Interest rates going up soon...
Discussion
DonkeyApple said:
Derek Chevalier said:
98elise said:
Derek Chevalier said:
superkartracer said:
Derek Chevalier said:
egor110 said:
economicpygmy said:
The problem with letting the housing market go nuts is unproductive captial. They want people spending in the wider economy. And as said above, the risk is future generations being completely locked out; rates going up is the lesser of two evils. That said, I dont believe they will before the election.
so mortgages go up, rent goes up and you kiss goodbye to spare cash that can be spent in the wider economy.I'm a landlord and I can't see that high house prices help anyone other than someone out to make a fast buck.
This is why its expensive to rent in area's where houses are expensive, and cheap where properties are cheap.
98elise said:
DonkeyApple said:
Derek Chevalier said:
98elise said:
Derek Chevalier said:
superkartracer said:
Derek Chevalier said:
egor110 said:
economicpygmy said:
The problem with letting the housing market go nuts is unproductive captial. They want people spending in the wider economy. And as said above, the risk is future generations being completely locked out; rates going up is the lesser of two evils. That said, I dont believe they will before the election.
so mortgages go up, rent goes up and you kiss goodbye to spare cash that can be spent in the wider economy.I'm a landlord and I can't see that high house prices help anyone other than someone out to make a fast buck.
This is why its expensive to rent in area's where houses are expensive, and cheap where properties are cheap.
We got our 1st house for 30k in the 90's, this was totally affordable for a postie and nurse without overstretching ourselves.
What chance do blue collar workers have nowadays and if they have no option to rent then there money is still tied up on property (just not there own) so they still have no spare cash to pump into the wider economy.
superkartracer said:
Why would the costs not be passed on? , why would the landlord lose money.
Landlords could very well lose money, most aren't professional investors and have bought an (imo) overpriced asset that might generate a small profit whilst interest rates are low, and they won't stay at these levels much longer. Margins for buy to let property aren't great, typically 5% of property value before costs (including mortgage costs) which doesn't leave much for void periods, letting agent fees, maintenance and refurbishment, etc let alone profit. I bought to let 16 years ago
, haven't added anything recently and am selling where I can. superkartracer said:
Is that a joke question?
No, he's not joking, this is what happens:Landlord: "I'm putting your rent up 10%."
Me: "OK, I'll find somewhere else to live."
<Landlord considers cost of finding a new tenant and possibility of replacing someone who looks after the place and pays the rent on time with a nightmare tenant>
Landlord: "OK, no increase this year."
I've had this conversation with several landlords during the decade when I've been renting in London. Rents haven't gone anywhere for years.
Edited by redwedge on Monday 16th June 11:31
RYH64E said:
Landlords could very well lose money, most aren't professional investors and have bought an (imo) overpriced asset that might generate a small profit whilst interest rates are low, and they won't stay at these levels much longer.
Margins for buy to let property aren't great, typically 5% of property value before costs (including mortgage costs) which doesn't leave much for void periods, letting agent fees, maintenance and refurbishment, etc let alone profit. I bought to let 16 years ago, haven't added anything recently and am selling where I can.
Agree, most of the population think that residential property is the only investment class, failing to realise that when the capital appreciation stops, as it will at some point, they'll be left with a depreciating asset with an increasingly expensive debt secured on it and no ability so shift it on quickly. My approach has been to buy good quality equities with my savings and use the dividends to pay rent. None of the hassle of owning a property and able to swiftly exit if things look like going pear-shaped. It's also handy when you fancy a bit of time off work - you can stick your stuff in storage and bugger off somewhere nicer for 6-12 months. And yes, I realise that's not something that would suit everyone!Margins for buy to let property aren't great, typically 5% of property value before costs (including mortgage costs) which doesn't leave much for void periods, letting agent fees, maintenance and refurbishment, etc let alone profit. I bought to let 16 years ago
, haven't added anything recently and am selling where I can. Edited by redwedge on Monday 16th June 11:30
RYH64E said:
Margins for buy to let property aren't great, typically 5% of property value before costs (including mortgage costs) which doesn't leave much for void periods, letting agent fees, maintenance and refurbishment, etc let alone profit. I bought to let 16 years ago , haven't added anything recently and am selling where I can.
In my end of the world it's a different tale: 7-8% yield on property price (12% on equity invested after mortgage costs), no agent fees, long term (5 years+) tenants and low maintenance requirements. I'd buy another three or four if I had the financing, despite imminent rate rises., haven't added anything recently and am selling where I can. Crafty_ said:
I'm at +0.79% and overpaying to get rid of it.
If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
I don't get this. Why would people pay off debt whilst debt is cheap?If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
Surely that money can be better utilised elsewhere (invested in shares, ISAs or a business) and then used to pay off debts when the interest on the debts outweigh the return elsewhere?
At +0.79% that's 1.29% net of tax. Even holding some of that in cash in the right places would yield more.
oyster said:
Crafty_ said:
I'm at +0.79% and overpaying to get rid of it.
If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
I don't get this. Why would people pay off debt whilst debt is cheap?If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
Surely that money can be better utilised elsewhere (invested in shares, ISAs or a business) and then used to pay off debts when the interest on the debts outweigh the return elsewhere?
At +0.79% that's 1.29% net of tax. Even holding some of that in cash in the right places would yield more.
The issue is that in reality the spare capital is not being invested but spent. It is also worth noting that the most cost efficient and risk free manner is the former, simply paying down the debt directly.
DonkeyApple said:
oyster said:
Crafty_ said:
I'm at +0.79% and overpaying to get rid of it.
If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
I don't get this. Why would people pay off debt whilst debt is cheap?If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
Surely that money can be better utilised elsewhere (invested in shares, ISAs or a business) and then used to pay off debts when the interest on the debts outweigh the return elsewhere?
At +0.79% that's 1.29% net of tax. Even holding some of that in cash in the right places would yield more.
The issue is that in reality the spare capital is not being invested but spent. It is also worth noting that the most cost efficient and risk free manner is the former, simply paying down the debt directly.
If anything it adds risk.
I would much rather have £50k sat in a 1.29% net bank account than to overpay the 1.29% mortgage by £50k as it means if I have a life-changing situation I then do not have access to thyat £50k should I need it.
It's only risk-free to overpay a mortgage if you can't resist buying something you don't need because you think you're better off than you are. But to be honest I stopped doing that when I was about 12.
oyster said:
DonkeyApple said:
oyster said:
Crafty_ said:
I'm at +0.79% and overpaying to get rid of it.
If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
I don't get this. Why would people pay off debt whilst debt is cheap?If they do go up I think they'll take it pretty slowly, if they stick (say) 1% of increases out there over the next year it could stagnate growth. Its also certainly a vote loser in the GE "They put my mortgage up, now I can't afford to .... - its the governments fault!" Regardless of whose fault it really is.
I reckon if they do go up we'll see 0.5% before the GE at the most.
Surely that money can be better utilised elsewhere (invested in shares, ISAs or a business) and then used to pay off debts when the interest on the debts outweigh the return elsewhere?
At +0.79% that's 1.29% net of tax. Even holding some of that in cash in the right places would yield more.
The issue is that in reality the spare capital is not being invested but spent. It is also worth noting that the most cost efficient and risk free manner is the former, simply paying down the debt directly.
If anything it adds risk.
I would much rather have £50k sat in a 1.29% net bank account than to overpay the 1.29% mortgage by £50k as it means if I have a life-changing situation I then do not have access to thyat £50k should I need it.
It's only risk-free to overpay a mortgage if you can't resist buying something you don't need because you think you're better off than you are. But to be honest I stopped doing that when I was about 12.
What you are referring to is the opportunity cost of not having immediate access to that capital. One would obviously always maintain a cash float for instant access to hedge shorter term requirements, but you pay for this so it isn't per se efficient to keep a sum beyond a suitable level in this manner.
So for example, if your debt is running at the general/crude average for property of 4% then you are 'paying' the opportunity cost of 2.5% in order to retain cash on instant access at 1.5%. The risk free element is in direct reference to the alternative that was mentioned above of investing the cash for returns in the capital markets where you are trading higher capital risk for the opportunity/assumption of higher yield.
Rovinghawk said:
RYH64E said:
Margins for buy to let property aren't great, typically 5% of property value before costs (including mortgage costs) which doesn't leave much for void periods, letting agent fees, maintenance and refurbishment, etc let alone profit. I bought to let 16 years ago , haven't added anything recently and am selling where I can.
In my end of the world it's a different tale: 7-8% yield on property price (12% on equity invested after mortgage costs), no agent fees, long term (5 years+) tenants and low maintenance requirements. I'd buy another three or four if I had the financing, despite imminent rate rises., haven't added anything recently and am selling where I can. oyster said:
Rental prices are based on supply and demand, just like buying prices. Cost is a much lesser factor.
Does a landlord with no mortgage charge a lower rent than a landlord with a mortgage? Of course not.
Cost (or value) does factor. Even if you don't have a mortgage, you need the rents to be above cash investments, otherwise its a poor investment. If prices rise but your rent doesn't, then there comes a point where you should cash in put the money into bonds etc.Does a landlord with no mortgage charge a lower rent than a landlord with a mortgage? Of course not.
oyster said:
It's only risk-free to overpay a mortgage if you can't resist buying something you don't need because you think you're better off than you are. But to be honest I stopped doing that when I was about 12.
To be fair, in that case a large chunk of the populace has economic literacy below age-12.98elise said:
oyster said:
Rental prices are based on supply and demand, just like buying prices. Cost is a much lesser factor.
Does a landlord with no mortgage charge a lower rent than a landlord with a mortgage? Of course not.
Cost (or value) does factor. Even if you don't have a mortgage, you need the rents to be above cash investments, otherwise its a poor investment. If prices rise but your rent doesn't, then there comes a point where you should cash in put the money into bonds etc.Does a landlord with no mortgage charge a lower rent than a landlord with a mortgage? Of course not.
And that is market forces at work.
DonkeyApple said:
So for example, if your debt is running at the general/crude average for property of 4% then you are 'paying' the opportunity cost of 2.5% in order to retain cash on instant access at 1.5%. The risk free element is in direct reference to the alternative that was mentioned above of investing the cash for returns in the capital markets where you are trading higher capital risk for the opportunity/assumption of higher yield.
Where are you getting 4% from?My whole comment was related to people suggesting paying down mortgages with rates of 1-1.5%. If you can get 1.5% net interest on a bank account instead then it's plainly better to hold it there until the mortgage rate exceeds the bank savings rate. Of course only if you can resist spending the money.
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