| Comment | With interest rates at 6% prices will go down and fast, 100%.
As an example for a mortgage of 200k for 25 years:
- at 3% (not long ago) you paid 950 a month. The total cost was 285k.
- at 6% (now) you will pay 1290 a month. The total cost is 386k.
When people start the process of buying a property, the first thing they do is to see how much they can pay per month for the mortgage. Let's say a family calculates that they can pay 1000 a month, then at 3% they could aim for a total mortgage of 200k. Now a 6%, if they want to pay 1000 a month, the total mortgage would be 150k. So basically their purchasing power will be 50k than 2 months ago. Instead of checking around the West End or Southside, they will check the East End. But as they do that, many will do the same, decreasing the market in premium areas, and the only solution for them if they want to sell is to lower the prices.
Add to the equation all the people who will need to remortgage and suddenly won't be able of paying the new monthly payments. More houses in the market. |
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