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mfs1959

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Everything posted by mfs1959

  1. I have checked the quotation. It has only the most tenuous link to anything written by Goethe. In the interests of accuracy I emailed the site address to inform them. Perhaps more people would like to tell them of their error.
  2. That is precisely why I started the thread with the commentary from The Times Business pages. It is a definite shift in sentiment.
  3. I know, and this is the Business pages rather than the Money pages. It may, just, reflect a new sentiment.
  4. Today in The times Business: The drug dealers started moving out of my street about three years ago. They have been replaced by marketing types, chief information officers and graphic designers. Both groups seem to favour the same cars, oddly, newish Astra’s and oldish BMWs. I used to chat to the dealers, partly out of an interest in their finances (they didn’t seem to make much money) and partly because I decided they’d be less likely to rob me if they knew me. Their moving on was a sign that my unremarkable street in an ordinary bit of north London was quickly gentrifying. Among the new neighbours, who are much nicer and far less interesting, there is one main topic of conversation: house prices. My favourite question to them is this: could you now afford to buy the property you live in? The answer is always the same: “No, not by miles. We certainly could not.” Our collective happy assumption is that one day we will sell at a huge profit, but that does raise the question of who the buyers are going to be. Russians? Bankers? Why would they want to live on my street? You can’t even get drugs any more. So what we’re left with is a bunch of people living in properties they can’t afford on the dicey premise that a load of other much richer people one day will. This is a balloon, plain and simple, into which we regularly blow another gulp of air. It will go pop in a horrible way.
  5. They forget that ladders go both up and down...
  6. She should already be in the 40% tax bracket, as she reports an excess of rental income over mortgage payments. I wonder if she declares her income to HMRC, not least if she is still collecting tax credits; the report gives enough info for HMRC to have a shufti.. Taking the best estimates from the report, her rental income may be £22k and, on her approx £300k rental mortgages she would only pay perhaps £15k in interest payments.
  7. You are, of course, right. I was being lazy. It is, in fact, a 30% return based on the £1m investment assumed. Of course, if prices fall in the south then yields can rise.
  8. Mark Alexander's letter certainly raises some interesting thoughts. We have a BTL investor who, assuming he is paying 5% interest, has mortgages worth £4m. Since he is highly geared we will assume he has paid only a 20% deposit for these mortgages. Thus he had £1m in cash and has a £5m portfolio. £300k in rent is only a 6% return; most BTL fans quote returns at least a little above that. Even a 1% increase in return will generate an extra £50k in rent annually. Of course, George Freeman is expected to take Mark Alexander's figures as being beyond question. As an aside, if this mythical investor really has a million in cash and doesn't expect any immediate return then I have an interesting proposition for locating a lost silver mine in Atlantis. He can contact me by reply.
  9. It seems that at least one BofE insider, a member of the MPC, is rather more hawkish on inflation than the rest of the MPC. Link
  10. The components in question are inside the boat, not exposed to sea water. That said, cost cutting by scrimping on components on a project of this size is futile.
  11. There are a lot of 10-15 year old Transits on the roads also and I have seen some carrying rather hefty loads.
  12. There is nothing wrong with a couple supporting themselves by each working part-time. There is everything wrong with a system that bribes taxpayers with their own money to work part-time. Incidentally, where did all of the money come from to support house price inflation? An awful lot of people used their tax credits to help fund house moves. Most income growth between 2004-7 came from tax credits rather than wage rises.
  13. I said rates were wavering as, while there are some reduced rate offers, the best rates require 30% or 40% deposits. Meanwhile: The Skipton Building Society recently raised their SVR from 3.5% to 4.95% after it had pledged not to have their SVR at more than 3% above the Bank of England base rate. I am not sure which is the reliable trend.
  14. We do not need to go even that far. We should have had a nice clean crash in 2007/8, but Gordon and QE muddied the waters by papering over the dodgy loans. Since then the banks are wary of lending on property as they don't want to get caught out again; hence the requirement for 25% deposits, now being reduced to 10% deposits. They are also exercising forbearance as they cannot afford to take a hit on their loan books by revealing how little some properties are worth, compared to the amount outstanding. Real interest rates have already edged up, but are now wavering. Sooner or later they will rise. When they do we will find out who was swimming naked; the crash takes place and we then get a more realistic setting of house prices and the market will move again. Unfortunately some people will get their fingers burnt because they bought into the hysteria of ever-rising house prices; this includes the banks who should by now have increased reserves and be better able to cope with the hit.
  15. Sorry, just had to apply a slight amendment. Professionals should behave to a higher standard.
  16. If the only concern is the amount of interest paid, you are correct. Your calculation is applying the principle behind PPI compensation to the IO sphere. I would hope that the lenders will argue about the buyer's use of the asset and potential rent that they would have had to pay for that asset. Over 25 years IO payments will be less than the amount of rent that the asset would have realised. Offset this against the interest charges and nearly all buyers are still quids in.
  17. I agree with your point. There will be irrationality. Compensation should, however, be limited as they would have had to rent the house (or another house in its stead) they claim to be buying.
  18. I've added a tiny correction. As you say, it is expectations that often are to blame.
  19. I know that a lot of people talk about compensation for interest-only mortgages, but I do not buy it. I would like someone to explain why it is a problem, perhaps with reference to the hypothetical examples below. I acknowledge, in saying this, that some banks no doubt signed people up for mortgages on an interest only basis where there was not a snowball's chance in hell that the debt would be repaid. At the same time, there were willing customers who signed up. Even allowing for misbehaviour on the part of the banks there may not be a huge payoff on offer. Financial compensation aims to put the customer in the same position that they would have been in had they not signed up for the product. Hence with PPI claims they calculate the amount paid, allow for interest on that money as if it had been savings, and come up with a final figure. WIth mortgages it is surely more complex. The customer used the mortgage to buy a house. Usually, they then lived in that house. Let's say that in 2005 someone borrowed £150k at 4% interest only. So they have been paying £6k per year for 7 years and still owe £150k. One could say that they are down by £42k and deserve that money back in compensation, plus interest on the amount that they have paid. However, they have enjoyed the use of an asset. Had they rented the same house it is not impossible that their initial rent would have been £500 per month, or even slightly more. Initially then, their rent and interest payments could have been the same. Over the 7 years one might see rents rising while interest stays the same; the customer has therefore saved money. If we go a little further and assume that the bank charged a higher interest only rate than the standard rate then the customer may argue that annually the IO mortgage has cost 0.75% of £150k. On the other hand the customer has had the use of the extra money that they did not pay in repayment charges; let's call that £3k annually. Interest would be calculated as if that had been deposited in savings accounts. Also the house may have appreciated in value; any appreciation from 2005-7, and potentially static prices thereafter, could arguably affect the scale of losses that the customer suffered.
  20. Why waste paper? They'll wait until it drops to a price at which it might sell...
  21. Whilst this is possible, they have spent 5 years complaining to their local MP. It must be equally likely that he retired at 65 and since then has noticed that it isn't that quiet at home during the day and, because they no longer get up so early, the post office traffic is a bit disruptive.
  22. No, it says they bought the house 43 years ago. They are now great-grandparents, hence the possible generational thing. Nowadays, how many 27-year-old decorators could afford a £0.5million house?
  23. The comments on the local newspaper site are revealing. Often you get people saying how sad it is that someone's life has been ruined. Not this time: over-estimates by estate agents, recession, never worth that much. Is the message getting home?
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