Softening house market?

Any 1% increase in interest rates require circa %11 price drop in house prices in order to offset total mortgage impact over 30 years. It's going to be tough few years for both sellers and buyers.

Any sharp increase in number of sales fall through won't be a surprise to me if lenders start to increase rates

How many people care about the total cost of the mortgage over life?

Given the craziness over the past few years, I'd say that people wouldn't care about a 1 or 2% rise. Just give me a house now dammit!

Personally, I think one would be mad to buy now. But, many here will disagree.

So in your world, do people not care about a 10 percent hike either?

That's an interesting guarantee.

Someone needs some lessons on how markets work.

More people are buying because more are selling. The result is that pent up demand has been satisfied at the price point achieved hence no rise in prices. The current quarterly rise is less than inflation for the period so is in fact a fall.

Our housing market isnt a free market but in fact is full of distortions.

Its quite conceivable in Ireland that for many folk with AIPs, an additional 1-2% increase in rates wont necessarily affect them if their serviceability as assessed by the mortgage provider (particularly professional couples with no kids) remains higher than the 3.5x LTI limit imposed by the Central Bank.

Covid had no effect on the property market?, I dont know what planet you live on. Covid drove up prices of property and other assets at a silly rate, across the world. Well, governments response to covid did.

Policy is shifting now and rate hikes are just started. Policy dictates prices of assets, not covid.

can you prove otherwise? I understand you're having difficulties understanding compound interest rate calculation based on mathematical facts as well as what you read. I'm basically saying if... and then ... It doesn't mean that housing market must respond to interest rates changes the exact opposite way

Yeah the maths is obviously correct but it's not quite that simple. A 10% cheaper house with a 10% more expensive loan isn't really exactly the same cost - for one thing the deposit requirement is lower. And with the rate of inflation, any initial cost like a deposit is relatively more significant than future costs. You also have to consider how long the mortgage will be fixed for as the initial rate isn't absolute. Low rate mortgages need to factor in the probability of an increase in future, and vice versa. You can also offset some of that compound interest pain if you have the ability to pay early too. So even on a pure numbers basis I don't think the higher rates would justify an exact equivalent drop in house prices.

There are other factors too. Higher rates will help those saving for a deposit to get there slightly quicker for example. And there are many cash buyers out there or people trading up who don't need a mortgage to cover the whole cost of a home. I don't know what percentage of average house prices are actually covered by loans and it probably varies by market segment.

There is clearly a psychological factor at play too where many people don't think about it as much as they think about the headline price when bidding, though this is obviously tempered by what banks will actually allow them to stretch themselves too.

Rising interest rates will cool the market but I don't expect to see anything like a direct mapping between mortgage cost increases and price decreases. I think we'll see a levelling and maybe a very slow and modest drop. Given the current rate of inflation any levelling off is already a fairly big drop in real terms.

I think if we do see a big drop it would be due to sentiment and consumer confidence rather than mortgage rates - for example if we see a particularly bad winter with the energy crisis and start seeing job losses and major recession fears.

No, COVID had no effect on cooling the property market, which is true. The opposite happened.

I don't think rising interest rates or 1 or 2% will cool it either.

I'm open to being proven wrong, but a price crash won't happen. Supply is low, demand is high and nothing will change there for years. COVID, Brexit, and a war in Europe has done little to reduce demand, or increase supply. Prices are just hitting the ceiling of affordability.

Demand dictates the price of assets. Policy incentivises or disincentivises demand.