Interest rates going up soon...

[gibbon]

Rovinghawk said:

Please show me where I can get a BTL mortgage at 1-1.5%.

4% sounds a lot more realistic.

Mines at 2.99 fixed 2 yr and about the best I could find.

[98elise]

oyster said:

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.

That's a very different line to your previous assertion that increased landlord costs will just get passed onto the tenants. Are you now accepting that market rents are actually governed by tenant demand? If a landlord then decides the rent isn't enough to make a profit then fair enough they may decide to invest elsewhere.
And that is market forces at work.

Rents are driven by supply AND demand, not one or the other.

Additional costs will result on a lowering of supply, which then causes an over demand, and therefore rents rise.

[DonkeyApple]

Cotty said:

Does this mean I my ISA might start performing?

No. All performance is sucked out via wrapper and structured product fees.

[DonkeyApple]

oyster said:

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.

Agreed. If rates after taxes are equal then below a certain level (governed by FSCS levels in reality for UK) then running an offset has only fecklessness as a true downside.

[jdw1234]

98elise said:

oyster said:

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.

That's a very different line to your previous assertion that increased landlord costs will just get passed onto the tenants. Are you now accepting that market rents are actually governed by tenant demand? If a landlord then decides the rent isn't enough to make a profit then fair enough they may decide to invest elsewhere.
And that is market forces at work.

Rents are driven by supply AND demand, not one or the other.

Additional costs will result on a lowering of supply, which then causes an over demand, and therefore rents rise.

But the houses won't get mothballed, they will be sold on the open market.

Lots of landlords selling increases supply of houses for sale.
Prices drop.
Owners occupiers or new landlords can buy at lower prices/LTVs (yield is better if you buy at a lower price).

[gumshoe]

jdw1234 said:

But the houses won't get mothballed, they will be sold on the open market.

Lots of landlords selling increases supply of houses for sale.
Prices drop.
Owners occupiers or new landlords can buy at lower prices/LTVs (yield is better if you buy at a lower price).

Yeah, I'm not getting the "supply reduces because landlord costs increase"???? Like jdw1234 says, it's not like they get mothballed by the landlord until such a time his/her costs drop?

[Crafty_]

oyster said:

I don't get this. Why would people pay off debt whilst debt is cheap?

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?

I'd rather be rid of the liability.

Also do consider that sooner or later rates will go up, if I hadn't of overpaid previously to this I'd have a larger capital amount outstanding - costing me more in interest payments for a longer period. Going to be difficult to work out because of the number of variables (rate, amount outstanding, term left etc) but it may not work out cheaper to earn (say) 2.5% interest on money now instead of using it to overpay. I expect some clever person can work out a formula for it ?

I'm not putting every last penny in to the mortgage, so there is an element of income from interest on savings/investments anyway.

[Welshbeef]

Were actually delaying our extension by a few years - will only commence it when mortgage free or even save up and then pay outright for the extension (offset mortgage goes without saying).

[Pit Pony]

Given that my children are "young adults" just starting out in life, and that I have savings receiving less interest than inflation, I'm not sure that putting up interest rates by a few % would make any difference to my family.

[youngsyr]

Crafty_ said:

oyster said:

I don't get this. Why would people pay off debt whilst debt is cheap?

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?

I'd rather be rid of the liability.

Also do consider that sooner or later rates will go up, if I hadn't of overpaid previously to this I'd have a larger capital amount outstanding - costing me more in interest payments for a longer period. Going to be difficult to work out because of the number of variables (rate, amount outstanding, term left etc) but it may not work out cheaper to earn (say) 2.5% interest on money now instead of using it to overpay. I expect some clever person can work out a formula for it ?

I'm not putting every last penny in to the mortgage, so there is an element of income from interest on savings/investments anyway.

I don't follow? If you can earn 2.5% net on your money or pay down a debt attracting 1.5% interest, you are always better off to invest the money rather than pay down debt.

The length of either the investment or the liability do not come into it - for the time (no matter how short) that you can earn more interest than you're paying on the money, you are better off investing.

When the situation changes and mortgage rates are higher than net investment rates, you use your savings plus the extra interest you've earned to pay down the mortgage.

[oyster]

Crafty_ said:

oyster said:

I don't get this. Why would people pay off debt whilst debt is cheap?

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?

I'd rather be rid of the liability.

Also do consider that sooner or later rates will go up, if I hadn't of overpaid previously to this I'd have a larger capital amount outstanding - costing me more in interest payments for a longer period. Going to be difficult to work out because of the number of variables (rate, amount outstanding, term left etc) but it may not work out cheaper to earn (say) 2.5% interest on money now instead of using it to overpay. I expect some clever person can work out a formula for it ?

I'm not putting every last penny in to the mortgage, so there is an element of income from interest on savings/investments anyway.

It doesn't need a clever person.

If you're being paid 1.5% net of tax on credits and paying 1.5% on debts then you're even.

My point though is that if you're paying 1.5% on your mortgage and could get 2% net of tax on any money you have saved up, then you're throwing money away if you overpay the mortgage.

[oyster]

98elise said:

oyster said:

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.

That's a very different line to your previous assertion that increased landlord costs will just get passed onto the tenants. Are you now accepting that market rents are actually governed by tenant demand? If a landlord then decides the rent isn't enough to make a profit then fair enough they may decide to invest elsewhere.
And that is market forces at work.

Rents are driven by supply AND demand, not one or the other.

Additional costs will result on a lowering of supply, which then causes an over demand, and therefore rents rise.

But the supply won't disappear unless the house gets knocked down or boarded up. The supply may simply move to a different landlord or to an owner-occupier.

[DonkeyApple]

youngsyr said:

Crafty_ said:

oyster said:

I don't get this. Why would people pay off debt whilst debt is cheap?

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?

I'd rather be rid of the liability.

Also do consider that sooner or later rates will go up, if I hadn't of overpaid previously to this I'd have a larger capital amount outstanding - costing me more in interest payments for a longer period. Going to be difficult to work out because of the number of variables (rate, amount outstanding, term left etc) but it may not work out cheaper to earn (say) 2.5% interest on money now instead of using it to overpay. I expect some clever person can work out a formula for it ?

I'm not putting every last penny in to the mortgage, so there is an element of income from interest on savings/investments anyway.

I don't follow? If you can earn 2.5% net on your money or pay down a debt attracting 1.5% interest, you are always better off to invest the money rather than pay down debt.

The length of either the investment or the liability do not come into it - for the time (no matter how short) that you can earn more interest than you're paying on the money, you are better off investing.

When the situation changes and mortgage rates are higher than net investment rates, you use your savings plus the extra interest you've earned to pay down the mortgage.

Although it depends on your tax liability. You need the cash return net of tax to be notably greater than the debt financing rate.

[gibbon]

Uk inflation drops to 1.5%, well below 2% target.

Rate of inflation down to its lowest level in four-and-a-half years in May.

Rates going up? Why exactly?

[DonkeyApple]

gibbon said:

Uk inflation drops to 1.5%, well below 2% target.

Rate of inflation down to its lowest level in four-and-a-half years in May.

Rates going up? Why exactly?

I does depend on what factor(s) trigger the fall etc.

At a wild guess I would say it is down to oil prices so cheaper transport costs. This will benefit cost of living but potentially fuel house price inflation. As house prices form the largest single personal asset impacting cost of living there is the argument that it is more important to control that inflation thn worry about the general basket of goods as a whole.

Personally I believe there are better tools for tackling house inflation than rates and much safer ones.

I also believe that there is a political element that favours increasing rates so as to release money to the larger, older demographic over slowing house inflation.

[youngsyr]

DonkeyApple said:

youngsyr said:

Crafty_ said:

oyster said:

I don't get this. Why would people pay off debt whilst debt is cheap?

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?

I'd rather be rid of the liability.

Also do consider that sooner or later rates will go up, if I hadn't of overpaid previously to this I'd have a larger capital amount outstanding - costing me more in interest payments for a longer period. Going to be difficult to work out because of the number of variables (rate, amount outstanding, term left etc) but it may not work out cheaper to earn (say) 2.5% interest on money now instead of using it to overpay. I expect some clever person can work out a formula for it ?

I'm not putting every last penny in to the mortgage, so there is an element of income from interest on savings/investments anyway.

I don't follow? If you can earn 2.5% net on your money or pay down a debt attracting 1.5% interest, you are always better off to invest the money rather than pay down debt.

The length of either the investment or the liability do not come into it - for the time (no matter how short) that you can earn more interest than you're paying on the money, you are better off investing.

When the situation changes and mortgage rates are higher than net investment rates, you use your savings plus the extra interest you've earned to pay down the mortgage.

Although it depends on your tax liability. You need the cash return net of tax to be notably greater than the debt financing rate.

...which is precisely why I wrote "If you can earn 2.5% net..."

It doesn't have to be "notably greater" either, if it's even 0.1% greater than you're better off investing rather than paying down.

[98elise]

gumshoe said:

jdw1234 said:

But the houses won't get mothballed, they will be sold on the open market.

Lots of landlords selling increases supply of houses for sale.
Prices drop.
Owners occupiers or new landlords can buy at lower prices/LTVs (yield is better if you buy at a lower price).

Yeah, I'm not getting the "supply reduces because landlord costs increase"???? Like jdw1234 says, it's not like they get mothballed by the landlord until such a time his/her costs drop?

More Landlords will either cash in, or stop buying property. This will reduce the supply to the rental market. At the same time the increase in costs will also drive more people to the rental market.

I'm a Landlord and I've stopped buying (last house completed on Friday). I will not be buying any more for the foreseeable future. My brother is selling his as its value makes the yield look very small, and that's without rate rises.

I might be wrong, but it is my opinion.

[youngsyr]

98elise said:

gumshoe said:

jdw1234 said:

But the houses won't get mothballed, they will be sold on the open market.

Lots of landlords selling increases supply of houses for sale.
Prices drop.
Owners occupiers or new landlords can buy at lower prices/LTVs (yield is better if you buy at a lower price).

Yeah, I'm not getting the "supply reduces because landlord costs increase"???? Like jdw1234 says, it's not like they get mothballed by the landlord until such a time his/her costs drop?

More Landlords will either cash in, or stop buying property. This will reduce the supply to the rental market. At the same time the increase in costs will also drive more people to the rental market.

I'm a Landlord and I've stopped buying (last house completed on Friday). I will not be buying any more for the foreseeable future. My brother is selling his as its value makes the yield look very small, and that's without rate rises.

I might be wrong, but it is my opinion.

A reduction in rental supply must mean an increase in outright buying supply, unless you demolish your rental properties rather than sell them?

[jdw1234]

[quote=98elise

More Landlords will either cash in, or stop buying property. This will reduce the supply to the rental market. At the same time the increase in costs will also drive more people to the rental market.

[/quote]

Won't it just mean more houses coming to market for sale with less competition from landlords = falling prices?

[IroningMan]

So, for the large numbers of 'squeezed middle' households who are surviving on the back of very low mortgage payments, despite six consecutive years of inflation outrunning pay increases by some margin, interest rate rises will do what, exactly?