'Not' buying a property.

[goldilocks]

we're 18months into our first mortgage

people who are saying 'enjoy your money' have obv never felt the satisfaction of sitting back with an ice cold beer in a garden you own, after a day spent improving your home.

i'd take my bricks and mortar over travel / fast cars / wining & dining any day!

 

[mrbios]

we're 18months into our first mortgage

people who are saying 'enjoy your money' have obv never felt the satisfaction of sitting back with an ice cold beer in a garden you own, after a day spent improving your home.

i'd take my bricks and mortar over travel / fast cars / wining & dining any day!

You can do all that with renting just as easily. With the added benefit that some improvements you don't have to pay for if you can persuade the owners that it's a good enough idea that it means they pay for it / pay for half of it.

 

[OpenToSuggestions]

Renting when young is finem as you may move around etc.
However when older (say 40) and you are still renting then you have been paying to borrow a property for all these years and it amounts to nothing.
When I get to retirement age (if the government ever let us retire, but that is another issue ) I want something to show for my life!

Surely the little extra a month on top of the rent to pay a mortgage is worth it in the long run?

I do firmly believe that house prices are far too high though.

 

[HaX]

I do firmly believe that house prices are far too high though.

You speak the truth.

Between 1999 & 2009 house prices increased by over 150%, pushing the national average house price to over 7 times the national average wage. Traditionally, this has been in the range of 3.5-4.5 times the average wage.

This has created an intergenerational wealth divide. Many under 35s currently unable to afford to buy a family home, would have been able to do so had they been born 10 years earlier, and been of a working age when house prices were more in line with wages.

The cause of the housing boom was largely as a result of market manipulation and credit deregulation performed by then chancellor, Gordon Brown, in a short sighted attempt to generate economic growth out of thin air. Naturally, people already on the housing ladder benefited from this immensely, because on paper they became very wealthy, and were able to use Mortgage Equity Withdrawal to fund home improvements, new purchases and holidays etc. Unfortunately this was a one-shot method of achieving growth and has resulted in Britain having one of the highest levels of household debt in the developed world.

The housing boom was orchestrated through a number of means. Firstly, light touch regulation of the banking industry, leading to sub-prime mortgage lending, and up to 125% mortgages being available - rather than needing to save for a deposit, you could actually borrow 125% of the value of the property you were purchasing. Secondly, housing costs were removed from inflation indexes. This circumvented the mechanism which ensured that if house prices rose sufficiently enough to distort inflation figures, interest rate rises could be used to arrest abnormal growth.

There were also other factors at play too. These include constricted supply due to increasingly restrictive planning regulations and increased demand due to immigration from EU member states, though it is unlikely that these would have had a significant impact on prices.

There were also changes made (again by Gordon Brown) to tax legistlation with regard to pension schemes and investments . These changes were made despite advice from the treasury (and various economists) not to. This resulted in billions being slashed from pension pots, and many final salary schemes ending. This resulted in people looking for other investment vehicles to fund their retirements. Buy-to-let was seen as a very sound investment, both in terms of annual yield and capital appreciation.

We have had, and still do have a housing bubble in this country. It is currently being kept inflated by low interest rates and various other tools. I do not see housing as a worthwhile investment, and will not be making a purchase until the average houseprice:wage ratio returns to more conventional levels.

 

[franco_22]

You speak the truth.

Between 1999 & 2009 house prices increased by over 150%, pushing the national average house price to over 7 times the national average wage. Traditionally, this has been in the range of 3.5-4.5 times the average wage.

This has created an intergenerational wealth divide. Many under 35s currently unable to afford to buy a family home, would have been able to do so had they been born 10 years earlier, and been of a working age when house prices were more in line with wages.

The cause of the housing boom was largely as a result of market manipulation and credit deregulation performed by then chancellor, Gordon Brown, in a short sighted attempt to generate economic growth out of thin air. Naturally, people already on the housing ladder benefited from this immensely, because on paper they became very wealthy, and were able to use Mortgage Equity Withdrawal to fund home improvements, new purchases and holidays etc. Unfortunately this was a one-shot method of achieving growth and has resulted in Britain having one of the highest levels of household debt in the developed world.

The housing boom was orchestrated through a number of means. Firstly, light touch regulation of the banking industry, leading to sub-prime mortgage lending, and up to 125% mortgages being available - rather than needing to save for a deposit, you could actually borrow 125% of the value of the property you were purchasing. Secondly, housing costs were removed from inflation indexes. This circumvented the mechanism which ensured that if house prices rose sufficiently enough to distort inflation figures, interest rate rises could be used to arrest abnormal growth.

There were also other factors at play too. These include constricted supply due to increasingly restrictive planning regulations and increased demand due to immigration from EU member states, though it is unlikely that these would have had a significant impact on prices.

There were also changes made (again by Gordon Brown) to tax legistlation with regard to pension schemes and investments . These changes were made despite advice from the treasury (and various economists) not to. This resulted in billions being slashed from pension pots, and many final salary schemes ending. This resulted in people looking for other investment vehicles to fund their retirements. Buy-to-let was seen as a very sound investment, both in terms of annual yield and capital appreciation.

We have had, and still do have a housing bubble in this country. It is currently being kept inflated by low interest rates and various other tools. I do not see housing as a worthwhile investment, and will not be making a purchase until the average houseprice:wage ratio returns to more conventional levels.

I just hate old people when I read about this kind of stuff, I worked with a guy once that said he bought his first flat for like £17000 in the 80s

 

[edscdk]

I just hate old people when I read about this kind of stuff, I worked with a guy once that said he bought his first flat for like £17000 in the 80s

my mum and dad brought their house for £3000, it was valued last year at £550k.... but they brought a few years before the 80's !

 

[rG-tom]

Auto spell correction, meant to be throwing.

It might be different in other parts of ten pj try but where I am, we pay 725 a month rent and I bet if it went on the Market it would be 120k so we are paying more than the mortgage. Where the sense in that, toto worse parts of Bristol and I would be looking at 80-100k for a run down 2/3bed house. Which would probably be 450 a month rent could afford that on my own and live how I want.

£725 on a 120k property? That DEFINITELY doesn't make any sense.

£595 on a £160-180k property makes it a much more difficult short term decision

 

[bledd]

Me and the gf came to a point where we had to choose what to do the future

We could either own a crappy house and live in poverty, or, rent and live in style

We chose the latter; private parking, brand new house, never been happier

 

[Lakeland]

Me and the gf came to a point where we had to choose what to do the future

We could either own a crappy house and live in poverty, or, rent and live in style

We chose the latter; private parking, brand new house, never been happier

I suppose it entirely depends on your location and house prices vs renting

 

[rG-tom]

Just one quick question about LTV, I'm going to guess that it is loan to purchase price rather than agreed market value?

IE if i buy a house at 15% less than surveyed value, it doesn't mean that I won't need a deposit?

I'm fairly sure I know the answer to this, but i thought it's worth asking the stupid question incase

 

[daz]

we pay 725 a month rent and I bet if it went on the Market it would be 120k so we are paying more than the mortgage. Where the sense in that, toto worse parts of Bristol and I would be looking at 80-100k for a run down 2/3bed house. Which would probably be 450 a month rent could afford that on my own and live how I want.

Looks like I'll be buying an investment property in Bristol next then. 7.25% rental return if those figures are true.

 

[Nitefly]

I think that buying a house as soon as possible is a very sensible thing to do. I doubt that I'll be good enough at saving money to do it until quite a few years.

 

[Wicksta]

People talk about rent as "wasted" money - but what do they think the interest portion of a mortgage repayment is? The amount you're "investing" is only equivalent to the principal you're paying off each month.

The interest payments will come down as you pay off the mortgage. Rent will only ever go up.

I rented until my 30s and while the freedom was good I never really had anywhere that felt like 'home'. Also two places I was forced to move, one because they wanted the flat for their daughter and the other place they sold the maisonette I was living in.

 

[Jez]

Just one quick question about LTV, I'm going to guess that it is loan to purchase price rather than agreed market value?

IE if i buy a house at 15% less than surveyed value, it doesn't mean that I won't need a deposit?

I'm fairly sure I know the answer to this, but i thought it's worth asking the stupid question incase

The "value" in the usual case of purchasing a house will be deemed to be what you are buying it for.

 

[HaX]

The interest payments will come down as you pay off the mortgage. Rent will only ever go up.

As the loan progresses, you will be paying less interest and more capital off, but this is a very gradual sliding scale. At the start of any mortgage, you are mainly paying interest.

On a side note, there is only one way interest rates will be going from here, and that is up, though with the current apathy at the Bank of England, when they go up is anyone's guess!

Anyone on a tracker/standard variable rate mortgage will be in for a rude awakening when rates return to more normal values.

 

[Jez]

Anyone on a tracker/standard variable rate mortgage will be in for a rude awakening when rates return to more normal values.

Not if they have even half a brain they wont, as we can all read forecasts and work repayments forward. People need to be sure to view this current market as a holiday, rather than the norm and get upset when normality resumes.

 

[Shaz]sigh[]

Anyone on a tracker/standard variable rate mortgage will be in for a rude awakening when rates return to more normal values.

Rough with smooth. I've just put an offer in on a house and can afford rates to hit around 18% before I have to alter my lifestyle. This is also taking in to account theoretical situations such as my partner losing her job or my salary being halved etc etc. Derisking a situation as much as possible seems the right way to go at the moment thus why I have technically underbought.

Fixing for 2-5 years at this point seems naive therefore I've opted for a 2 year discounted tracker and will reassess in 2013. As with everything however, this is a calculated risk.

But I agree, for people who can't manage their money or whose income has changed dramatically, times are a changing.

 

[fLux_]

This is something i've considered and a lot of it comes down to what your priorities and circumstances are.

I'm 22, get on well with my parents and living at home although not ideal, isn't a problem. I would prefer to live alone but I see renting as a complete waste of money give what i've just said.

By staying at home for another year or so I can build up a large chunk or all of the deposit. A decent 3 bedroom house in my area (NW UK) can be had for £120K - £150K so a minimum or £12K-£15K is all that's needed for a 10% mortage. I may also consider a rent to buy type arrangement if there's any available on a suitable property.

Because of my circumstances it makes much more sense to just stay put for a year and make the most of not really having any outgoing.

 

[Hagar]

I was mortgage free after 24 years, moved house three times, the mortgage went up and down depending on the equity I had in each house at the time. I rented until I was 29 then took the plunge on a £13,700 terraced house, I was earning about £3500 at the time in 1982 so 4x income.
My philosophy is use repayment mortgages, always overpay when you can, short fixed terms are OK less than five years but shop around to reduce charges and make sure you can vary payments. Moving house will cost at least £5k

 

[Pate]

Just remember, a pound now is worth more than a pound in the future. (NPV). Worth factoring in.

Personally I'd like to see a shift in culture towards renting, though I fear we are far to set in our ways to be able to change.