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peter_2008

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About peter_2008

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  1. I am not sure the boomers have benefited as much as it appears on the "paper value" Sure some did, but many pensioner are also savers; and I am often amazed that so many pensioners would complain about bad returns on their saving/pension, lack of cash without realising that cheap interest rate, which made many pensioners "property wealthy" on the paper, is also what destroyed their saving/pension return. In my idea world, people would retire with a £250K property (mortgage free) + a £250k pension pot earning 5% annual interest. It would be a non-luxury, but good and simple life. But no, what's the FUN in that! Instead, let them retire with a £500K property and practically NO saving! Let them equity release through life time mortgages and give the house back to banks when they die. Maybe the banks have planned this all along?
  2. History repeats itself. Personally, I am betting on the return of 125% mortgage as the sure sign of a market that is about to crash (within 2 years ish). We are getting there.
  3. So...Lucy works for a company that promotes minimum £1,000 a month rent ("starting £245 per week") for a glorified bed-sit as a desirable "life style". No wonder she thinks it is a great idea to buy a house with 5 others.
  4. https://www.bbc.co.uk/news/business-46895770 It will become the norm, just like 5 times x joint incomes, BoMAD and 40 years mortgages are becoming the norms.
  5. Indeed you are right. According its annual report below, Persimmon built about 16,000 houses in total in 2018. So that's over £60,000 profit per house. I don't know... that's like saying instead of being dickslapped 125 times, I have ONLY been dickslapped 60 times...I suppose it is quantitatively better. https://www.persimmonhomes.com/corporate/about-us/our-performance
  6. The most devastating effect of HTB is that it effectively lowers LTV ratio. Say FTB only have £15,000 as a deposit and say the max they can borrow is 75% LTV. Then, the max the house can sell is £60K Say FTB only have £15,000 as a deposit and say the max they can borrow is effectively 95% LTV (i.e with 20% HTB), the max the house can sell is £300,000. It is truly the "crack cocaine", and now people are hooked on it, the government just need to invent the mortgage equivalent of "meth".
  7. £1 Billion profit for building 8,000 houses. That £125,000 profit per house. Never mind numeracy skills, the government doesn't even know how to use a calculator.
  8. £1 Billion profit for building 8,000 houses. That £125,000 profit per house. Never mind numeracy skills, the government doesn't even know how to use a calculator.
  9. I mentioned this elsewhere before. Typical FTBs really do not care about the actual house price. 80% FTB relies on BoMAD on deposit; and with HTB, FTB only care about monthly cost. If they can afford the monthly cost, they really think they CAN afford it no matter what. It's as simple as that. I think we literately need to see FTB blood on the street before this madness will stop, which I expect won't happen until 2023, when AND if HTB is withdrawn.
  10. Someone in the mortgage industry told me that banks have been selling essentially mortgage frauds in Asian markets for years. Below is a rather simplified version, but basically the way it works is like this: 1. UK banks cannot grant mortgage directly to Asian property speculators, because that attracts too much attention from regulators. 2. Asian banks cannot issue liar loans to speculators using local properties as collateral, because that attracts too much attention from regulators 3. But UK banks can lend to Asian banks 4. Then Asian banks issue liar loans to speculators with UK properties as collateral, because that type of transaction is NOT locally regulated 5. Asian property speculators use the money to buy UK properties. 6. UK house price up. 7. Banks and speculators make money. Repeat from 1
  11. I did show the "7% + no house price increase over 5 years" scenario as well. You can see my previous posts. The benefits is a lot less compared with 3%, but still workable
  12. I have now also corrected my 3% IR 40 years mortgage scenario A deposit of £25K, and borrow £250,000 at 3% to buy a £275k house. A 25 years mortgage at a monthly payment of £1,186 A 40 years mortgage at a monthly payment of £895 In the short term, the monthly payment is almost £300 (25%) less. That’s a big difference for a lot of people. Run with it for 5 years. My equity increases by £18k over 5 years. Also assuming that property price goes up a modest 5% over 5 years. The house will be worth about £290K after 5 years. So that adds another £15k equity. That's give me £25k (initial deposit) + £18k (capital repayment) + £15K (house price increase) = £58k equity after 5 years. My equity increases from 9% (25k/275k) to about 20% (£58k/£300k). That's all well then. Except, if 40 years mortgage becomes the norm, house price will be inflated by another 30%.
  13. My apology. I did get the monthly breakdown wrong. The equity build up over 5 years is very different, when it is 7%. A deposit of £25K, and borrow £250,000 at 7% to buy a £275k house. I CANNOT afford a 25 years mortgage at a monthly payment of £1,767 But I CAN afford a 40 years mortgage at a monthly payment of £1,554 In the short term, the monthly payment is about £200 less. Still a big difference for a lot of people. If I just start with a 40 years mortgage, and run with it for 5 years. That means my equity increases by £7,000 after 5 years Say property price goes up 0% after 5 years. That gives me £25k (initial deposit) + £7k (capital repayment) = £32k equity. At this point, my 5 years fixed rate mortgage deal comes to an end and I switch to the normal 25 years mortgage. My equity increases from 9.1% (25k/275k) to about 11.5% (£32k/£275k). It is not as rosy as the picture of 3%, but still "worth it"???
  14. Now looking at what devastation 40 years mortgages can do to house price. Say the max monthly payment someone can afford is around £1200. For a 25 years mortgage, the limit of house you can buy is £275K For a 40 years mortgage, the limit of house you can buy is £350K What will happen is that every £275k house will simply inflate to £350k. I think I am using more or less average UK household scenario here, so don't surprised if average UK house price goes to £350k, if 40 years mortgages becomes the norm.
  15. I did used a bank's mortgage calculator for this question. I don't know how everyone else arrived at they figures regarding monthly capital and interest payment. I am simply using the monthly breakdown figure provided by the bank. You are welcome to cross-check using other methods. I am not actually arguing for 40 years mortgage. Like others said, I am aware that normalising 40 years mortgage etc could be the next financial WMD. I am trying to start a discussion about why it can look rather attractive for individuals, even if collectively it would be devastating to the society. To test the sensitivity of my case, I looked at a more conservative scenario below: A deposit of £25K, and borrow £250,000 at 7% to buy a £275k house. I CANNOT afford a 25 years mortgage at a monthly payment of £834 (capital) + £933 (interest) = £1,767 But I CAN afford a 40 years mortgage at a monthly payment of £521 (capital) + £1,033 (interest) = £1,554 In the short term, the monthly payment is about £200 less. Still a big difference for a lot of people. If I just start with a 40 years mortgage, and run with it for 5 years. That means my equity increases by £521 x 12m x 5y = £31,260. Say property price goes up 0% after 5 years. That gives me £25k (initial deposit) + £30k (capital repayment) = £55k equity after 5 years At this point, my 5 years fixed rate mortgage deal comes to an end and I switch to the normal 25 years mortgage. My equity increases from 9% (25k/275k) to about 20% (£55k/£275k). That's still not too bad. Yes, I have to pay the additional interest over 5 years at £100 x 12m x 5y = £6,000. But on balance, still the deal looks good??
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