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Notting Hell

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     I ❤️  HPI
    House prices only go up.

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  1. Rate of interest on cash deposits is i %. Inflation is r %. (CPI or RPI etc.) In order to live, you spend £x /year. For capital not to lose purchasing power it needs to grow at r %. On top of this, £x is extracted to live on. c * (1+i) = c * (1+r) + x (where c is initial capital, and i is the rate of interest on retail bank deposits) (1+i) = (1+r) + x/c c = x / [(1+i) - (1+r)] c = x / (i-r) So if i < r (rate of internet on cash deposits is less than rate of inflation) it is impossible to 'live off the interest'. Let: x=£12,000 (frugal lifestyle, house paid off etc. £1,000 a month) For i = r + 0.25 (interest on bank deposits outpaces inflation by 0.25%): c = x/(0.25) = 12,000/(0.25/100) = £4.8M For i = r + 0.50 (interest on bank deposits outpaces inflation by 0.50%): c = x/(0.50) = 12,000/(0.25/100) = £2.4M For i = r + 1.00 (interest on bank deposits outpaces inflation by 1.00%): c = x/(1.00) = 12,000/(1.00/100) = £1.2M So, you would need absurdly large amounts of capital, a large interest rate delta (i-r), and a very frugal lifestyle to make this work...
  2. Yes there are a few...! What are their motives though? How can EnglishRose be a Lawyer earning enough to pay for all she claims to when she is posting on ft.com all the time? It must be some form of parody account at the very least...
  3. I apologise this is slightly off-topic, but the commenters below often post anecdotal evidence regarding house prices and economy in UK on the FT and Telegraph websites. 1. EnglishRose on ft.com 2. Nostradamus2 (formerly Sound of the Suburbs) on ft.com and posts under another alias on telegraph.co.uk that I can't recall immediately (you can tell it's the same poster from the style of prose). 3. BRITISH BROWN FEMALE on telegraph.co.uk Now, the reason I am posting here is the following. After reading these commenters for roughly a year, they always post the same or very similar comments on the threads they post on. The other thing all the commenters have in common is that the stories they post are plausible but slightly unrealistic. The comments are normally somewhat contentious. I have begun to wonder whether these posters are genuine individuals or are posting with ulterior motive. I have two working theories: These accounts are actually operated by the newspapers. They function simply to drum-up comment engagement, which requires the purchase of a subscription. They are operated by some body attempting to frame a narrative on economic issues, for example: EnglishRose: 'I will work until I drop, I put my 5 children through private school, university, and deposit on first houses.' Sound of the Suburbs: Always posts the same equation 'disposable income = wages - cost of living' BRITISH BROWN FEMALE: claims to have retired at forty. Anyway, my question to posters on this site, has anyone noticed these commenters in particular or other similar commenters. Why do these commenters post the same post over and over. Who is operating these accounts. The actual article a newspaper writes is becoming less and less relevant. I for one often 'skip straight to the comments'. However, if you were a newspaper with a motive to push a particular story, you don't have to worry about what the newspaper article says anymore. The newspaper posts the narrative instead in the comment section, which does not come under journalistic scrutiny. I think that a lot of online news is being manipulated through the comment section. Anyway, just thoughts. Would be very interested to know what commenters on here think.
  4. @zugzwang Thank you for the plot. Has anyone made any prediction of trend reversal? There is always a lot of discussion (generally, not just on here) about CPI vs bank rates, but actually there are 3 rates to consider. The additional being the retail deposit rates. Notice how they track the bank rate until GFC...
  5. I think maybe I wasn't entirely clear. The same idea is noted by Douglas Adams and his story about The Restaurant at the End of the Universe. Where due to the marvels of compound interest, 1p deposited in a savings account in the diner's own era pays for the fabulous cost of the meal at the end of the universe. This of course, does not, and I assert has never, worked. Douglas Adams, or at least this story, represents financial illiteracy. It is not possible for cash deposits to outpace inflation, and this has never been the case. Unless anyone knows otherwise?
  6. I apologise that this is slightly off-topic, however I recognise that members here will have some useful insight. Several boomers have said to me over the years that they 'intended to retire and live off the interest'. Meaning they intended to have £x saved in their bank account earning r% interest. They then intended to live on the interest and not touch the principle. Anyone who does not require donation of the family brain cell would realise that this strategy doesn't work as the rate of (consumer) inflation always outpaces the rate that retail banks will offer on cash savings. However, my question is, has this always been the case? Was it ever possible to 'live off the interest' without the principle losing purchasing power, when the funds are deposited into retail accounts? Or is it just basic financial illiteracy that has been stated to me? A myth. On to premium bonds next... the most ******** 'investment' I have ever come across... another favourite of the boomers... Nothing premium about them. Earning effective 1.25% or whatever it is in premium bonds, while inflation runs at 10%!!! 'But I get a win every month'
  7. The trade-off is small mortgage for psychological comfort vs large mortgage for (potential, and historic) financial gain. Which is the better life strategy...?
  8. Thanks for this thread- this is essentially my thesis too. The other point I would make is that wages never fall. House prices only go up - because currency inflation is built in. The implicit assumption of many posters on this site appears to be that if you post on this site, you believe a crash is inevitable. I do not think house prices will crash.
  9. The relevant sections are 2.52-2.60. It states that "this rate should be set with reference to forward swap rates" which "represent the cost of raising funds on the money markets, and reflect the market’s expectation of what will happen to interest rates in the future." So who knows anything about forward swap rates and whether it encapsulates any information about inflation?
  10. You make a good point. Does the stress-test assume that the mortgage rate increase is related to the general cost of living increase--we are seeing this is not true. i.e. mortgage up 3%, cost of living up 3%. Not mortgage up 3%, cost of living up 10%. The assumption could be that you pay the mortgage at all costs and otherwise forego every other expense. The other factor is that for the v. big mortgages the cost of mortgage is >> (much greater than) the cost of living. It's the biggest expense for most, so it has the greatest influence on causing financial stress. It seems flawed at first glance. What does the actual MMR report say though. Need the hard details.
  11. Sounds like a good plan, thanks for posting this.
  12. Isn't the modern strategy finding the cheapest way to get your house on Rightmove? I can't see what value add an EA adds. Maybe you need a photographer with good camera/correct lens (fish eye). Get a drone and add a video to the listing too. You could do your own floor plan if you have a bit of technical skill. Then upload it to RM (via a DIY portal if there is one?). Do your own viewings at open houses at the weekend. Not sure why it costs £££ to sell a property to be honest.
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