Sellers should only hope this trend crosses the Atlantic

getyoufreecash_newboxBritish mortgage rates headed below 1%. At most price ranges, the amount of a buyer’s income is a fixed pie, divided between the seller and the mortgage lender. Reduce the size of one slice and the other necessarily grows larger.

Now that our own Fed has suspended, for now, its announced intention to raise rates this year, perhaps mortgage rates will drop like Britain’s.

Or not; you finance guys can correct me.

12 Comments

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12 responses to “Sellers should only hope this trend crosses the Atlantic

  1. Anonymous

    Seems like they have a very different system over there. Most people only have two-year fixed rates. To get the lowest rates, you need to put 40% down — at US-standard 10-20%, it’s more like 3-4%. Here, you can get super low rates even with 10% down. And their average rate was nearly 7% after the 2008 downturn, while I don’t think ours was that high. So a lot more volatility, since your rate will change, potentially by several percentage points, every couple of years.

    • Anonymous

      Well put, and the exact risk with the adjustable rate mortgages issued prior to the last crisis and being issued again over the last few years.

  2. Anonymous

    Many of the cash buyers in Greenwich are not really cash. Many are borrowing from their broking accounts. I can borrow 80% of the value of my taxable broking account at anywhere from 1-3%, you can even get a fixed rate. The key advantages are you do not have to sell your stocks and bonds creating a tax bill. If most of your portfolio is in income stocks and municipals the interest income will more than offset the loan interest. Who needs the hassle of a mortgage approval! The Fed needs to keep an eye on this securities based lending.

  3. Anonymous

    There are so few cash buyers in town. I see a big chunk of the major contracts — buyers are regularly purchasing $3+m houses (which these days is a major contract in town) with 10% down. People do funny stuff at the “low” end of the market when they’re afraid of a bidding war, like getting loans from their employers and then lying and saying it’s a cash purchase. But that’s about it.

    • Anonymous

      Is that really a lie? Seems to me that when you make a “cash” offer, you simply give up your right to get out of the deal just because you can’t get a mortgage. A cash offer doesn’t mean there won’t be financing of some kind involved.

      • Anonymous

        Well, it’s still a lie. It matters less for buyers of houses, though there’s an increased risk of something falling through between contract and close than in a true cash deal. In condos/co-ops, it matters quite a bit.

    • Jonathan

      I don’t know. With jumbo rates at 3.25%, why not borrow the max? We put 50% down on our past two homes, but now I’m thinking that was not so smart and we should have borrowed more and kept the difference in stock.

    • Anonymous

      Money is too cheap to ignore
      Anyone paying all cash probably doesn’t have any income to report.

  4. Real OG

    Any real estate update?

  5. Anonymous

    Its also possible to get financing based on LIBOR rather than based on Fed rates. I suspect if there is a divergence in rates. A lot more people will get mortgages that are based on variable LIBOR rates.