Mortgage Payments

[AtW]

All of us on this forum know you're not the brightest, but it doesn't take much brains to realise that if you pay people 30-40 Euros per hour (as they do in Germany) to screw together cars, that is not added value and is not viable in the long run.

People who screw together cars are in the UK actually - Japanese/French car makers do R&D in their own countries (like Germany) and outsource cheap assembly to the UK.

Either way what's this got to do with me renting a house? I do what's more appropriate for me and it seems rather retarded to think that someone who rents is somehow an idiot - it is this kind of thinking that got many people in trouble as they felt they had to buy.

[ferret]

When UK inflation really kicks in (imported due to weak pound) BoE rates could go up to 10%+.

I agree, but that means that house prices will also be rising by at least 10%.

How do you work that one out Cyberman? The reason for the currently high house price is due to low interest rates. If we get the high interest rate scenario that AtW suggests (and I think this is a possibility too) then it will mean that mortgages are a lot more expensive and this will keep house prices low, not cause them to rise. We are more likely to have high inflation on household goods but not necessarily house prices...

[Cyberman]

How do you work that one out Cyberman? The reason for the currently high house price is due to low interest rates. If we get the high interest rate scenario that AtW suggests (and I think this is a possibility too) then it will mean that mortgages are a lot more expensive and this will keep house prices low, not cause them to rise. We are more likely to have high inflation on household goods but not necessarily house prices...

If interest rates are at 10% it means that inflation will be running very high. The 10% inflation was just a 'guesstimate', but of course it could be much higher. House prices would tend to follow inflation in 'normal times', so it would be better to have your money in houses rather than cash.

[PM-Junkie]

How do you work that one out Cyberman? The reason for the currently high house price is due to low interest rates. If we get the high interest rate scenario that AtW suggests (and I think this is a possibility too) then it will mean that mortgages are a lot more expensive and this will keep house prices low, not cause them to rise. We are more likely to have high inflation on household goods but not necessarily house prices...

Oh dear, I guess cybertory is showing his ignorance of economics again. A shame the ignore function doesn't stretch to quotes.

The basics, as most people with more than one brain cell can understand, are that a change in interest rates affects the value of assets such as house and share prices. Higher interest rates increase the return on savings in banks and building societies, and this usually encourages savers to invest less of their money in property and company shares. This inevitably reduces the demand for these assets, and any fall in demand is likely to reduce their prices. Conversely, lower interest rates have the opposite effect, ie they tend to increase asset prices.

Plenty of empirical evidence of this - ie it's only been happening for most of the last 50 years. Of course, that was when the banking system works - and if they don't get it working again within the next 6 months people will have a lot more to worry about than the relationship between interest rates and inflation. What we see at the moment is lower interest rates not having any impact on the fall in house prices, largely due to cash flows all but stopping.

Pretty basic stuff, but clearly it flies over cybertory's head...and anyway this doesn't apply in his own unique little economic world where house prices are still going up. Apparently.