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frugalista

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  1. You guys are talking at cross purposes. You should only buy shares if you believe in the profits of that company. Dividends are one way that profits can be distributed back to shareholders. Note that share buybacks are pretty much dividends by the back door but don't show up as such. Since we live in an Age of Growth, it is believed that it does make sense for profits to be reinvested so that future profits will be bigger. However in the asymptotic limit (which is perhaps only of theoretical value) the only point of reinvesting those profits and thereby growing the capital value of the company is so that value can ultimately be returned to the shareholder in the form of dividends. frug.
  2. Milngavie / Bearsden is the most expensive suburb of Glasgow. Not only that but there are very few other Glasgow suburbs which are even vaguely posh so there is a supply demand issue. frug.
  3. The difference is that the UK is the only one of those countries which is supposed to have been enjoying an uninterrupted economic boom for the last 12 years. frug.
  4. But what you're saying is that a business will refrain from taking a step which reduces its own risk and which it has the legal right to take. BTW the bears predicted this on hpc.co.uk years ago. frug.
  5. If people move say every 7 years and the average property is say 2 months on the market then you would expect all other things being equal and uncorrelated, any given property to be on the market 1 / 42 of the time. Which is to say, 1 / 42 of all property should be on the market at any given time. If the current figure is more like 1/20 then it probably means either people are moving more often (unlikely given how expensive it has become) or property is spending longer on the market. frug.
  6. removing speculative sellers may reduce the number of properties coming to market but it won't affect the price because speculative sellers are not on the margin. HIPS are effectively a tax on selling, so they should make houses (very slightly) less valuable, because buying one means that at some point in the future you will have to get a HIP to sell it. If anyone cannot immediately see this I have a rather involved analogy lined up to explain it. frug.
  7. Given the unprecedented mountain of UK personal debt, what's more likely a ) 1m people have become dangerously overstretched and are robbing Peter to pay Paul in order to keep their home a little longer in the futile hope that "something will turn up" b ) 1m people have become scheming frugalistas and are skimming money out of the credit card companies? frug.
  8. An IO mortgage is simply renting some money from the bank, not paying it back. But you can pay some back every month if you choose to, it is up to you (and you have to have the self discipline to do this). You have to sign something saying that you have a plan to pay the money back somehow by the end of the term, e.g. by saving. I am not sure what the banks intend to enforce by this. A repayment mortgage is both renting the money and paying it back, in very small chunks at first but then greater chunks as time goes on. You normally don't have much option but to repay the money in the schedule specified by the mortgage. It is great for people who don't have much savings discipline. If you get a repayment mortgage with an extra long term, e.g. 35-40 years, this is a kind of halfway house, you are paying back some money, but not much. An IO mortgage with monthly payments of £1000pcm will allow you to buy a more expensive property than a repayment mortgage of £1000pcm but your mortgage will be far more sensitive to interest rate changes and you will have a bigger risk of negative equity. Overpaying your mortgage is like a tax free savings account where the interest rate is the one you're paying on the mortgage. If you are such an investment whizz that you think you can beat this tax free return then making less overpayments might be an option (using an IO mortgage or otherwise). frug
  9. Try the nationwide affordability survey, FTB affordability is now almost as bad as in the last crash frug.
  10. The independence of the BoE was a PR stunt. They gained control of interest rates, which is important, but lost control of banking supervision which is just as important. It is clear that the FSA, which was given the role of regulating mortgage business in October 2004, has been allowed to let mortgage lending get out of control since then. Was this intended by the government? I do not know. frug.
  11. Seems fine, you are very lucky to live in a nice rural area with 3-bed semis for £150k near a decent job. I don't think that's typical. Most hard working people with a mortgage of £120k or less should be alright whatever happens, as you say it can be paid from a minimum wage job with a bit of belt tightening. That's why Mervyn King specifically warned against supersized mortgages, which he defined as being £150k or over. frug.
  12. Whether or not FTBs "should" be able to buy a 3-bed semi, the reason that previous generations were able to work their way up was not typically because they were patient frugal savers but because of the massive wage inflation of the 70s and 80s which was happening in tandem with HPI. The HPI is here but because of structural changes to the economy there has not been any significant wage inflation since the early 90s. There's a good chance whatever you buy now you will be stuck with for years. frug.
  13. The above post demonstrates how the boom lasted even this long. "Greater fools" like the above mentioned friend being drawn in for purely speculative reasons. frug.
  14. A country can become rich without any change in external trade, simply by being more productive at home. Not everything is trade. For example if the domestic power grid makes a lot of cost savings and passes this on to domestic consumers, everyone is better off without any change in trade / foreign investment. Don't worry, though there is no danger of a productivity boom happening in the UK, it has one of the least productive workforces in the industrialised world. It is shocking how politicians have mentioned "inward investment" as if it meant Japanese companies coming to the UK to build new car factories (as did happen in the early 90s for example). What has actually happened over the last 10 years is that a huge amount of existing assets have been sold off overseas; property, bonds, shares, debt. All that's done is inflate the value of the pound and mortgaged our future to overseas investors. frug.
  15. http://www.communities.gov.uk/speeches/cor.../social-housing Social housing households: "nearly 4 million", according to the above. I've seen other articles where it says "nearly 3 million". frug.
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