Unmoderated
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5 hours ago, Aidan Ap Word said:
Well, true.
He has done nothing to fix this.
But as one of those households on just shy of 100k in East Sussex - he's right.
Sitting on a 100k deposit and looking for a house big enough for my family of 4 ... he has done bugger all for house prices ... but he is not wrong that our income means nothing out here.
And to all those who say "Move somewhere cheaper" - I ask ... why should I have to?
Totally agree. People imagine earning £100K or more to be some mythical realm where life's easy. It's a hard slog to get there (was for me anyway). As an individual it's insane to take anything over £100K as salary and instead you would use our world beating stupid tax system to chuck it into a pension.
You get pretty much zero back out of the system. I get taxed on my private healthcare and dentist benefits.
Then you get the people who are probably net recipients of state support over their lives moaning it's not fair that you earn so much (presumably they were out getting stoned or day drinking in a flat roofed pub while I was grinding away doing my ACA).
As a household £100K gross income puts you barely into the top 5%. TBH though you exclude the 42% of deadweight passengers who pay zero income tax and gross that up to a higher number of those actually bothering to work properly these days!
56 minutes ago, Fed_Up said:How do you feel knowing that there are several tens or hundreds of thousands who get a house in that area basically given to them for nothing, and you can't have one?
I'm in a similar boat just trying to work out if I'm mad.
I feel that any gifts like this should be taxed as if they're income. Pretty simple. Go out and earn £500K and you pay a bomb in tax. Someone gets given it and pays nothing.
As much I would love to shrink the state by 50% I still think they'd find better use for it than some posho arrogant eff-witt waster.
Perhaps they could use that extra tax income to sort out the BS income tax set up.
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31 minutes ago, Trampa501 said:
An ageing population may be contributing too. As you get older you're possibly less likely to fork out on fashion or that trendy nightclub. You already have enough stuff, but you want to experience nice holidays. In this respect old Stewy has a point.
Also young people not believing saving is worth it just think they might as well live for today.
An ex lost her mum when she was 18 and inherited £10K. Took her bestie to the Caribbean for a fortnight......
I have recently moved into the aviation industry and I am just amazed at the sheer scale and growth of it. It's insane!
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7 hours ago, msi said:
That's a balance sheet hit....
Not for the defaulting party.
They purchased at $137.5M and would be depreciating over 50 years (or whatever their policy is). Then it would be written down to that new $102M valuation and the depreciation schedule amended accordingly.
Not entirely sure how you book the remaining $90M drop on disposal though but presumably there was significant debt tied with the purchase so that would go too.
I'm wondering though if someone's got a decimal point in the wrong place. That is a staggering adjustment in 3 years. I think truly exceptional in any market in history? Even in Japan there were only a handful of places that did this and that is the text book for egregious property bubble.
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5 hours ago, TheCountOfNowhere said:
Is this a sign of desperation ?
Suspected this would happen. I heard stories of this in reverse during Covid. People offering £1.5M on a £1.1M house and losing out to a higher bidder!
Looking at the places that had the biggest increases over Covid will give clues to where the coming biggest squeezes will be.
Anecdotally I was in London this weekend. Place was very busy, struggled to get a table for a later lunch and the highlight was paying £24 for 4 ice-creams out of a fecking van!
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37 minutes ago, PrincessNutNut said:
Can't disagree with anything in here - and good to see you've got it figured out.
Housing gains on your primary residence are a nice way to avoid taxes, but it means using your residence as an investment vehicle. That's a high emotional price to pay - can't imagine many explaining that one to their missus.
I think the key to your situation isn't the house, though, it's the freedom it provides to make the rest of the investments.
And that, ultimately should be the goal for anyone aspiring to escape the rat race.
Small point: While you're looking at a 10 year window until retirement, you've hopefully got a few decades thereafter - so it makes sense to allocate at least a portion with that sort of outlook.Thanks.
I really look at the house mostly as a buy now to save later vehicle. Sort of an investment but more like solar panels. Take the hit now and reap the benefits for years to come.
I find it takes all the emotion out of it tbh. Don't get attached to things. It's a nice house in a nice town but there's plenty of other nice places.
One thing I did do it read up on the town's development plans. There's a road being built which will turn my street from a cut through to pretty much local traffic only. They've already done some works, including closing one road and this has helped. Things like that give you a relative gain to other houses regardless of what the market is doing. I also got planning permission which at least de-risks it for a buyer should I sell up.
Spot on re the freedom and breathing space to make other investments. That is extremely fortunate. Each year it gets a little easier, well that's the overall trend. Wages increase year over year. You get promoted. You change companies etc. All this makes the mortgage value diminish relative to your income. The hardest thing is getting started and saving up for that deposit. That's really the hurdle and the hardest thing to do.
I totally agree. Nobody should cash their pension at 57.... I plan on having a few years income requirements in cash or short dated bonds and then the rest in a balanced portfolio. All my pension is in equities right now and I'm paying in £5K/month with additional payments to be made later in this tax year subject to bonuses and mitigating tax charges.
I don't have kids either - big saving for me compared to peers at my point in life. If I do keep working it'll be to help out my nieces and nephews with a deposit or support with uni fees (subject to them picking a 'proper subject'). I was very resentful of the state of things 20 years ago but I'm disheartened that it's even more challenging now for someone to buy their own home. Student debt is a big problem in the UK and doesn't really give the same advantages here it does in places like the USA. Even more ridiculously, there are no tax breaks for student loans compared to leasing an EV or making pension contributions. Really what we're saying is we'll subsidise brand new performance cars but we'll make graduates pay for their education out of taxed income. No wonder they're talking about forty year mortgages!
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Just now, msi said:
We need a real discussion on what Socialism means for the UK without the drooling of ReDsUnDeRtHeBeD from the Rabid Right. If you have that with a real discussion on what it means to be a small-c Conservative, I think the overlap would be surprising
Fully agree.
Most people get blinded with tribalism. Instead, I learned to take the view that people are really arguing about fairness.
The middle ground is, by definition, balanced. It's not a central planned economy, nor is it unregulated capitalism with a shrinking few able to consolidate wealth and power at the people's expense.
There's little in it between a centre ground voter.
I want neither of them in total control after the next GE. Hung parliament with LibDems and Greens holding sway would be wonderful.
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1 minute ago, PrincessNutNut said:
Everything carries risk. Nothing more than being indebted, as it reduces your antifragility (nod to Mr. Taleb)
If you rent something that's easily within your means, then it's not an issue at all.
For the potential inconvenience of being someone's customer, renting then allows to optimise capital allocation to where the return is best.If you put 20k in an ISA for 40 years, you're likely looking at around 4 million (inflation adjusted) at the end. (Assuming a conservative 7% real return.)
And I venture that the taxes / moving costs paid in buying & moving houses as you "climb the ladder" isn't insignificant either.
You're only looking at the beginning of the equation, where you're operating with high leverage into house price inflation.
As you pay more off, you both increase the capital tied into property, but also decrease leverage, reducing your return.
And saying house prices compound is a stretch. They appreciate, sure (as long as national debt grows). For you in this specific scenario, it's the opposite of compounding, because you're paying the interest on the debt. It's the levered bet on house price inflation that offsets the negative growth to an extent.
Worst of all, it's all paper wealth, tied into the roof over your head. You can't access one without losing the other (or using yet more debt).
I'm not advocating renting in all cases over anything else - just stating some obvious responses to some of these claims.
As always, it depends on individual circumstances, and in many cases a (reasonable) mortgage is the correct choice.Everything carries risk. There are riskier things than a mortgage. All debt does is amplify risk AND the reward - hence your correct observation that ROCE is highest at the beginning of the equation. It's higher because gearing is higher. In a higher risk, higher reward strategy you would argue that the largest interest only mortgage possible was the best solution and then bang everything else into the stock market provided you can shelter it from tax. This is important. While the stock market has out performed house prices it falls short if you apply a 20% tax on those returns.
I don't really plan on climbing the ladder but yes, those taxes are high for anyone in the South East. Originally I wanted to simply renovate this place, make £100K tax free and then do two or three more, all with tax free gains and end up in a modest but nice place working remotely with a house I've not paid any tax to purchase. not quite working out that way but I could live here forever and if I extend it'll actually end up as my second move being a downsize!
My mortgage payments are two things, interest (under £300 a month which you might look at as wasted money - same as rent) and capital repayment (paying down of my debt, or simple saving) of £760 a month. the total mortgage is cheaper right now than anything I'd find for rent in the area, let along a detached home with large garden, nice street, log burner etc.
SDLT sucks but you'll also pay SD on your stocks and shares chasing your 7% return.
Yep, at 7% compounded I'd have just shy of £4M (£1.2M in real terms assuming 3% inflation) after 40 years. Obviously this overlooks the simple problem of not being able to save £20K a year until into my 30s and even then probably not able to do much else after paying rent etc. Still, at 30 years it's £1.8M (£769K in real terms) and even after 20 yeas it's not bad.
I'm looking at ten years though so I can retire at 50-ish. Already got some saved (plus premium bonds) so I can get £350K (£260K real terms) assuming I want to risk having it all on the stock market and I can get 7%. If I stick to 5% in a cash ISA I'm not so far behind, only £314K (£233K real terms).
Note, even thinking about a retirement at 50 would be a non-starter had I not bought my house in 2017.
Pension is the biggy for me. Tax savings are huge.
Most people's largest expense in life is tax (except for the 42% of flee loading adults not paying any income tax in this country) so I think that's a great place to start when it comes to building wealth. ISAs are tax free too of course.
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22 minutes ago, Social Justice League said:
Me too. We really need a new socialist party to vote for.
Imo Labour should just split. Let Starmer be a Tory with 'Blair Cult' and return Labour to what it should be.
Elections are won on the centre ground.....
Ignoring it wont be workable the other issue with this Labour brain fart is that people can't afford current prices and falling prices = bad for homeowners so the financial 'help' Labour will provide will either cost the taxpayer (why TF I am buying someone a house I'm excluded from buying!?) or simply smash out more debt onto buyers.
Joke all around.
Absolutely no fan of the Tories and they totally deserve to lose but I think Labour are only looking strong because they've not actually aired any of their policies yet.
Change for change's sake isn't always advisable.
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44 minutes ago, scottbeard said:
Hi @Unmoderated. As per my post above, I can't see them coming down more than 0.75% in the next year, because I don't think the inflationary pressure has gone away, and if the UK started cutting rates below the US the value of the £ would drop and that in itself would cause higher inflation.
However, as I said I think the 4.2% fixed rate was a steal because essentially it's still favourable over 5 years even if rates are cut.
Let's say that over the next year rates are cut by 1% to 4.25%, and then over the year after that they are cut AGAIN to 3.25% and then held for the rest of the 5 years. That to me is quite an optimistic scenario for interest rate cuts, but it's not impossible. That would translate to an average Base Rate over the 5 years of 3.65%, which in turn would lead to an average tracker mortgage cost of something like 3.9%-4.0% over the 5 years. In other words, not a lot below what my 4.2% fixed rate is.
Conversely, imagine if my expectation plays out instead. Let's say that over the next year rates are cut by 0.75% to 4.5%, and then over the year after that they are cut by a further 0.5% to 4% and then held for the rest of the 5 years. That would translate to an average Base Rate of 4.2% and so an average tracker rate of more like 4.5%. So my fixed rate is better - again not by much though.
However, those are not the only two scenarios. There is also a scenario in which interest rates aren't really cut at all, or have a small token cut followed by rises. In that case there's no need for maths - the 4.2% fixed rate would be many thousands of pounds better.
So ultimately I guess where I'm at is that I think in most of the "likely" scenarios the fixed rate is still pretty reasonable, but it cuts out completely for me all the worry of interest rates rises. In other words, it's like i'm getting protection against interest rate rises for free.
Of course, I am discounting here the possiblity that interest rates will be cut dramatically to near zero again. I don't see that as likely enough to place any weight on in financial planning for me personally, and even if for some freakish reason it did I don't lose my house the way I might if rates went to 10%+ say and I hadn't fixed.
Hi @scottbeard, sound logic as ever.
That all makes sense. I think I'm fortunate then with the fix until Jan 2027. Fully accept I'll never have a 0.99% fix (or variable) again in my life but I'm looking at extending this place or moving into something like my forever home so looking to borrow an additional £200-250K. If house prices start coming down instead of feathering down then it'll make moving the most compelling scenario but as it stands the extension might clinch it.
Obviously I want rates to hit 10%, house prices to fall 50% and then I upsize just before they drop rates to 1% and I remortgage on a long fix and live happily ever after.
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1 minute ago, Pebbles said:
To be fair she is doing exactly what is right. I will operate in the bounds I am legally entitled to do to my advantage even if I might not agree with it being permitted. For example I don't like immigration however given it exists I would use it to my advantage even if I campaign against it. Likewise on tax policy I would do what's allowed regardless of if I agree it should be permitted and would happily campaign against it. It's not the two positions are perfectly possible.
Yeah, I get that.
She's complaining on behalf of her kids lol.
But that wasn't my point - by doing do you take a huge amount of financial freedom away from people loving in those areas. What if they've moved down there to live for ten years? You crash the value of their house in that area (but not the rest of the UK) and then what? You end up restricting the flow out.
It's, again, unworkable. Local houses for local people.....
The biggest winners will be those moving there from London with family there, maybe they grew up there. They'll earn big salaries working remotely and you'll hand them a massive discount from restricted demand in places like Cornwall.
I would vote for something that makes ALL houses affordable, not just special areas for 'special' people.
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1 hour ago, PrincessNutNut said:
If you invested into compounding returns all of your life instead of paying off a large debt, I doubt you'd be worried about either rent or mortgage.
The only issue there is paying rent while investing in a compounding return asset which brings either risk, or very low real returns. I have to live somewhere. I would be getting annual rental increases. Whatever some people say on here national rental costs have increased fairly dramatically over the last decade. Constantly on the treadmill.
Then there's tax. If I maxed out my ISAs (as I do now) I might have another £160K Possibly might not have been able to afford to if rental prices kept going up - not to mention the costs of moving each time (thankfully they've now been reigned in).
Keeping on that investment theme and look at the ROCE... put down a 15% (£65K) deposit, pay the mortgage for 7 years (same costs or better than renting over that time for me) and the house price goes up 20% (or C£85Ksince 2017), I've paid down about £60K on the mortgage and balance sheet is up £210K from £65K.
Also, house prices are compounding like anything else. Not that's I view it as an investment other than at some point it will provide me with free* accommodation.
Right now it's already yielding benefits. My mortgage is lower than the rent on the small flat I had nearly 8 years ago.
*Aware it requires maintenance - maintenance is also baked into the rental fees.
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1 hour ago, nero120 said:
That wasn't my intention, only to say that they were taken over by the federal gov in 2008.
Ah, understood.
Wasn't trying to nit pick - was just making the point that the government has previously supported massive property lending, 90 years ago.
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Just now, nero120 said:
I never said otherwise?
You seemed to imply that they were only government backed since 2008?
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2 minutes ago, nero120 said:
Due to fanny and freddie, essentially the US gov directly subsidises house purchases since 2008 when these institutions (that directly purchase mortgages from banks) were taken over by the federal gov.
Freddie and Fanny were both set up during the Great Depression and backed by the US government.
Hint, the F in both stands for 'Federal'.
You are partly right though - it was created to help put a floor under ever falling property prices during the depression.
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2 hours ago, Blobsy said:
‘Owning’ a house really isn’t all that you know.
Are you getting it yet?
I'd like to not be paying a mortgage or any rent in retirement. I cannot imagine retiring otherwise.
2 hours ago, Quid Game said:Answers why you’re not seeing your mass repossessions though as however many people a week come off fixed term deals. Just extend the mortgage term and keep the monthly payments largely the same. Easy choice really of either that or paying rent into your retirement. At least you’ll end up owning something / can do what you like with it, and eventually you will pay it off. Most will also likely get pay rises and career progression along the road, and some will get an inheritance. Extend the term temporarily to manage the here and now and then cut it back down again when life allows.
Or go IO... Would you rather have to lose your house and move and pay rent or just tread water on the debt with inflation effectively dropping the real value?
I took the longest possible period on my mortgage a could of years ago (35 years I think). Logic, 0.99% fixed for 5 years and inflation would repay nearly as much as I do in capital at normal interest and inflation rates plus I have higher cashflow each month to put to one side. Should the worst happen I can continue as I was for several years.
As it happened inflation took off and has eroded more of that debt than I have repaid since I bought the place!
2 hours ago, mynamehere said:That rather depends on the alternative.
Yup
2 hours ago, wighty said:Did you find restrictions on overpayments?.
Typically up to 10% of the outstanding balance is allowed. Anything over can trigger an early redemption fee.
35 minutes ago, desiringonlychild said:I do that too. Overpayments are free if they don't exceed 10% of the balance.
I have a long mortgage but in practice overpay at least £500 per month when mortgage is £1020 ..this is so that if I do get pregnant and need to spend 2k on childcare I have that option.
I overpay at the end of the term instead. Keep the money in an ISA or Premium bonds etc. That way not only could you stop saving and have the extra £500 you've access to an emergency fund without getting into debt. Kinda like a DIY offset mortgage.
1 minute ago, Quid Game said:So genuine question - how does this stay afloat in places like the USA where 30 year mortgages are common and taken out at the point of purchase? Do we see this start to gravitate to the uk where you take out a 30 year fix?
Mortgages are sold off to pension funds I guess. They get a reliable income secured against a real asset.
If you can fix for 5 years you can fix for 50 years. It's just the premium for such certainty starts to get more and more expensive with duration.
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On 11/05/2024 at 12:44, A.steve said:
Good question. There's one obvious way to make it "work":
In future, it will be compulsory to state if you are a "Local FTB" or not whenever making an offer to transact on real-estate. Once the offers are in, there are two possibilities: (A) the highest offer is from a "Local FTB" (B) the best offer is from a party that is not a Local FTB. In scenario A, the transaction can go ahead. In scenario B, bidding is re-opened... and remains open until a bidder who is declared a "Local FTB" has made the highest offer.
The beauty of this scheme would involve canny investors making absurdly low "Local FTB" offers in the names of their children... while also making insanely high offers as BTL investors. This will prevent properties from transacting - driving up he value of existing assets... by supply and demand... because supply will be constrained without demand being satisfied. QED.
And you imagine locals would vote for that? Knowing it would impair the value of said house?
What's to stop someone living in Cornwall buying it cheap and using it as a holiday let?
Plus you simply waste time with scenario B, you might as well ignore BTL offers. How do you determine who is a BTL if they're buying cash?
Impossible in practice and likely would end up with a sub market for dodgy rentals.
Anecdotally I know of people complaining about the Londoners driving up property prices in Cornwall. One of the biggest complainer sold her massive house for a huge amount to someone down from London. These people are allowed to vote and breed!
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Incredible down here for about 30 minutes.
Really amazing.
Something like this puts things into perspective. Our place in the world, in the universe.
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3 hours ago, scottbeard said:
I just took out a 5 year fixed rate of 4.2%
I take the view that this is an absolute steal - with current BASE rates at 5.25% even if they do come down a bit as a 5 year average MORTGAGE rate I think that will prove very good
Base rates would have to average lower than 3.75% over the 5 years to make it a bad deal and I can’t see them going below 4.5% in the near future never mind so far below 3.75% as to make the 5 year average below 3.75
Interesting SB. AS you know I value your views on here.
I am inclined to believe that rates will be at least 1-1.5% lower in 12 months time. I'm interested in why you're of the view they'll not have moved much at all?
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1 hour ago, Si1 said:
Good chance. Solar storm and clear skies.
Thanks for this!
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5 minutes ago, Bear Necessities said:
Haha, yes I've become very invested in watching Colin Furze digging out the underground DeLorean garage at the front of his house, after seeing what he did in the back garden! (His neighbour must love him!)
Fred Dibnah caused subsidence issues with his neighbours by digging his own coal mine.
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11 minutes ago, fellow said:
Without that £10 billion borrowed per month, we would not have achieved even the small amount of growth we have seen over the last year. That was my point. This bigger point is the longer this borrowing continues, the worse the long term prospects for the UK economy will be.
And my point is that if you correct for borrowing in the comparable period it's actually had a negative impact on the GDP figures.
I agree we need to borrow less btw.
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32 minutes ago, fellow said:
Nope, the rate of borrowing (deficit) has fallen but debt has still increased by a whopping £120 billion over the last twelve months. this is unsustainable and massive spending cuts or tax rises are needed to balance the books (after the election).
P.S. There's a difference between borrowing (deficit) and total borrowed (debt).
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25 minutes ago, fellow said:
Nope, the rate of borrowing (deficit) has fallen but debt has still increased by a whopping £120 billion over the last twelve months. this is unsustainable and massive spending cuts or tax rises are needed to balance the books (after the election).
Sorry, but you're confusing things and this isn't what you said:
3 hours ago, fellow said:And we have achieved that by borrowing a mere £10 billion per month:
Stating that 0.6% GDP growth is thanks to us borrowing £10bn a month, when we were borrowing slightly more than this in the previous period actually demonstrates GDP has grown faster than the change in rate of borrowing (which is fallen).
All things being equal government spending would have to increase to grow GDP.
While it might be fair to say if we stopped borrowing altogether and ran a deficit of £nil GDP would fall (it would) that's not an argument supporting this.
In other words, like it or not, the economy is growing all by itself (caveat - timing of Easter, bad weather, bounce back from subdued growth last year etc etc).
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25 minutes ago, regprentice said:
I believe the most recent immigration numbers are for the first half of 2023 at 672k when the figure for all of 2022 was 745k.
Its very unlikely Q1 2024 immigration will be 500k....but its not impossible and it could be a lot closer than you think. Couple that with the potential for a downward gdp revision as the statistics get refined over time and GDP per capita could credibly be negative for Q1 2024 in the final statistics.
672K was the year ended June '23, not H1.
Impressive you recalled that number though!
Assuming pro rata then 336K in H1. Taking the 2023 year figure of 745K then it's 186K in Q1 which is not immaterial in the point you're making.
Would be nice if they quoted GDP per capita too.
House Seller Desperation....
in House prices and the economy
Posted
Yup.
At best we see a slow adjustment of incomes to prices in real terms but, sadly, I can't see the average market dropping nominally more than about 5% and that's the best case. I think we're close to seeing prices steadily locking in with incomes and rising again within 12 months.
I am seeing higher value stuff sticking around though and more fall throughs. This is anecdotal of course.
From a finance perspective you are correct. The next waves would be 3 year (not so common) and 5 year (more common) fixes coming to an end. Mine is 5 years and ends Jan 2027. I will have had 5 years to do something about the 50% increase in monthly payments and that's assuming no change in rates.
Interest rates stopped rising in August 2023. It's old news now.
Any seriously bad economic impact would likely result in some BoE support so just like the GFC or Covid you'd expect lower rates in that scenario. Perverse but bad news was reflected by stock prices rising since it meant lower for longer or more QE.
Topsy turvy world.