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julietOscarEch0 t1_irictdc wrote

Reply to comment by hmiamid in [OC] House price you can afford by paying 1000/month for 30 years vs. interest rate by hmiamid

But what do you think your numbers represent? US mortgage rates already went from 3 to 6/7 and we're not seeing anything like the drop you show. I contend that's because your analysis is naive with respect to inflation.

Regarding the UK market sure, but then the impact on 30 years fixed repayments is irrelevant because you can't fix for 30 years. Again, the wage/house price picture in 5 years (actually less since many people fix for 2) cannot be ignored.

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hmiamid OP t1_irihdpf wrote

  1. you don't really expect the market to crash the day after the interest rates rise. Its a slow progress.
  2. how do you think UK banks calculate people's affordability then?
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julietOscarEch0 t1_iril2ei wrote

UK bank affordability test already bake in a component of resilience to rate rises and the binding constraint for most people is an income multiple limit or raising a deposit. As such affordability has a lower dependence on rates than you might expect(and certainly nothing like your model). Probably the biggest impact so far is banks starting to withdraw 95% LTV deals.

So when do you expect the 30% drop in prices? I assume you have sold all property and found a way to short real estate since you seem to think the outcome is so certain?

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