Reply to: BoE sends 'clear signal' interest rates will be held

[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.

[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]

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

[PEEL]

You missed yourself out: the island village idiot.

Great chat.

[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]

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]

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]

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.

[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%?

[bobspud]

Good post.

There is a whole generation of people who will struggle to get on to the ladder. In the 80's and 90's, the average house price was roughly 4x the average salary, not it is over 9x. The is probably seen as good news for many homeowners, or those wanting to get their cash out the property, but what about first time buyers? They are going to have to wait longer to get on the market, or use the government help-to-buy schemes which I can't see how the government can ever stop.

I am still convinced a correction is overdue, but the governments actions are delaying it, and when it eventually does happen, more people will be burnt.

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. I can't talk to him about money because the most he earned was 20k or so. I think it would blow his mind if he saw my mortgage payments, I am regularly ashamed of my material wealth compared to them.

We had a correction the wrong way at the end of the 80's and that didn't go so well for the banks because people just wandered into the banks and gave back the keys to the houses. This uncontrolled collapse increased the supply at exactly the wrong moment. I am convinced the banks are ruling the government now and ensuring that they won't see that happen again. Either way there is only so much property available and the answer is average people can't afford a house.

[RedSauce]

Exactly.

Here in London, things are already super busy and I really can't see how this is going to help. I'm looking to buy again soon and watching the monthly increases in property value (or cost before Dim Prawn jumps in - hehe) is getting silly.

A property valued at £250,000 today could easily be around the £350,000 mark this time next year because of this scheme which is going to have an adverse effect on the very people it is supposed to be helping.

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?

[Martin@AS Financial]

I am in a position to buy, but the rate prices are rising in the SE are worrying, and the fact that (despite this strong rise) the government still feels the need for more intervention in January .

Exactly.

Here in London, things are already super busy and I really can't see how this is going to help. I'm looking to buy again soon and watching the monthly increases in property value (or cost before Dim Prawn jumps in - hehe) is getting silly.

A property valued at £250,000 today could easily be around the £350,000 mark this time next year because of this scheme which is going to have an adverse effect on the very people it is supposed to be helping.

[RedSauce]

Stand a little further back and observe things with a wider perspective.

I bought my place ten years ago and it has doubled in value. Even if the worst came to pass, my house would have to lose more than 50% to have cost me anything instead even though we had a massive crash in the last few years its still worth 50K more than it was when I needed it valued in 2006.

Fact of the matter is that despite all the tulip and gloom the lefty ******* at the beeb spent 2011/12 putting out, far from a triple dip recession we didn't even have a double dip. So I think its not so much the government leaning on them its the fact that there just isn't any bad news left that isn't already factored into the figures.

Good post.

There is a whole generation of people who will struggle to get on to the ladder. In the 80's and 90's, the average house price was roughly 4x the average salary, not it is over 9x. The is probably seen as good news for many homeowners, or those wanting to get their cash out the property, but what about first time buyers? They are going to have to wait longer to get on the market, or use the government help-to-buy schemes which I can't see how the government can ever stop.

I am still convinced a correction is overdue, but the governments actions are delaying it, and when it eventually does happen, more people will be burnt.

[AtW]

Following on from last month where Mark Carney announced that base rate would stay at 0.5% until unemployment falls below 7%, Deputy Governor - Charlie Bean has announced that it will not be raised in the near future.

They keep repeating it so often now

[bobspud]

I am in a position to buy, but the rate prices are rising in the SE are worrying, and the fact that (despite this strong rise) the government still feels the need for more intervention in January (via right to buy votes), indicates they are still not confident in the sustained rate of HPI. I also find it very odd that the government have been "pressing" news agencies to release articles about the strength of the market.

Stand a little further back and observe things with a wider perspective.

I bought my place ten years ago and it has doubled in value. Even if the worst came to pass, my house would have to lose more than 50% to have cost me anything instead even though we had a massive crash in the last few years its still worth 50K more than it was when I needed it valued in 2006.

Fact of the matter is that despite all the tulip and gloom the lefty ******* at the beeb spent 2011/12 putting out, far from a triple dip recession we didn't even have a double dip. So I think its not so much the government leaning on them its the fact that there just isn't any bad news left that isn't already factored into the figures.