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UK House prices: News & Views

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What we are seeing in the bond market is not a flight to UK safety. We are seeing the B of E print money to buy our own debt to suppress the yield. The PIIGS yield has now dropped because the LTROs have meant they can do the same via their banks. Their other problem was they had more debt maturing earlier.

 

So did the USA (average of 4 years, compared to the UK's of 14 years).

 

But heh, I guess being the reserve currency has some advantages.

 

The other point to note is that the markets believe the UK can sort it’s problems (great as they are). It’s not that clear regarding the PIIGS.

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Halifax confirmation: http://www.halifax.c...variable-rates/

 

Following a review of our variable mortgage interest rates, also known as lender variable rates, we are increasing the Halifax Standard Variable Rate from 3.50% to 3.99% from 1st May 2012.

...

In addition to Halifax Standard Variable Rate we are also increasing Halifax Variable Rate 2 (currently 3.40%) and Halifax Flexible Variable Mortgage Rate (currently 3.40%) to 3.89% from 1st May 2012.

 

 

 

 

3.5% to 3.99% is a jump of 14% in additional interest payments. But this is not a "proper" rise is it, JD?

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Halifax confirmation: http://www.halifax.c...variable-rates/

 

Following a review of our variable mortgage interest rates, also known as lender variable rates, we are increasing the Halifax Standard Variable Rate from 3.50% to 3.99% from 1st May 2012.

...

In addition to Halifax Standard Variable Rate we are also increasing Halifax Variable Rate 2 (currently 3.40%) and Halifax Flexible Variable Mortgage Rate (currently 3.40%) to 3.89% from 1st May 2012.

 

 

 

 

3.5% to 3.99% is a jump of 14% in additional interest payments. But this is not a "proper" rise is it, JD?

 

No, I don’t think it is.

 

Indeed, it's pennies for the vast majority (Halifax Av of ~67k for SVR mortgage holders) so that's less than £1 per day. (Might have to have to skip a couple of lattes or pints a week?)

 

It will only affect a relatively small number right on the margins.

 

A rise in base from 0.5% at present to 1% is a 100% rise, but it will only really hurt when we see "proper" rate rises when we get back to positive "real" interest rates.

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> It will only affect a relatively small number right on the margins.

Yes, but it is at these margins that the market is set. Only about 10% of the housing stock is up for sale at any time. If a rise in rates causes 5% of all homeowners to sell, that is a 50% increase in the supply of houses for sale.

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> It will only affect a relatively small number right on the margins.

Yes, but it is at these margins that the market is set. Only about 10% of the housing stock is up for sale at any time. If a rise in rates causes 5% of all homeowners to sell, that is a 50% increase in the supply of houses for sale.

 

It has always been so, about the 10% mark, boom or bust.

 

Those few with the big mortgages, that they can't afford already (and therefore cannot remortgage), might think about selling, yet they might just get into more debt (as already happens with some, credit cards or whatever), or even rent out (as many also do).

 

Just the same with unemployment. An extra 1 million now are unemployed, yet, there aren't an extra 500,000 houses for sale (assuming 2 workers per house). Indeed, the number for sale is lower now than before (albeit with less buyers too).

 

Besides, many sitting on a 3.5% SVR have been doing so because they couldn't be bothered spending about two hours (and paying a fee of about £1000) to get a new deal that would only be saving them a little bit anyway (I know one or two). For example, my fix rate is 3%. The difference sitting on a 3.5% SVR is not that great. At 4%, it makes people think again and makes it worthwhile to go for a new deal.

 

 

When we get proper rate rises, things will be different. When that finally comes, is another question.

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It has always been so, about the 10% mark, boom or bust.

 

Those few with the big mortgages, that they can't afford already (and therefore cannot remortgage), might think about selling, yet they might just get into more debt (as already happens with some, credit cards or whatever), or even rent out (as many also do).

 

Just the same with unemployment. An extra 1 million now are unemployed, yet, there aren't an extra 500,000 houses for sale (assuming 2 workers per house). Indeed, the number for sale is lower now than before (albeit with less buyers too).

 

Besides, many sitting on a 3.5% SVR have been doing so because they couldn't be bothered spending about two hours (and paying a fee of about £1000) to get a new deal that would only be saving them a little bit anyway (I know one or two). For example, my fix rate is 3%. The difference sitting on a 3.5% SVR is not that great. At 4%, it makes people think again and makes it worthwhile to go for a new deal.

 

 

When we get proper rate rises, things will be different. When that finally comes, is another question.

 

 

 

In 2006-2007 all it took was a move from 4.25% to 5.75% base rates - a rise of 35% - to precipitate the fastest and largest period of falling house prices on record. The market becomes geared to what present rates are and then suffers when they from this base. And this was during a period of increasing real income and rising employment.

 

The factors that are causing RBS and Halifax to raise their rates will put pressure on other lenders to do the same, and one by one they will follow. Rates will definitely not be going down for a while. They can't really go any lower.

 

Sonner or later the markets will look at UK growth figures and work out that the coalition deficit elimination plans are not credible, and at that point they will stop lending and rates will rise. It will not be the BoE that precipitates this; they will have it forced upon them. And if the BoE buys their own bonds, they will print money to do so and create inflation that will further reduce household income.

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When we get proper rate rises, things will be different. When that finally comes, is another question.

 

I've said it before and no doubt I'll say it again before this is over. ALL possible outcomes from this situation result in rapid and dramatic rate rises.

 

It still amazes me that so few understand how fragile, artificial and temporary the current rate environment is. It could last a few more years, but in terms of a 25 year+ mortgage commitment that's the blink of an eye.

 

Taking on hefty debt at the moment is pure folly.

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It still amazes me that so few understand how fragile, artificial and temporary the current rate environment is.

 

True, but this is what happens inside the warmth of an financial asset bubble. It should not come as a surprise to anyone who has followed the dotcom or housing bubble or any other historical bubble.

 

 

People inside the bubble come to regard it as the new norm and do not consider that it is unsustainable or what the fallout will be when the bubble bursts.

 

The current bubble bond bubble distorts our perception of reality, but it is no more sustainable than any other bubble. It's there, it's real, and one day it will burst.

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When I was passing through Heathrow a few hours ago,

I thought I read a headline saying a Rate Rise was imminent.

 

So maybe we will get the London peak BEFORE the Olympics

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Last November I wrote that I was hearing on the grapevine that hedge funds were turning their attention to the UK and were looking to attack UK gilts over the next 3 months to obtain a higher rate and that this would have an effect on UK house prices as the cost of credit would become more expensive. A similar tale I heard February 2011 was on Italian bonds and look were they went to 6 months later.

 

It may appear that the banks are anticipating this and pricing this in to maintain their margins, as seen by recent rate rises by RBS, Halifax and Santander.

 

Another whisper I heard in January 2012 was from the former owner of certain well known estate agent in Central London who implied an increase in rates was on the cards this year.

 

It would appear these whispers are beginning to hold more wait.

 

All the same London is a very large connected village with micro markets within. Some will continue to do well, others will level off, some may just simply melt away.

 

My tip for future security in London is Richmond - Teddington - large family housing, excellent schools, good communication links to London, and great community village feel.

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High? HIGH? ROFL!

They will have ZERO tools to reign in retail price inflation when it starts to really wreck havoc. It will be spectacular. Of course these idiots will fix prices just to create a HUGE black market and zero tax income, so they will need to print more and more. It will be unimaginable.

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In 2006-2007 all it took was a move from 4.25% to 5.75% base rates - a rise of 35% - to precipitate the fastest and largest period of falling house prices on record. The market becomes geared to what present rates are and then suffers when they from this base. And this was during a period of increasing real income and rising employment.

 

The factors that are causing RBS and Halifax to raise their rates will put pressure on other lenders to do the same, and one by one they will follow. Rates will definitely not be going down for a while. They can't really go any lower.

 

 

It was actually more to do with the mortgage lenders (indeed, all lenders) suddenly stopping lending to anyone that could put a cross on a bit of paper.

 

They haven't really restarted yet. There are still very strict criteria in place and only very recently has the 90% mortgage started to reappear, let along the 95.

 

I agree there is only one way rates can go, but they wont rise properly for some time yet, and most will fix when that time comes.

 

Sonner or later the markets will look at UK growth figures and work out that the coalition deficit elimination plans are not credible, and at that point they will stop lending and rates will rise. It will not be the BoE that precipitates this; they will have it forced upon them. And if the BoE buys their own bonds, they will print money to do so and create inflation that will further reduce household income.

 

The markets know full well the situation in the UK at present and they already know the deficit will take longer to reduce than the conlibs originally thought (Even the ratings agencies have caught up on that one).

 

They also know the UK debt has an average 14 year maturity. Along with the BOE and nationalised banks buying UK bonds when needed, they know it's really not worth the bother trying to put on a squeeze, when there are far easier targets elsewhere.

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All the same London is a very large connected village with micro markets within. Some will continue to do well, others will level off, some may just simply melt away.

 

My tip for future security in London is Richmond - Teddington - large family housing, excellent schools, good communication links to London, and great community village feel.

There may be fewerjobs everywhere, when the financial sector implodes.

 

It might be smart to look for areas outside London which have very little financial sector employment, and grow plenty of food

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Halifax remains weak: -0.5% (sa) for Feb.

 

NSA:

 

Nov	2011	520.4	-1.5	160,801
Dec	2011	510.7	-2.3	157,803
Jan	2012	514.2	-1.6	158,879
Feb	2012	514.3	-1.7	158,897

 

 

SA:

 

Nov  2011  522.9  -1.0  161,556
Dec  2011  517.5  -1.0  159,888
Jan  2012  520.8  0.6  160,925
Feb  2012  518.2  -0.5  160,118


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I've said it before and no doubt I'll say it again before this is over. ALL possible outcomes from this situation result in rapid and dramatic rate rises.

 

It still amazes me that so few understand how fragile, artificial and temporary the current rate environment is. It could last a few more years, but in terms of a 25 year+ mortgage commitment that's the blink of an eye.

 

Taking on hefty debt at the moment is pure folly.

 

I agree with that. The banks to do well out of it?

 

Since 2007 lending criteria has tightened and larger deposits were required. Now councils and the government are going to provide 20% deposits on various ponzi schemes because the banks won't lend 95% - they know what's coming. When rates rise people are going to struggle but when they sell, the loss to the banks is going to be minimal, while they rake in more mortgage interest. They have shifted the lending risk to bank of mum/dad, councils and the government. I can see more housing activity this year with all these ponzi schemes. The banks will lend on 95% mortgage schemes because they have such limited downside to them at no loss for 5 years and then only if prices drop 25%+. But these schemes all depend on the B of E printing to suppress our interest rates forever while our debt to GDP is rising. Surely it cannot last? We don't have savers in Japan to fall back on?

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Up go mortgage rates....

 

Halifax second lender to hike rates

http://www.home.co.uk/guides/news/story.htm?halifax_second_lender_to_hike_rates

 

Well perhaps finally here comes the second leg down.

 

See previous posts.

 

Probably more to do with ISA season being able to offer a few more 1/10ths of a percent, and a bit of catching up with other lenders (most near to 4% svr).

 

One day, the real rate rises will come. One day, but not today.

 

Best guess, two or 3 years.

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See previous posts.

 

Probably more to do with ISA season being able to offer a few more 1/10ths of a percent, and a bit of catching up with other lenders (most near to 4% svr).

 

One day, the real rate rises will come. One day, but not today.

 

Best guess, two or 3 years.

 

You wrongly believe that all that is needed is a few more years for the economy to strengthen enough for the BoE to being to orderly raise interest rates without crashing the economy. This is a complete fallacy. The economy is now structured in a way that it is dependent on ZIRP to feed the debt bubble. Deficits will continue to be run, the debt will continue to grow which all the time makes it impossible to for rates to go voluntarily higher. Any rise in rates will collapse this house of cards, which no government will allow. Government isn't the solution. Government is the problem.

 

Therefore, it will be forced upon us by the markets at some point. Doesn't matter if the debt is long term. When our creditors decide that they don't want to lend to us any more then up go the rates and down goes the country.

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...The economy is now structured in a way that it is dependent on ZIRP to feed the debt bubble. Deficits will continue to be run, the debt will continue to grow which all the time makes it impossible to for rates to go voluntarily higher. Any rise in rates will collapse this house of cards, which no government will allow. Government isn't the solution. Government is the problem.

Agreed.

London never had sufficient Property price correction to bring prices down to affordable levels, as has know happened in some parts of the UK, and across almost the whole of the USA.

 

So those ultra-low rates are vital in London to maintain some illusion of affordability. Take them away, and anyone with a mortgage LTV of 70% or maybe even 50% of peak values would suffer greatly.

 

Yes, it could bring the House down, and probably will IMHO.

 

The only good point for London residents is that higher rates would probably trigger a huge rush of (forced?) sales by foreigner BTL owners, and that might help to make London property more affordable in the future. I think that many foreigners have been suckered into buying expensive new properties.

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You wrongly believe that all that is needed is a few more years for the economy to strengthen enough for the BoE to being to orderly raise interest rates without crashing the economy. This is a complete fallacy. The economy is now structured in a way that it is dependent on ZIRP to feed the debt bubble. Deficits will continue to be run, the debt will continue to grow which all the time makes it impossible to for rates to go voluntarily higher. Any rise in rates will collapse this house of cards, which no government will allow. Government isn't the solution. Government is the problem.

 

Therefore, it will be forced upon us by the markets at some point. Doesn't matter if the debt is long term. When our creditors decide that they don't want to lend to us any more then up go the rates and down goes the country.

 

Yeah, end of the world, different this time etc etc. Been hearing it for the last 50 years or more.

 

You do not know what will happen any more than I do.

 

And, it actually does matter that the debt is long term and that the BoE can print. It means that with the ability to buy their own bonds, and get their own bailed out banks to do the same (albeit behind closed doors), that a squeeze does not work (UK got thumped by that sort of thing back in 1992 and learnt the lesson well, which is why Darling moved to lengthen the maturity in his last throw).

Besides, the markets aren’t totally stupid. Better to get a regular income stream than force craziness, unless you're picking on someone that can't fight back (with printing etc).

 

So yes, there are problems, but then again, there always have been, and there always will be.

 

So, I guess we will see.

 

At the moment, the most likely outcome is the economy will slowly improve over the next couple of years and the deficit will slowly reduce, with low-ish GDP growth. After that, who knows.

 

I don't, and I'm pretty sure no-one here does either, no matter what they think they know.

 

Agreed.

London never had sufficient Property price correction to bring prices down to affordable levels, as has know happened in some parts of the UK, and across almost the whole of the USA.

 

So those ultra-low rates are vital in London to maintain some illusion of affordability. Take them away, and anyone with a mortgage LTV of 70% or maybe even 50% of peak values would suffer greatly.

 

Yes, it could bring the House down, and probably will IMHO.

 

The only good point for London residents is that higher rates would probably trigger a huge rush of (forced?) sales by foreigner BTL owners, and that might help to make London property more affordable in the future. I think that many foreigners have been suckered into buying expensive new properties.

 

Credit supply, not necessarily rates is the key (unless rates go mental).

 

Anyone with a half decent deposit can fix at lifetime low rates for 10 years now.

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Yeah, end of the world, different this time etc etc. Been hearing it for the last 50 years or more.

 

You do not know what will happen any more than I do.

 

I know that:

 

 

- Interest rates cannot go any lower

- At market prices, this country will quickly become insolvent

- As long as the BoE interfere in the market then the factors that led us into this position will remain in place

- Any growth is illusionary if it is being driven by debt If interest rates are zero then you can increase debt infinitely without your payments going up, but this makes it impossible for you to then deal with higher rates in the future

- The BoE will keep printing money and maintain ZIRP which will make us all poorer through inflation

- Anyone who lends this country money will be making a negative real return on their money

 

None of these points are subject to any reasonable doubt.

 

 

Anyone with a half decent deposit can fix at lifetime low rates for 10 years now.

 

Yup. As incomes won't be increasing, they're gonna need to.

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I know that:

 

 

- Interest rates cannot go any lower

- At market prices, this country will quickly become insolvent

- As long as the BoE interfere in the market then the factors that led us into this position will remain in place

- Any growth is illusionary if it is being driven by debt If interest rates are zero then you can increase debt infinitely without your payments going up, but this makes it impossible for you to then deal with higher rates in the future

- The BoE will keep printing money and maintain ZIRP which will make us all poorer through inflation

- Anyone who lends this country money will be making a negative real return on their money

 

None of these points are subject to any reasonable doubt.

 

 

"Oh man, don't hit me with those negative waves so early in the morning" B)

 

-IRs for personal loans and business certainly can go lower, and will as the credit supply starts to get back to normal (not crazy 2007 levels, but not stupidly low 2009-2010 levels either).

-We are at market prices. QE skews it, but the market is the market, and as such it still results in market prices.

-BoE and governments have always interfered. Whether it was MIRAS or other interventions. Has always been, will always be.

-Growth reduces deficits (so long as spending is reduced as is at present). Lower deficits = lower debt growth = more that are willing to lend.

-ZIRP makes savers poorer, borrowers richer. On the whole, we're s**t loads wealthier than we were even 20 years ago.

-Well that doesn’t seem to worry them at the moment.

 

All points regarding economics are subject to reasonable doubt.

 

 

Yup. As incomes won't be increasing, they're gonna need to.

 

Incomes have been rising at over 2% for the last few years, even during the worst downturn in three generations. They will continue to rise, and at a greater rate, as things start to improve from s**t, to just about OK, to not so bad, to the new normal.

 

Things ain't anywhere near as bad as they could have been, and people (except maybe on here and HPC) are starting to realise it.

 

The only advice I can offer to those that won't even counter the possibility that the worst may now be over, is to never forget the immortal words of OB... :D

 

EDIT more suitable clip for my current attitude..after all, we ain't gonna starve.

 

"Hi man..." B)

 

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Yeah, end of the world, different this time etc etc. Been hearing it for the last 50 years or more.

. . .

Credit supply, not necessarily rates is the key (unless rates go mental).

 

Anyone with a half decent deposit can fix at lifetime low rates for 10 years now.

If sovereign debt problems spread to the UK, which I think is likely, then you may see both:

 

+ Tightening credit, and

+ Higher rates

 

Plus maybe:

 

+ A weaker pound.

 

If you see two of those, or two out of three, then you may see foreign BTL owners turn sellers. Their supply, plus the housing now under construction could be a big factor driving the market lower. If the selling pressure is big enough, the government will not be able to halt a slide in London property prices. There will be too much supply on the market.

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A question if I may?

On this quasi Trumpton-like isle where no one starves and the profligate are hugged and patted on the head,

are there any govt. plans for maintaining the recovery during say, a five degree sustained drop in average temperature?

 

Slightly off topic but this is a UK-centric thread of such high intensity that I thought someone might know the answer.

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