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Originally Posted by Alanmelon
I don't profess to know an awful lot about the subject, but is there nothing that can be done by the government to cap/slow the rise in these prices?
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Raising interest rates is the only realistic way to slow the market down - but if you raise them too high, then people will not be able to borrow, existing homeowners will not be able to afford their payments - and then you have a crash again.
Also, it is not in the remit of the Bank of England to raise interest rates on the grounds of housing - although it is clear that this is necessary and they are doing so.
I'm not sure if there are any more sensible options to improve the situation without hurting people. The only real option is to saturate any open space with 2/3 bed houses to meet demand, which should increase competition and lower cost - however they have been doing this for a while now, and the greed of the house builders means that the prices are actually going up.
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Originally Posted by Scarlett
I have only one thing to say to people buying right now and that is fixed rate. I did that when we bought our house last year (okay I could only get 3 years fixed rate) which is why I get to take a slightly more relaxed view of the rate raises.
Also due to my new job, I can manage if the rates hit 8% (and possibly higher as well) but I'd rather not see a crash as I've only just started out so for the first few years, I'm pretty much paying the banks interest and not my capital. So if there is a crash I'm going to be stuck in negative equity for several years  |
Actually there is a far more sensible option that would mean far fewer cases of negative equity and tiny amounts of repossesions becuase people could not afford higher payments linked to big increases in the interest rates:
There's some discussion about it now - but we are one of the few countries in Europe that does not have fixed rate mortages for the whole term of the loan. If you buy a car for £20,000 you look at the interest rate and that rate is fixed for the whole term.
However most people cannot get mortgages in this country which are fixed for any longer that 3-5 years. There's a few that are 10 years - but you'll pay 7-8% on those - that's the same rate as my credit card!!!
By entering into a mortgage that is fixed for the whole 25 years - you always know how much your payments will be, and you can ensure that you can afford them. Sadly, with most lenders knowing that rates will rise, they are unwilling to enter into such an agreement.