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Are UK House Prices about to peak?

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Lanark
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Re: Are UK House Prices about to peak?

#505234

Postby Lanark » June 6th, 2022, 10:12 am

Nimrod103 wrote:But the only significant house price drop in both graphs (which start in 1995) occurred at the point where the real mortgage rate changed direction to an upward trajectory.

Heres one from the US, in 2010 prices of both house prices and interest rates fell at the same time:

https://cdn.theatlantic.com/media/mt/bu ... -56453.png

Since 2010 they have gone back up, so I think the thing is: there is a strong link between the two, but it is not immediate, a lot of people are on fixed rates and don't need to move, so they can just ignore market changes for several years.

Nimrod103
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Re: Are UK House Prices about to peak?

#505318

Postby Nimrod103 » June 6th, 2022, 1:25 pm

Lanark wrote:
Nimrod103 wrote:But the only significant house price drop in both graphs (which start in 1995) occurred at the point where the real mortgage rate changed direction to an upward trajectory.

Heres one from the US, in 2010 prices of both house prices and interest rates fell at the same time:

https://cdn.theatlantic.com/media/mt/bu ... -56453.png

Since 2010 they have gone back up, so I think the thing is: there is a strong link between the two, but it is not immediate, a lot of people are on fixed rates and don't need to move, so they can just ignore market changes for several years.


Well, yes, those on fixed rates are not really relevant to the argument.

murraypaul
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Re: Are UK House Prices about to peak?

#505326

Postby murraypaul » June 6th, 2022, 2:10 pm

Nimrod103 wrote:Well, yes, those on fixed rates are not really relevant to the argument.


94% of new mortgages written in 2021Q4 were fixed rate, and that figure has been over 90% since 2017Q4.

https://www.fca.org.uk/data/mortgage-lending-statistics

Mike4
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Re: Are UK House Prices about to peak?

#505328

Postby Mike4 » June 6th, 2022, 2:15 pm

murraypaul wrote:
Nimrod103 wrote:Well, yes, those on fixed rates are not really relevant to the argument.


94% of new mortgages written in 2021Q4 were fixed rate, and that figure has been over 90% since 2017Q4.

https://www.fca.org.uk/data/mortgage-lending-statistics



That surprises me, given my own long experience with taking fixed rate mortgages is they have ALWAYS turned out with the passage of time to have been a Bad Decision.

servodude
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Re: Are UK House Prices about to peak?

#505332

Postby servodude » June 6th, 2022, 2:35 pm

Mike4 wrote:
murraypaul wrote:
Nimrod103 wrote:Well, yes, those on fixed rates are not really relevant to the argument.


94% of new mortgages written in 2021Q4 were fixed rate, and that figure has been over 90% since 2017Q4.

https://www.fca.org.uk/data/mortgage-lending-statistics



That surprises me, given my own long experience with taking fixed rate mortgages is they have ALWAYS turned out with the passage of time to have been a Bad Decision.


Shirley... only if you discount the value of a period of certainty?

Mike4
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Re: Are UK House Prices about to peak?

#505349

Postby Mike4 » June 6th, 2022, 3:03 pm

servodude wrote:
Mike4 wrote:
murraypaul wrote:
Nimrod103 wrote:Well, yes, those on fixed rates are not really relevant to the argument.


94% of new mortgages written in 2021Q4 were fixed rate, and that figure has been over 90% since 2017Q4.

https://www.fca.org.uk/data/mortgage-lending-statistics



That surprises me, given my own long experience with taking fixed rate mortgages is they have ALWAYS turned out with the passage of time to have been a Bad Decision.


Shirley... only if you discount the value of a period of certainty?


True, and yes I get that, but my point is with the benefit of hindsight, in every case when I've taken a fixed rate, the market moved in a way that benefitted the lender rather than me.

Having realised this, I've since used the existence of an acceptable fixed rate as the worst case scenario likely to happen, and taking the variable rate is always likely to be a winning decision.

Nimrod103
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Re: Are UK House Prices about to peak?

#505393

Postby Nimrod103 » June 6th, 2022, 6:19 pm

murraypaul wrote:
Nimrod103 wrote:Well, yes, those on fixed rates are not really relevant to the argument.


94% of new mortgages written in 2021Q4 were fixed rate, and that figure has been over 90% since 2017Q4.

https://www.fca.org.uk/data/mortgage-lending-statistics


But the typical fixed rate is two or five years in the UK, though I seem to recall they are for much longer in the USA. I'm sure such fixes distort the relationship a bit, but relatively quickly the mortgagee returns to paying the SVR.

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Re: Are UK House Prices about to peak?

#505396

Postby Eboli » June 6th, 2022, 6:23 pm

Mike4 suggested:

...given my own long experience with taking fixed rate mortgages is they have ALWAYS turned out with the passage of time to have been a Bad Decision.


What's the time line Mike4? I had a fixed deal in the 1980s that was highly profitably. I would suspect that would be rare for the period after the general fall of Bank base rates (i.e. from 18% in 1991).

But then again the last dinner party I attended was about then too :)

Eb.

Nimrod103
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Re: Are UK House Prices about to peak?

#505398

Postby Nimrod103 » June 6th, 2022, 6:23 pm

Mike4 wrote:
servodude wrote:
Mike4 wrote:
murraypaul wrote:
Nimrod103 wrote:Well, yes, those on fixed rates are not really relevant to the argument.


94% of new mortgages written in 2021Q4 were fixed rate, and that figure has been over 90% since 2017Q4.

https://www.fca.org.uk/data/mortgage-lending-statistics



That surprises me, given my own long experience with taking fixed rate mortgages is they have ALWAYS turned out with the passage of time to have been a Bad Decision.


Shirley... only if you discount the value of a period of certainty?


True, and yes I get that, but my point is with the benefit of hindsight, in every case when I've taken a fixed rate, the market moved in a way that benefitted the lender rather than me.

Having realised this, I've since used the existence of an acceptable fixed rate as the worst case scenario likely to happen, and taking the variable rate is always likely to be a winning decision.


I tend to take the same view with all fixes, such as energy. Unusual situations can arise, such as the Ukraine war, where those who fixed with big suppliers won (except for those like me who fixed at a low rate with a minnow unhedged supplier who went bust). In general I feel that the bank or energy supplier has a much better idea of the market direction than me, so any fix they offer will be to their benefit, not mine.

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Re: Are UK House Prices about to peak?

#505399

Postby Lootman » June 6th, 2022, 6:25 pm

Nimrod103 wrote:
murraypaul wrote:
Nimrod103 wrote:Well, yes, those on fixed rates are not really relevant to the argument.

94% of new mortgages written in 2021Q4 were fixed rate, and that figure has been over 90% since 2017Q4.

https://www.fca.org.uk/data/mortgage-lending-statistics

But the typical fixed rate is two or five years in the UK, though I seem to recall they are for much longer in the USA. I'm sure such fixes distort the relationship a bit, but relatively quickly the mortgagee returns to paying the SVR.

Yes, the standard mortgage in the US is a 30-year fixed loan. They are something of a free lunch since you can refinance if rates go down, or keep them forever if rates go up.

Part of the problem in the UK is that we don't have long-term fixed mortgages, but then that is because we don't have the equivalent of GNMA and FNMA, whose job it is to buy these mortgages and securitise them, enabling banks to get the loans and the risk off their balance sheet so they can make new loans.

murraypaul
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Re: Are UK House Prices about to peak?

#505564

Postby murraypaul » June 7th, 2022, 11:34 am

Nimrod103 wrote:But the typical fixed rate is two or five years in the UK, though I seem to recall they are for much longer in the USA. I'm sure such fixes distort the relationship a bit, but relatively quickly the mortgagee returns to paying the SVR.


And people remortgage to another fixed rate.

Obviously increased rates eventually take effect and hit people in the wallet, but nowhere near as quickly as they would have done decades ago.

murraypaul
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Re: Are UK House Prices about to peak?

#505565

Postby murraypaul » June 7th, 2022, 11:39 am

Mike4 wrote:Having realised this, I've since used the existence of an acceptable fixed rate as the worst case scenario likely to happen, and taking the variable rate is always likely to be a winning decision.


A fixed rate mortgage is an insurance product.

Do you want to pay more for your mortgage for the bank to take on interest rate risk rather than taking it on yourself?

Personally, the answer is yes, but then I am risk averse.

(Although for the last few years, I think taking on a long term fixed rate mortgage has been a pretty obvious choice, given all that has been going on.)

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Re: Are UK House Prices about to peak?

#505747

Postby xeny » June 8th, 2022, 11:02 am

Nimrod103 wrote:
Can you cite a time when house prices fell, but mortgage rates remained constant or moved lower?


If you're looking at real prices and BoE base rates (which I acknowledge isn't quite mortgage rates), then that seems to have been the case in the early 90s (and matches my recollection of the time and) and around 2008.

See https://marketrealist.com/2017/11/bank- ... e-to-0-50/ and https://monevator-monevator.netdna-ssl. ... prices.jpg

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Re: Are UK House Prices about to peak?

#512401

Postby vand » July 7th, 2022, 9:19 am

House prices are at a peak, and yet the Housebuilders have been getting smashed from pillar to post over the last year.

These two trends will not continue; one will reverse.

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Re: Are UK House Prices about to peak?

#512752

Postby Tara » July 8th, 2022, 3:08 pm

vand wrote:House prices are at a peak, and yet the Housebuilders have been getting smashed from pillar to post over the last year.

These two trends will not continue; one will reverse.



Not necessarily. House prices may start to fall a lot now, and housebuilders may continue to fall, but at a slower rate.

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Re: Are UK House Prices about to peak?

#512878

Postby richlist » July 9th, 2022, 8:58 am

I don't think anyone has mentioned the shortage of housing. We aren't building enough, there are more buyers than there are properties in some areas of the country. There is also a massive shortage of rental property. Doesn't supply and demand influence sale prices ?

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Re: Are UK House Prices about to peak?

#512893

Postby servodude » July 9th, 2022, 9:56 am

richlist wrote:I don't think anyone has mentioned the shortage of housing. We aren't building enough, there are more buyers than there are properties in some areas of the country. There is also a massive shortage of rental property. Doesn't supply and demand influence sale prices ?


I think it was mentioned earlier
And the fact that at the last record there were 600k empty properties (or 2 years+ worth of proposed building) in the UK
Not sure how it all adds up but it feels a bit like the market might be a bit manipulated

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Re: Are UK House Prices about to peak?

#512914

Postby Lanark » July 9th, 2022, 11:12 am

In quite a few areas 1 in 4 houses are being used for airbnb, which means they are sitting empty for most of the year

http://insideairbnb.com/

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Re: Are UK House Prices about to peak?

#512981

Postby Tara » July 9th, 2022, 4:14 pm

servodude wrote:
richlist wrote:I don't think anyone has mentioned the shortage of housing. We aren't building enough, there are more buyers than there are properties in some areas of the country. There is also a massive shortage of rental property. Doesn't supply and demand influence sale prices ?


I think it was mentioned earlier
And the fact that at the last record there were 600k empty properties (or 2 years+ worth of proposed building) in the UK
Not sure how it all adds up but it feels a bit like the market might be a bit manipulated


Of course it is manipulated. If the correct number of houses were built in the UK then there would be no shortage and house prices would then move closer to a reasonable multiple of average UK earnings instead of the current 12x average earnings.

But no government wants a house price collapse when they are in government and so the correct number of houses to meet demand are never built by the government of the day.

So UK house prices are largely manipulated by various schemes such as never building enough houses, help to buy, right to buy, absurdly low interest rates, in order to keep UK house prices artificially high.

It’s a bit like a Ponzi scheme.

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Re: Are UK House Prices about to peak?

#512997

Postby Wuffle » July 9th, 2022, 5:32 pm

I suspect that there is enough appropriate accommodation for our various needs but awful distribution.
But you really wouldn't win any new friends pointing that out.

W.


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