Bbc News Defines House Price Rises As "positive"

[tomwatkins]

Money is debt.

High house prices, means we can borrow more against them, more money in the economy, we are "wealthier". We all have enough work to do now, to pay back the debt. People are happy.

But the real endgame, is for those in the know is to control all the assets, become debt free [become debt issuers], and get everyone else highly indebted for the next 30 years+. We are witnessing a major milestone here.

Millstone surely.

[The Spaniard]

It shows there is something wrong with an economic system that produces massive incentives to raise costs for others, rather than create new wealth

Indeed, and there are two distinct rentier classes (though a person might well belong to both.)

The housing market is where these two classes come together, interacting with devastating effect.

[Prof]

I know what you mean, I dont want massive HPI either, but at the same time if I need to sell, I dont want to lose money.

While logically the idea of wanting 5% savings increase versus 10% in the value of your house is flawed, looking at the long term that is the best position

If you need to sell, you should be able to buy cheaper. Unless you bought in quite recent times, you aren`t going to lose much, if anything.

Why would it be a flawed idea that I want my savings to increase at a moderate rate, rather than my house value increasing at a high rate ? My house is where I live, my money is what I use to feed and entertain myself. If my money goes up by 10% per annum, but houses only go up by 5%, the prospect of a larger/nicer house is more likely, if I want one. If I don`t want one, a better holiday, a PC upgrade or some nice clothes won`t leave such a large gap in my finances.

OK, things aren`t so clear cut, as the UK has an economy that seems to rely on HPI, so lower HPI has a lot of knock-on effects. If only we could wean ourselves off HPI, and back to getting our wealth through real endevour and innovation, then I would consider that to be a real improvement in our standard of living.

[BrickandMortar]

What a load of toss!

If you are moving 'up' the ladder from a 1 bed flat to a 3 bed terrace for instance then whilst your flat may have been increasing in value with HPI the place you want to move to is now way more expensive meaning you have to take out a larger loan and pay more money in interest to the bank over 25 years. Get your head around this and stop being an idiot!

Basic example:

1 bed flat in 2001: 100K

3 bed terrace in 2001: 150K

Difference when moving up = £50K

Assume HPI of 100 % (for simplicity)

1 bed flat in 2010: 200K

3 bed terrace in 2010: 300K

Difference when moving up = £100K

To move up the ladder you'd have to borrow more money and pay more interest to the bank. The banks are the ONLY winners.

My God people are stupid, why don't people WAKE up and realise that HPI is only in the interest of the banks and that we are being robbed by them!

I would not be so quick to call people idiot and stupid if I were you. One flaw with the above calculation is the initial rate of borrowing and deposit required. Take your example again.

Bought flat in 2001 for 100K sell in 2010 for 200k. Equity carried forward - 100k (Other costs omitted for simplicity)

3 Bed terrace price 2001 150K, 2010 price 300K. Extra 150K purchase cost.

Clearly, the equity from the flat sold would make the purchaser have a LTV of 33.3%. At todays borrowing interest rates, that would make a 3-4% bracket rate, which on a 200k purchase.

Had there been no HPI, purchaser would have "to find" a 15-20k for at least 10% deposit on the 150k 3 bed terrace to go up the ladder and worse be on the lender higher interest rate, may be 6-7% on a purchase price of 150k since LTV would be 80-90%.

So in summary you have:

With HPI

LTV 33.3% rate 3-4%, borrowing 200k

Without HPI

LTV 80-90% rate 6-7%, borrowing 135k

Not saying HPI is a good thing, but this is why HPI is so welcome by existing homeoweners.

Edited January 12, 2010 by BrickandMortar

[Prof]

I would not be so quick to call people idiot and stupid if I were you. One flaw with the above calculation is the initial rate of borrowing and deposit required. Take your example again.

Bought flat in 2001 for 100K sell in 2010 for 200k. Equity carried forward - 100k (Other costs omitted for simplicity)

3 Bed terrace price 2001 150K, 2010 price 300K. Extra 150K purchase cost.

Clearly, the equity from the flat sold would make the purchaser have a LTV of 33.3%. At todays borrowing interest rates, that would make a 3-4% bracket rate, which on a 200k purchase.

Had there been no HPI, purchaser would have "to find" a 15-20k for at least 10% deposit on the 150k 3 bed terrace to go up the ladder and worse be on the lender higher interest rate, may be 6-7% on a purchase price of 150k since LTV would be 80-90%.

So in summary you have:

With HPI

LTV 33.3% rate 3-4%, borrowing 200k

Without HPI

LTV 80-90% rate 6-7%, borrowing 135k

Not saying HPI is a good thing, but this is why HPI is so welcome by existing homeoweners.

May I just point out that assuming the mortgage is not interest only, over the 9 years, some of the capital would have been repaid, therefore increasing the equity in the flat, with or without HPI.

OK, here`s my theory -

No HPI

2001

Flat 100K

House 150K

2010

Flat 100k

House 150K

Approx. £25K paid off mortgage (guesstimate), which "creates" £25K of equity, enough for the deposit on the house. OK, the borrower still has a fairly high LTV, but does now have a decent track record of paying a mortgage.

Also, without HPI, the banks may not have to "punish" borrowers so much for taking out higher LTVs.

Edited January 12, 2010 by Prof

[ccc]

May I just point out that assuming the mortgage is not interest only, over the 9 years, some of the capital would have been repaid, therefore increasing the equity in the flat, with or without HPI.

OK, here`s my theory -

No HPI

2001

Flat 100K

House 150K

2010

Flat 100k

House 150K

Approx. £25K paid off mortgage (guesstimate), which "creates" £25K of equity, enough for the deposit on the house. OK, the borrower still has a fairly high LTV, but does now have a decent track record of paying a mortgage.

Also, without HPI, the banks may not have to "punish" borrowers so much for taking out higher LTVs.

BrickandMortar also fails to see another important thing.

The original purchase of the 100k would of had at least a 10% deposit on it. So instantly 10% equity exists. As you say over 9 years ? Perhaps paid off 25k of the capital. So that leaves total equity of 35k.

Put that towards the 150k house ? Deposit of about 23%. Debt total is about 115k compared to 175k.

In the 100% increase situation ? You do end up owning more of the house - but you also end up owning more debt.

I really do not understand why anyone would want that.

[erranta]

You would have thought by now that the message had got through. The message being that rising house prices only benefit speculators, downsizers and people who sell up and get out of the UK. For everyone else rising house prices are bad news.

You forgot to add a major point - the EXPONENTIAL rise in Xtra 'takings' for the money lenders!

(Which is why their wholly con-trolled media and advertising pump out the messages to pump up the prices!)

As we have seen, those in the forefront of 'the big game' all have multiple homes &/or B.T.Lets

[ingermany]

What a load of toss!

If you are moving 'up' the ladder from a 1 bed flat to a 3 bed terrace for instance then whilst your flat may have been increasing in value with HPI the place you want to move to is now way more expensive meaning you have to take out a larger loan and pay more money in interest to the bank over 25 years. Get your head around this and stop being an idiot!

Basic example:

1 bed flat in 2001: 100K

3 bed terrace in 2001: 150K

Difference when moving up = £50K

Assume HPI of 100 % (for simplicity)

1 bed flat in 2010: 200K

3 bed terrace in 2010: 300K

Difference when moving up = £100K

To move up the ladder you'd have to borrow more money and pay more interest to the bank. The banks are the ONLY winners.

My God people are stupid, why don't people WAKE up and realise that HPI is only in the interest of the banks and that we are being robbed by them!

and once you've paid off the bank and retired from work the government take the house to pay for your social care costs. Social care per couple= 60k pa/nursing care 80k pa: Your lifetime investment buys you about 3-4 years in an old peoples home.

Edited January 13, 2010 by ingermany

[meow]

I think HPI is bad. I'd like prices to continue falling. But I don't believe it will happen.

That's a fair attitude to take, but I think your belief will prove unfounded

[MinceBalls]

I would not be so quick to call people idiot and stupid if I were you. One flaw with the above calculation is the initial rate of borrowing and deposit required. Take your example again.

Bought flat in 2001 for 100K sell in 2010 for 200k. Equity carried forward - 100k (Other costs omitted for simplicity)

3 Bed terrace price 2001 150K, 2010 price 300K. Extra 150K purchase cost.

Clearly, the equity from the flat sold would make the purchaser have a LTV of 33.3%. At todays borrowing interest rates, that would make a 3-4% bracket rate, which on a 200k purchase.

Had there been no HPI, purchaser would have "to find" a 15-20k for at least 10% deposit on the 150k 3 bed terrace to go up the ladder and worse be on the lender higher interest rate, may be 6-7% on a purchase price of 150k since LTV would be 80-90%.

So in summary you have:

With HPI

LTV 33.3% rate 3-4%, borrowing 200k

Without HPI

LTV 80-90% rate 6-7%, borrowing 135k

Not saying HPI is a good thing, but this is why HPI is so welcome by existing homeoweners.

I think my comment about idiot stands. All you have demonstrated is

Not saying HPI is a good thing, but this is why HPI is so welcome by existing homeoweners.

So that's sustainable

You are (one is, not calling you) mental if you think borrowing more money and paying more interest for living in the same place is a GOOD THING

Your argument also neglects the fact that if people pay less to the banks they can save more. It's really quite simple, if your mortgage is less per month then you can save more per month. Where do you think the extra 50K / 100K interest is coming from in order to service the debt? Surely you could just put that aside / invest it in something else during the course of your working life?

Edited January 13, 2010 by MinceBalls

[Prof]

You are (one is, not calling you) mental if you think borrowing more money and paying more interest for living in the same place is a GOOD THING

This is the point that many people just don`t "get". Paying more for a property, because of HPI, will cost you more. Smaller mortgage = more money to spend on what you want. Of course, those that want HPI are usually those that have already signed on the dotted line, and simply think they can take advantage of someone else having to pay a larger mortgage (ultimately, that is what it boils down to). Of course, this can only go on for so long until we have a crash, then lives can be ruined. I suppose it`s human nature to try and get the better of our fellow humans, but surely we can make the playing field a little more level when it comes to obtaining shelter. "It`s a free market", I hear cried from those that want to maintain the status quo. The UK property market doesn`t look very "free" at the moment, in more ways than one.

[Stars]

This is the point that many people just don`t "get". Paying more for a property, because of HPI, will cost you more. Smaller mortgage = more money to spend on what you want. Of course, those that want HPI are usually those that have already signed on the dotted line, and simply think they can take advantage of someone else having to pay a larger mortgage (ultimately, that is what it boils down to). Of course, this can only go on for so long until we have a crash, then lives can be ruined. I suppose it`s human nature to try and get the better of our fellow humans, but surely we can make the playing field a little more level when it comes to obtaining shelter. "It`s a free market", I hear cried from those that want to maintain the status quo. The UK property market doesn`t look very "free" at the moment, in more ways than one.

It isn't remotely free. The ownership of land itself implies an uncircumventable cartel and that cartel is also restricted

[uncle_monty]

those with property, that 70% majority?

Less than 70%. Upsizers lose out, as previously discussed.