Don't spend all your Christmas money just yet – mortgage rates…

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  • Don't spend all your Christmas money just yet – mortgage rates…
  • longj
    Member

    Interest rates were lowered in theory to boost the economy. However the real reason was to boost banks balance sheet. Base rate is 0.5% but banks have added a large margin on top of that when compared to pre crash. Now banks are turning a profit, interest rates may well go up but in turn banks will reduce their margins. So in short, calm down it’ll be OK.

    Premier Icon Kryton57
    Subscriber

    …banks will reduce their margins. So in short, calm down it’ll be OK.

    Possibly a bit niaive….

    Premier Icon stumpyjon
    Subscriber

    Until house prices drop back towards 3.5 times per average income this is only going to getworse. Lowering the interest rates hasn’t helped. There probably is a shortage of hoysing in the country but that is not what caused house prices to rocket out of control. Easy credit did that and low interest rates are part of it. The housing market isn’t your usual supply and demand situation, access to credit is what sets the prices, not the cost to build or availability. Lenders cap what they want to lend to 3.5 times avedage salary, average house price will be around 3.5 times average salary (probably a bit higher due to inheritance etc skewing the figures), remove the cap or make it 6.5 times and the average pricegoes to 6.5 times. Bottom line is same people are in the same house having paid a lot more. The only winners are people downsizing / inheriting and the banks, everyone else sees more of their income go on rent and mortgage.

    Trouble is to get out of the mess will crucify a lot of people a second time who have bought in the last 10 years as they end up in negative equity.

    Premier Icon stumpyjon
    Subscriber

    More houses isn’t the full answer either, there will never be enough desireble housing so whilst people can borrow too much the value of the houses many people aspire to will be silly expensive.

    trail_rat
    Member

    Go azeri on the issue ….

    25% max mortgage . 15-25% interest rates( high savings rates too though)

    2 bed appartment in central baku 200k ……

    Takes a while for average waged average person to buy a house there….

    Its not helped by the lenders getting bigger returns on bigger loans. Expecting the banks to sort it out is daft.

    longj
    Member

    Possibly a bit niaive….

    Not really. Banks are in the business of lending money. If individuals and businesses can’t afford to borrow at a given rate they will need to make it affordable right ? Furthermore repossessing property is not a good way to make money. It would make no sense for banks to bloody mindedly keep margins at 3-5% if by doing so they get hardly any business.

    Premier Icon Kryton57
    Subscriber

    Good point longj – i guess 3% profit on lots of money is better than 8% on not much money.

Viewing 8 posts - 46 through 53 (of 53 total)

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