OzTennis

Yeah, the lesson is that interest rates needed to be increased.

The Monetary Policy Committee of the Bank of England sits this morning as it happens to deliberate on UK interest rates. Many are predicting an increase, we'll have to wait until 12.00 noon GMT to find out.

OzTennis

iPom

There will be another one... but I think that once things stabilise, it will be going down again by the end of next year... So everyone who's buying needs to leave it for another 3-6 months to make the sellers really desparate.

Mwahahahahahahahaahaha!

OzTennis

Yes, things are never quite as simple as they seem. For example, interest rates are up, 'families and tradespeople suffer' or whatever is claimed. But, the rise in interest rates MAY:

1 In the long run make housing more affordable. I know the cost of mortgages goes up but you need to also consider the impact on the housing market which should dampen down prices. What's better - a cheaper mortgage and a higher price to pay or a dearer mortgage and not so high a price to pay?

2 The said family may be discouraged from buying as much using plastic, is that a bad thing?

3 Said family gets a higher return on their savings.

etc, etc

Things are just not as simple as they seem and as someone else said you can't just pick out one little part of the business cycle and predict doom and gloom just on the basis of short term movements.

OzTennis

iPom

I'd say a cheaper mortgage, but I'm not sure now you've said it. Either way, if it's a variable rate, going in at a high point, with speculation of a lowered rate may not be a bad thing....It's only really bad if they're stretching themselves and the IR goes up again, causing poverty issues, right? (I'm learning Oz, merely a student of economics, so feel free to correct me... )

Depends if they pay it off every month, but if they don't, then no!

Which is fairly pointless if they've got huge debt on the CC, right?

ginaf

I have been following the Sydney market on Realestate.com.au for a while now and have seen the same things as you. House listed for auction, doesn't sell. Same house listed for sale at offers above, doesn't sell. Same house then relisted as "new" on the market by a different agent at auction, still doesn't sell and finally price gets dropped by 15% and STILL doesn't sell. It's not just one property either their are many in the areas that we would like to live in that are like this. I have seen houses on for well over a year now and the owners are just leaving them up there, it's madness to me.

OzTennis

No, things are not as simple as when I said they are not as simple as they seem!

We'd need to know the actual magnitudes of the different changes in mortgage repayments and house prices - it's not a simple case that the effects of cheaper mortgage/higher prices vs dearer mortgage/lower prices are equal effects (as though the lower mortgage repayments from lower I/R's is exactly equal to the lower house prices from higher I/R's).

As you say, changing interest rates would appear to have no effect on those who pay monthly before interest gets charged but it may have a psychological effect even on these people (some would think, what if I can't pay off monthly if for example I lost my job or with a dearer mortgage?)

If people don't save, people can't borrow, that's where the lending institutions get their funds from obviously. So, when I/R's rise this can encourage saving from some which can in turn be lent to others. For example, with the I/R rise and Term Deposit rates going up we transferred some (UK) funds into (Oz) Term Deposits - which someone else will now be able to borrow (albeit at a higher I/R but the funds would not have been available). The I/R rise can encourage more foreign investment.

Yes, generally speaking people will borrow more than they save so the I/R rise for most is initially going to have more impact on their borrowing.

OzTennis

OzSheila

And today in the UK the Abbey announces the 57 year mortgage:
http://www.dailymail.co.uk/pages/liv...&icc=NEWS&ct=5

OzTennis

The same Abbey (owned by Banco Santander of Spain) which announced it was making mortgages available at 5 times (rather than max 3.5 times) salary. I'm sure the average person in the street will think, that's great, 30 more years to pay off the mortgage. The principal of the loan will be dwarfed by the interest. And who has a working life of 57 years, in theory you will still be paying off the mortgage from your pension.

Interesting stat in the article - average UK house price £211,500 equals about $520K; average Melbourne house price for comparison is about $375K. I wouldn't say average salaries are 39% higher in the UK!

OzTennis

DWT

Found this all very interesting as I am moving over to Melbourne in January.

£211,500 is the average UK house price, what is the median price for the whole of Australia or the median price for Victoria? If you take Melbourne as the capital of Victoria shouldn't it be compared to London, where the average house price is £324,513 or $795,000

http://www.wheresmyproperty.com/pric...donaverage.asp

stuckinblighty

BofE have just added .25% ..now at 5%.Onwards and upwards

OzTennis

That was the median price I quoted, I called it the average to simplify matters, median being the midpoint of all prices arranged from lowest to highest and I didn't want to get into whether there was negative or positive skewness, modes, standard deviation and things like that.

For a detailed study of Melbourne property prices go to:

http://www.domain.com.au/Public/Guides.aspx

and download your free copy. I don't have an 'all Australian' average but you can get figures for Sydney, Brisbane (in the other guides), Perth, Adelaide etc easily on the internet. Each state has a real estate institute or equivalent which publishes stats on a quarterly basis.

Melbourne as a rough rule of thumb is the 3rd most expensive city after Sydney and Perth so perhaps a comparison with Edinburgh rather than London might be more realistic. I would agree that you would expect Melbourne to be above Australian averages (or medians) and therefore the UK average being 39% above Melbourne's (and salaries not being that) tells us that property is more affordable in the latter - borne out by higher rates of home ownership in Australia (and I'm not wishing to start a debate on how much sturdier UK houses are vs Oz, let's just agree to say the climate necessitates this).

OzTennis

OzTennis

Snap!

http://news.bbc.co.uk/1/hi/business/6129780.stm

I'm interested in how you use the term 'lucky country' in this context (as though an interest rate rise proves it isn't which is palpable nonsense).

You probably didn't know that the person who coined this term (Donald Horne), used it as an ironical derisive term (like you) in his book of the same name (which we all had to read at school).

Some of you might like to look at this article to get a more realistic view of what to expect in Australia. It isn't the land of perpetual sunshine, milk and honey, everyone is each other's mate etc. Perhaps this should be mandatory reading for intending migrants (there'd certainly be fewer threads on BE's if people understood better what they were going to).

http://www.naa.gov.au/Exhibitions/events/mulvaney.html

OzTennis

DWT

Thanks for thatall food for thought. I will be bringing some capital with me but will still need a mortgage, so I'll have to decide when might be best to enter the Australian property market. Cystal ball time again

OzTennis

In Melbourne the so called experts in the property market say there is a 'rule of 10 Km'. Namely, you can't really go wrong buying property at any time within 10 Km of the CBD. Obviously there will be exceptions to this rule eg for a time units/apartments on the edge of the CBD fell in price due to an oversupply but even they are increasing in price now - i.e. in the long term you can't go wrong. Melburnians are looking for things like water and hills (direct views best, glimpses next, close to next); promiximity to CBD; near a railway station/tram/bus stop; schools; shopping facilities; countryside etc. Do your homeworks, ask questions here (and in BritVics) and you can hardly go wrong.

OzTennis

Vash the Stampede