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House Prices Are Cheap For Some

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While we are waiting for the crash to happen, I think it might be useful to look away from the headline rate house prices to look at the cost of homeownership.

There seems to be a gulf between different mortgage products available:

Case A) low LTV mortage (<65%) - like my First Direct lifetime tracker. Currently at 2.5% (BOE +2% for life. Fees are about £100

Case B) Higher LTV (80%+) - like Halifax's current offer of a 2 year traker at BOE+4.54% followed by the SVR - currently 4% APR. Fees of £497

I can't be bothered to do the sums - but over the life of the mortgage - Case A will be a lot cheaper than over the life of the mortgage. Roughly 2% for the first two years and then 1.5% for the next 23. If you compound that - it makes a huge difference. (Not to mention the lower fees).

The fact is that - over the lifetime of the mortgage, those who have healthy finances will pay thousands and thousands of pounds less.

The marginal cost of capital is probably similar to credit card interest rates.

It's probably always been this way. However, the liarloans meant that any Tom Dick or Harry could get a loan for more or less the BOE - without much/any Equity.

Hopefully, we are moving into an era where those who are Secretly Rich are rewarded for their prudence and the secretly poor are penalised.

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Hopefully, we are moving into an era where those who are Secretly Rich are rewarded for their prudence and the secretly poor are penalised.

Here's the thing, HPI has always been about rewarding the simple, plain Rich and penalising the Poor -- whether you're Secretly Rich or not so Secretly Rich is irrelevant. If asset values increase, the people holding the most assets reap the most rewards. Somehow, a large number of sheeple just don't understand that, so we've had 13 years of a government claiming to support working people encouraging house price inflation like mad.

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You could say that about anything.

not just houses - ownership pays.

i.e. if a company pays a dividend of 4% - if you own a million pound worth of shares you get paid £40k annually - which is purely passive income.

Or you could work for the same company and earn the same money.

Unfortunatley, most people don't have a million pounds.

That's ownership of profitable companies.

With property, the difference is that you don't own a house until you've paid for it. For me, a house is not an asset as it doesn't earn you money/

You may reap the benefits of HPI or suffer HPC - however, you pay for the privilege. Be it in mortgage interest or other expenses

If I can borrow money at 2.5%, while others have to borrow theirs on credit cards, charging maybe 12.5% - in the long run I'm laughing.

The only problem is that having cheaper borrowing is disguised by rising house prices - which reward the overstretched and reckless.

In 2002 - it would have made much more sense to borrow £150k at 6% to buy a house than £100k at 5%.

In 2010-XX - I hope that the more conservative are rewarded. :)

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  • 434 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
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      • up 5%

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