BoE sends 'clear signal' interest rates will be held

[Martin@AS Financial]

What is your plan then? As someone who specialises in finance, you must have your ear pretty close to the ground, do you think it is a good time to get on the road to riches, or do you think a correction is likely?

It's a good question RedSauce.

My plan is to keep saving for a deposit as I am keen to purchase another flat. It's just going to be a lot more difficult once the govt scheme is under way as there will be even more competition for such a limited stock of property in London. At the end of the day, we will only be able to tell how this is going to impact things from Jan 2014 but my opinion is that meddling with the housing market to secure votes is a dangerous game to play.

Without sounding like an estate agent, I do think it is a good time to buy as long as you take a long term view. Clients who I arranged a mortgage for 2 years ago with a 20% deposit have recently been able to remortgage onto 60% loan to value products on fixed rates as low as 1.79%. As long as they take advantage of the overpayment facility, they will shave years off their mortgage.

In terms of a correction, I think it will depend in which region you are looking to purchase in as there could well be a fall out at the end but it will not effect the country equally. My plan is to take advantage of a low rate and overpay the mortgage as much as possible to stay ahead of the curve should there be another downturn.

Finally, you have to bear in mind that rates are not always going to be this low so you need to apply a stress test. Yes, you may be able to borrow 6 x income but can you still afford the monthly payment if rates are at 7%?

[PEEL]

I say evict all the social housing folk out of central London, maybe in zones 1-3. It will make things cheaper for me. It's a pain that I've been working a few years on what should be a 'good' takehome pay only to still not afford a 10% deposit on a 350k one bedroom flat. Demolish the social housing estates and build nice new building for yupee young workers who are buying their first home.

With regard to rate movements, just take a look at the Libor futures curve and the basis on the a Libor / Base Rate swap. I'd send screen from bloomberg but i'd most certainly get fired.

[sasguru]

I say evict all the social housing folk out of central London, maybe in zones 1-3. It will make things cheaper for me. It's a pain that I've been working a few years on what should be a 'good' takehome pay only to still not afford a 10% deposit on a 350k one bedroom flat. Demolish the social housing estates and build nice new building for yupee young workers who are buying their first home.
.

Where will the nurses, teachers and policemen who work in London live, you moron?
I'd wager the work you do is far less useful.

[PEEL]

Where will the nurses, teachers and policemen who work in London live, you moron?
I'd wager the work you do is far less useful.

The last time I checked these sort of professionals weren't supported by social housing. Usefulness in employment is hard to compare. On an island where 1 person is a teacher, 1 person is nurse and 1 person is a hunter-gatherer and 1 person is an engineer who is the most useful?

[sasguru]

The last time I checked these sort of professionals weren't supported by social housing. Usefulness in employment is hard to compare. On an island where 1 person is a teacher, 1 person is nurse and 1 person is a hunter-gatherer and 1 person is an engineer who is the most useful?

You missed yourself out: the island village idiot.

[PEEL]

You missed yourself out: the island village idiot.

Great chat.

[bobspud]

I say evict all the social housing folk out of central London, maybe in zones 1-3. It will make things cheaper for me. It's a pain that I've been working a few years on what should be a 'good' takehome pay only to still not afford a 10% deposit on a 350k one bedroom flat. Demolish the social housing estates and build nice new building for yupee young workers who are buying their first home.

With regard to rate movements, just take a look at the Libor futures curve and the basis on the a Libor / Base Rate swap. I'd send screen from bloomberg but i'd most certainly get fired.

Nah mate even if they do boot the lot out you are still competing with the likes of me with a shed load of real cash and a want to buy 10 or more housed for my pension fund. You are screwed unless you want to get a proper job so you can earn a real wage

[d000hg]

I agree that average wages are a problem but the solution as I keep telling my kids is don't be average. My mum and dad bought their house for £17k about a year before the first bubble kicked off. They were the first generation in my family to actually own a home. The previous two generations had rented or had a council home. That purchase was a severe struggle for them and they spent my childhood renovating the place, They sold it 15 or 20 years later for over 10 times their purchase price. They moved out of London to a relatively cheap area, and it allowed my father to have a comfortable retirement with my mum until her death a year or so ago.

Very similar with my parents. They bought their first house for £4000 or so, IIRC, perhaps 40-45 years ago. The house I grew up in was huge but they got it for something like £16k 30-35 years ago. They sold it for something like £400k in the early 90s and were able to buy two properties without mortgages AND have money left to retire on.

The only way I can see us doing anything similar, even though we both have decent professional jobs and live in one of the cheapest areas of the country, is from my parents' and grandfather's inheritance. Which hardly seems the way things are supposed to work. A couple both working full time in professional jobs, with no plans for kids, should have it made!

[bobspud]

Very similar with my parents. They bought their first house for £4000 or so, IIRC, perhaps 40-45 years ago. The house I grew up in was huge but they got it for something like £16k 30-35 years ago. They sold it for something like £400k in the early 90s and were able to buy two properties without mortgages AND have money left to retire on.

The only way I can see us doing anything similar, even though we both have decent professional jobs and live in one of the cheapest areas of the country, is from my parents' and grandfather's inheritance. Which hardly seems the way things are supposed to work. A couple both working full time in professional jobs, with no plans for kids, should have it made!

Very true.