House price rising or what?

[nightrider]

- House price falls - more affordable since wages is falling

- Negative equity - current home owners stay put since they can't redeem - less homes available to buy

 

but I really wonder if it affects that many people - only the minority who bought in the circumstances I mentioned. Most homeowners I know bought at prices below todays levels, so can easily absorb any price falls without going into -ve equity. I would be surprised it the majority of homeowners had bough at a recent price peak or in the years afterwards.

[Danny_Boy]

but I really wonder if it affects that many people - only the minority who bought in the circumstances I mentioned. Most homeowners I know bought at prices below todays levels, so can easily absorb any price falls without going into -ve equity. I would be surprised it the majority of homeowners had bough at a recent price peak or in the years afterwards.

 

Nightrider I think quite a few home owners maye have re-mortgaged as well during the boom period. Capital raising, second mortgages and 90% re-mortgages where rife.

 

Northern Rock offered a product before the crash where buy you could borrow 125% of the purchase price the additional 25% for home improvements. But lots of borrowers rightly or wrongly used that money to live a lifestyle beyond their means.

[ismangil]

Nightrider I think quite a few home owners maye have re-mortgaged as well during the boom period. Capital raising, second mortgages and 90% re-mortgages where rife.

 

Northern Rock offered a product before the crash where buy you could borrow 125% of the purchase price the additional 25% for home improvements. But lots of borrowers rightly or wrongly used that money to live a lifestyle beyond their means.

 

Exactly the point I was going to make. Remember it's when you take out any mortgage not the original purchase.

 

In my case I purchased in 2001 (90% LTV), by 2004 it had doubled (yeah, in retrospect mega bubble wasn't it) so I was able to remortgage, at less than 70% LTV, even with redemption charges etc still had left over to convert the basement.

[Danny_Boy]

Exactly the point I was going to make. Remember it's when you take out any mortgage not the original purchase.

 

In my case I purchased in 2001 (90% LTV), by 2004 it had doubled (yeah, in retrospect mega bubble wasn't it) so I was able to remortgage, at less than 70% LTV, even with redemption charges etc still had left over to convert the basement.

 

Exactly, but your re-mortgage was in my opinion a sensible one, you probably added value to your property but at the same time stayed at a reasonably safe LTV level.

 

One of the lenders I use have currently got a 10 year fixed at 3.94% which I think is a good sensible option for people with equity in their homes who are not planning on moving any time soon.

[ismangil]

One of the lenders I use have currently got a 10 year fixed at 3.94% which I think is a good sensible option for people with equity in their homes who are not planning on moving any time soon.

 

Which brings us back to the problem less old property on the market, so buyers need to rely on new build homes with their 'premium' prices...

[Cyclone]

No don't be stupid, of course i don't. I just hope that the value of my house rises faster than the value of the houses where I'm looking to move next, and by the looks of it- it is.

 

If the values start to fall across the board then EVERYONE is in trouble as they get into negative equity and then the whole market stagnates- is that a better option? I think not.

 

Everyone except the large number of people who don't own houses already, and the large number of people who bought them more than 10 years ago...

 

So in fact, a small number of people would be in trouble...

 

---------- Post added 14-06-2013 at 17:03 ----------

 

This is simply not true and entirely circumstance dependent.

 

I would wager that the majority of first time buyers would pay equal or less per month on a mortgage than they would in rent (unless house sharing or not looking at like for like properties) with the added bonus that the house is theirs at the end of it all.

 

A 30 year mortgage on a 90% basis at a purchase price of £100k is about £450 a month (circumstance dependent).

 

I know of landlords charging £400 a month rent for £60k properties.

 

A 25 year mortgage would be the normal comparison, and borrowing 90k over 25 years gives £487/month as the cheapest amount on money supermarket.

 

That's comparable with rent of about £500 - £550 for a property worth that much.

 

But, and it's a big but, owning a house comes with additional costs, buildings insurance, maintenance, possibly furnishings, ground rent...

 

Which between them pretty much mean that the rent and the purchase cost about the same... Of course that's not interest only, which should be the real comparison I suppose. On the other hand there's little chance of actually getting an interest only mortgage with a 10% deposit.

 

---------- Post added 14-06-2013 at 17:03 ----------

 

I think house prices are increasing day be day. Mostly in urban areas it is increasing very rapidly.

 

And why do you think that?

 

---------- Post added 14-06-2013 at 17:06 ----------

 

Im a first time buyer, completed last week. Im much better off paying £350 a month for a 25 year, 75% ltv repayment mortgage at 2.99% fixed for 5 years for a 2 bed house with a garden and that i can make into a home, & that will eventually be mine to retire in than i was two weeks ago when i was paying £475 a month in rent on a small 1 bed flat with a balcony that will eventually be someone elses retirement nest egg.

 

I think if you can afford to buy & you're a ftb, then do it while you can get good fixed deals & house prices are still low(ish). It's the best decision i've ever made! ��

 

You might be... But you've not really done a full calculation there have you.

 

The flat and the house aren't a like for like comparison, you've not accounted for the additional costs of being a homeowner, or the lost interest that you would have been making on the deposit (ie if you kept it in ISAs).

 

I'm not trying to claim that renting is cheaper, just that it's not as simple as people like to make out.

[ismangil]

The flat and the house aren't a like for like comparison, you've not accounted for the additional costs of being a homeowner, or the lost interest that you would have been making on the deposit (ie if you kept it in ISAs).

 

This is a good point, made also in this article http://www.telegraph.co.uk/comment/columnists/janetdaley/10084693/More-people-renting-houses-rather-than-owning-them-would-be-better-for-our-economy.html

 

Having said that, it might be good for the fund managers, they get paid anyway, however for us investing £10k safely with positive return after inflation is actually quite hard - correct me if I'm wrong, with RPI at 3.6% (and real inflation probably (much?) higher), no cash ISA can do it.

 

So in my view putting it in your own property it's not that daft - yes risky, but it's somewhat easier and understandable than giving it to some bank/investment manager, and no investing is without risk!

[watchcoll]

Everyone except the large number of people who don't own houses already, and the large number of people who bought them more than 10 years ago...

 

So in fact, a small number of people would be in trouble...

 

---------- Post added 14-06-2013 at 17:03 ----------

 

 

A 25 year mortgage would be the normal comparison, and borrowing 90k over 25 years gives £487/month as the cheapest amount on money supermarket.

 

That's comparable with rent of about £500 - £550 for a property worth that much.

 

But, and it's a big but, owning a house comes with additional costs, buildings insurance, maintenance, possibly furnishings, ground rent...

 

Which between them pretty much mean that the rent and the purchase cost about the same... Of course that's not interest only, which should be the real comparison I suppose. On the other hand there's little chance of actually getting an interest only mortgage with a 10% deposit.

 

---------- Post added 14-06-2013 at 17:03 ----------

 

 

And why do you think that?

 

---------- Post added 14-06-2013 at 17:06 ----------

 

 

You might be... But you've not really done a full calculation there have you.

 

The flat and the house aren't a like for like comparison, you've not accounted for the additional costs of being a homeowner, or the lost interest that you would have been making on the deposit (ie if you kept it in ISAs).

 

I'm not trying to claim that renting is cheaper, just that it's not as simple as people like to make out.

 

I agree its more complicated. & yes i will have to maintain the property myself now. But at least i know i will maintain it rather than hope a landlord will pay up on demand to keep my life problem free - many wont. However, the council tax is the same. The water rates are the same. The gas will probably be a bit more expensive than the flat, but that had electric heating so was expensive anyway. & my insurance for buildings & contents is somehow cheaper than just the contents and tenants liability insurance (or whatever its called) in the flat. I will spend more of my own money, because i now finally have the freedom to do what i want to where i live! I'll spend money on a garden i didnt have before, but i'll benefit from enjoying a garden at last! I'd happily pay more for that kind of freedom to choose how i live.

 

The interest was pitiful on my £40k savings, so that was no great loss. Im happier owning a house than having money sat in the bank doing nothing. As a previous poster said, i have been paying off someone elses mortgage for the last 4 years. Now thats no longer a desirable option.

[bishboshben]

You might be... But you've not really done a full calculation there have you.

 

The flat and the house aren't a like for like comparison, you've not accounted for the additional costs of being a homeowner, or the lost interest that you would have been making on the deposit (ie if you kept it in ISAs).

 

I'm not trying to claim that renting is cheaper, just that it's not as simple as people like to make out.

 

There are also some other factors to consider as part of this as well:

 

First, the calculation assumes that rent will remain constant for 25 years. In reality though, rents will go up, just as they have increased in the last 25 years.

 

Second, what happens after the mortgage has been repaid. At that point the cost of home ownership will drop considerably, the cost of rent will carry on forever.

Edited June 15, 2013 by Ms Macbeth
fixed quote tags

[Danny_Boy]

You might be... But you've not really done a full calculation there have you.

 

The flat and the house aren't a like for like comparison, you've not accounted for the additional costs of being a homeowner, or the lost interest that you would have been making on the deposit (ie if you kept it in ISAs).

 

I'm not trying to claim that renting is cheaper, just that it's not as simple as people like to make out.

 

There are also some other factors to consider as part of this as well:

 

First, the calculation assumes that rent will remain constant for 25 years. In reality though, rents will go up, just as they have increased in the last 25 years.

 

Second, what happens after the mortgage has been repaid. At that point the cost of home ownership will drop considerably, the cost of rent will carry on forever.

 

The second part is correct but first part isn't quite as unless someone brings out a fixed for term mortgage then mortgage payments can change as well.

 

To be honest the cost of renting will go up with the cost of mortgages as most landlords have mortgages on their properties they let out.

Edited June 15, 2013 by Ms Macbeth
fixed quote tags