Blog Home  Bookmark and Share

House Prices & Interest Rates

| 1 Comment | No TrackBacks

The likelihood that the Bank of England may increase interest rates for the first time in three years should be a salutary warning to the overheated Irish housing market. Where the "Old Lady of Threadneedle Street" goes, other Central Banks are sure to follow either sooner or later.

In the current low-interest climate, many first-time buyers are very stretched to meet mortgage repayments. In a higher rate environment, their capacity to meet larger repayments is unlikely to increase and, depending on other economic factors, may even fall. If interest rates should rise by 2% over the next three years, then repayments on a 90% thirty-year mortgage at 3.5% p.a. for a €300,000 house would increase by 23%. On this basis, house prices would need to decline by about 18% for the monthly repayments to stay at their current level.

Rising interest rates could move many recent and future buyers with large mortgages into negative equity and expose their lenders to defaulting loans. It could also mean that many houses acquired as investments might be offered for sale to lock in gains or to cut losses. This would further depress prices. Can nothing be done to prevent this calamitous event from happening?

Letter published in the Irish Times on 28th October 2003.

No TrackBacks

TrackBack URL: http://www.planware.org/cgi-sys/cgiwrap/bf/managed-mt/mt-tb.cgi/25

1 Comment

Interesting! Learn a lot form your post. Hope see some new again when i come back.
Your site is now book mark to my all account.
Thanks again
Mortgage no money down

Leave a comment

OpenID accepted here Learn more about OpenID
Powered by Movable Type 4.25

About this Entry

This page contains a single entry by Brian published on October 22, 2003 11:19 AM.

Dublin's Traffic Mess was the previous entry in this blog.

TDs and the Dail is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

Top of Page