Friday, 16 May 2008

"Housing crisis: Mortgage rates at 8-year high"

It's not a housing crisis, though, is it? It's the same number of homes and the same number of people living in them. So I'd call it 'an interest rate shock'.

Are we supposed to feel sorry for people who took out a vast mortgage without asking themselves whether they'd still be able to afford repayments if interest rates were to rise by 2% or 3%? Or show any mercy to the banks who didn't advise their borrowers to do so?

Anyway, this is all good stuff. If typical monthly repayments go up by a quarter (from £800-odd to £1,000-odd) then typical house prices will have to come down by a fifth to maintain any semblance of affordability.

Further, if banks now require at least a ten per cent deposit, that is doing first time buyers a huge favour. You have to look at these insanely 'generous' mortgages as weapons with which FTB's kill each other. Take away the weapons, and FTB's, collectively, will benefit.

Ah well. Nulab will keep chanting the mantra about interest rates hitting 15% under the Tories. It puzzles me what relevance that can possibly have to somebody whose monthly mortgage repayments have just shot up by £200, but hey.

4 comments:

The Great Simpleton said...

I certainly don't feel sorry for anyone who too equity release to fund a nice life style ie cars, holidays. I have even less sympathy for the banks and building societies who allowed it.

It hasn't happened in the past but maybe after this "shock" people will start to treat a house as somewhere to life and not as a form of magic investment.

To paraphrase Martin Wolf (and I suppose he wasn't the first) we don't get rich by selling houses to each other at ever increasing prices.

dearieme said...

But we can get rich by selling houses to each other at ever increasing prices and then getting off the merry-go-round at the right moment.

Mark Wadsworth said...

D, which is what I did!

The Great Simpleton said...

dearieme,

perhaps that should have been we can't ALL get rich.....