Saturday, Apr 19, 2008
Long winded, but gets the message across...
Yahoo! Finance: Why Homebuyers Can Afford To Be Patient
The point is, you don't have to rush onto the market. You can take some time to improve your finances. You can take your time to find the right property at a bargain price, whether that shows up in one year or four. You don't have to buy the first property you see at the listed price.
Posted by mark wadsworth @ 09:01 PM (472 views) Add Comment
6 Comments
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1. mken said...
Very longwinded indeed and I'm not so sure about the statistics - 8% historical increase - is that inflation adjusted? etc.
Not sure about "finance improvement" helping either. I'd say deposit percentages for better deals will continue to increase - just as you have 10%,
the best deals will move to 20% etc.
But I do agree, buy later, prices are going down, why pay X for something that will cost half that tomorrow.
As for the day after that - Japanese style deflation.
2. Another Mikey said...
I can not believe Yahoo Finance have come up with this tripe!
So in a nut shell, keep saving your deposit up at £500 per month - even though house prices on average increase quick than savings interest, because that doesnt matter - you will have a good deposit to put down.
This is great news for all those 40 year olds still living at home with their parents.
For most people with a family however, putting £500 away for a deposit for four years is so unrealistic it is a joke.
Did the yahoo guys not realise that if people are saving up a deposit, that means they have no where to live - and hence will have renting costs????
3. Rental John said...
Hopefully we will get to a situation where reasonable prices, and affordable mortgages become the norm......but I doubt it.
Denial - Fear - Capitulation - Despair.......then return to mean, but how long?
4. Quiet Guy said...
"Now let's say you're determined to get on the ladder, so you're budgeting well and therefore saving £500pm towards a deposit."
Only a long estbalished homewoner with a modest mortgage payment would write something like that. I suspect that very few FTBers are putting away £500 per month - if they were, they wouldn't be FTBer in the first place.
"House prices, on average, will have risen 8%"
Evidence for this assertion?
I'm sitting tight in the hope that price falls will raise the proptionate value of my deposit (no choice really - buying now would be insane).
"Of course, you can't expect the market to go up smoothly at 8% every year."
Erh, quite. The author of this article seems to be stuck in a time warp and sincerely believes that prices are still going up.
5. Oldpen said...
Not so convinced by your analysis of saving deposit while the house price is going up 8% per annum.
(based on your example) - If I don't have any deposit and the lender is willing to lend me 160,000 (e.g. 100% mortgage), I just need to borrow 160,000. The monthly mortgage repayment is about 1096 based on Nationwide 5 Yr fixed rate at 6.15% (assume 25 years term)
However, if I wait and save deposit for 4 years (total deposit = 24000) and the house price would be 218000, I would have to borrow 19400 from the lender. It would cost 1328 monthly mortgage repayment under the same terms as above.
This means that I would have to pay 232 more per month. Hence, my disposable income will be reduced by 232. After all the 4 years's saving, I am not much worse off as I am buying the same house but have to bear a bigger mortgage and higher repayment. Also, I would waste money on renting over the 4 years.
Nevertherless, I would agree with you to save more deposit only if house prices are coming down.
6. quiet guy said...
"Now let's say you're determined to get on the ladder, so you're budgeting well and therefore saving £500pm towards a deposit."
Only a long established homewoner with a modest mortgage payment would write something like that. I suspect that very few FTBers are putting away £500 per month - if they were, they wouldn't be FTBer in the first place. Of course, these wannabe FTBers are building up a decent sized pension pot as well, yes?
"House prices, on average, will have risen 8%"
Evidence for this assertion?
I'm sitting tight in the hope that price falls will raise the proptionate value of my deposit (no choice really - buying now would be insane).
"Of course, you can't expect the market to go up smoothly at 8% every year."
Erh, quite. The author seems to be stuck in a time warp and believes that price are still rising.