rate better for the consumer”. I’ve clearly demonstrated, by example, that you’re mistaken that high-price-low-rate is better. But I think that you just don’t want to admit that low-price-high-rate is better.
Feel free to provide actual numbers to back up your argument, as I have.
You’re not demonstrating anything but your bias and lack of understanding.
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You ve demonstrated that if interest rates rise by 5% and house prices half, the result is better for the consumer.
Which is to say you’ve demonstrated nothing at all because that isn’t going to happen.
I think we can end this here 
. I think the root here is that, you said you hoped for an 8% rise. That would not only not make houses more affordable but would also lead to families up and down the country having their houses repossessed - something you are no doubt aware of. I don’t have much more to say to you on this other than I hope for your sake as well as others that what you are praying for doesn’t happen.
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we got there in the end.
We can close this loop now - because a low-price-high-rate environment is demonstrably superior for overall repayment amount, in addition to enabling more people to meet the deposit requirements on their wages (rather than inheritance and gifts).
Except now the government guarantees banks against the losses on 95% LTV mortgages (up to 20% loss), meaning that they will stil extend these mortgages.
Well…
Enough said.
Here’s the crux of it. You agree (!) “That would not only not make houses more affordable”, but you find the fact that in an increasing interest rate environment that some people will not be able to make the repayments unpalatable. This is a pick your poison thing. The alternative is that a generation is priced out of the market, capital becomes ever more concentrated, inequality rises, people rent forever. I think that’s a much more dystopian world than “a housing correction happens”. And they do happen. Like in 2007, or 1989. It’s inevitable.
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