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The Latest Cunning Plan To Keep House Prices High

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Anyone taking out a £200,000 mortgage spread over 35 years with an initial 4 per cent interest rate and £995 fee will end up paying back £373,781 at £890 a month. Over an extra five years, the total repayment cost exceeds £403,000 for only £50 a month less.

And this based on interest rates at 300 year record lows. That's some smart kids you educated, educated, educated, Mr Bliar.

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So you have to get your 40-year mortgage before you're 28 (so you can pay it off before retirement at 68), now? I thought the average FTB age had climbed to over 35 by now.

I really don't know where the buyers are coming from. Who takes these 'deals'?!

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Linda Isted of the Debt Advice Foundation charity warned that it was impossible to predict anyone's financial situation in 35 years' time. "We would always caution people to think very carefully about any kind of credit which is due to run past their retirement age – or even to run into a time of their life when they might be thinking about perhaps cutting back on working hours," she said.

So it won't be people on zero hour contracts or even those who reliably get the few hours a week in order to qualify for benefits/tax credits etc - and that would include a lot of graduates obliged to work in that sort of job these days.

Edited by billybong

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So you have to get your 40-year mortgage before you're 28 (so you can pay it off before retirement at 68), now? I thought the average FTB age had climbed to over 35 by now.

I really don't know where the buyers are coming from. Who takes these 'deals'?!

Paid off just in time to "release the capital tied up in your home" and sell it straight back to the same bank. :D

Who then sit quietly and wait for you to die.

Edited by shindigger

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Many are expecting to lower the length of their mortgage in the years ahead with the expectation that rising salaries will allow them to do so. Home-movers and those remortgaging are also taking up longer-term deals.

:rolleyes:

As Democorruptcy has often pointed out, longer term deals are manna from heaven for banks.

Edited by Joan of The Tower

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Anyone taking out a £200,000 mortgage spread over 35 years with an initial 4 per cent interest rate and £995 fee will end up paying back £373,781 at £890 a month. Over an extra five years, the total repayment cost exceeds £403,000 for only £50 a month less.

That in itself doesn't tell you anthing at all. It depends on future inflation over 40 years, the capital value of the house after 40 years, and the rents which would have to be paid instead for 40 years plus the additional rents to be paid forever at the end of the 40 years.

£50 a month for 40 years = £24,000 so you'd have to reduce the £403,000 by the value of £24,000 invested over 40 years too.

Or you could go back 40 years to 1974 I suppose and see what happened since.

EDIT: Personally I wouldn't enter into a 35-40yr contract for anything, especially not with a bank.

Edited by R K

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:rolleyes:

As Democorruptcy has often pointed out, longer term deals are manna from heaven for banks.

That piece of propaganda is very subtle. It compares 35 and 40 year costs.... thus making a mere 35 year mortgage seem acceptable.

Where were the 25 and 30 year comparisons, so people could see how much extra a 35 year mortgage costs?

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That piece of propaganda is very subtle. It compares 35 and 40 year costs.... thus making a mere 35 year mortgage seem acceptable.

Where were the 25 and 30 year comparisons, so people could see how much extra a 35 year mortgage costs?

£200k mortgage, 4% interest (!) total repayable:

20 year term: £294k

25 year term: £320k

30 year term: £347k

35 year term: £374k

40 year term: £403k

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That in itself doesn't tell you anthing at all. It depends on future inflation over 40 years, the capital value of the house after 40 years, and the rents which would have to be paid instead for 40 years plus the additional rents to be paid forever at the end of the 40 years.

£50 a month for 40 years = £24,000 so you'd have to reduce the £403,000 by the value of £24,000 invested over 40 years too.

Or you could go back 40 years to 1974 I suppose and see what happened since.

EDIT: Personally I wouldn't enter into a 35-40yr contract for anything, especially not with a bank.

What relevance does that have, toward the future? Long wave inflation is over, imo.

House prices are going back to the 70s.

40 year mortgages means they are just about scraping the bottom of the barrel for last of the idiot but solvent buyers (who are not victims, often calculating what it will be worth in the future after they've paid silly high asking price) still willing to proceed at insane asking prices. Crash coming.

Dreaming of forever hpi, with Savills joke 25% hpi forecast, yet: "We are increasingly hearing heartbreaking stories from older people who still face significant debts when they reach retirement age, and have no prospect of additional income to settle them."

There's very few buyers around for the joke large mid-prime to mansions around here, and value discovery is coming. Already seeing distress signals at higher end: (came back to market at £1,800,000 with a special £10,000 turn-key package for buyer.... now asking offers in excess £1,700,000) If money tightens up...

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=5888638&sale=23303265&country=england

Edited by Venger

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Game over man :(. HPC has lost the battle

How so ?

We're not the ones paying well over the odds for a simple shelter.

Nor are we the ones lining the pockets of the useless chancellor.

Nor are we the ones stuck with a deprecating crumbling asset

Nor are we the ones encouraging our children to buy into an anything but free housing market

Nor are we the ones gifting our children deposits to commit financial suicide.

Nor are we the ones stuck in this country, a country desperate for money and looking like it's hell bent on starting a war with anyone they can find.

Nor are we the ones terrified that prices will fall.

Nor are we the ones lying to people to scare them into joining the pyramid.

Nor are we the ones to blame for the mess.

There was no battle to loose, the war has already been won.

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It feels like 2007 all over again. Even the month before the banks were collpasing the MSM were telling the sheeple how prices would keep going up and what great value property was and how London was special.

The fact we have the london mega bubble shows how either the government are a) up to the necks in it either collectively or individually B) how stupid they are c) how gullible they all or d) Desperate for the 5 mins of power and glory.

The country is ****ed and we all know who's to blame.

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O.K., "game over" may be a little OTT but the can has been kicked down the road yet again, for at least the next 5 years. People only look at the monthly payments and this will aloow them to borrow yet more again (than they could a few months ago) for the same "X amount per month".

It's all they see, not the total debt they're taking on :wacko:

Edited by maffo in oxford

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O.K., "game over" may be a little OTT but the can has been kicked down the road yet again, for at least the next 5 years. People only look at the monthly payments and this will aloow them to borrow yet more again (than they could a few months ago) for the same "X amount per month".

It's all they see, not the total debt they're taking on :wacko:

That is exactly how things seem to work now. I was recently in a furniture shop and looking at wardrobes, I saw one I liked but told the salesman that it seemed expensive for what it was. I was told not to worry as they would be hhappy to do me a credit deal so it was only x amount per month. They ignored the fact that I was pointing out to them that I thought the cost for the piece of crap they were trying to sell was too high in the first place.

People are now conditioned to only look at the monthly cost and are blinded to the fact that things are overpriced, and that they are being done. People seem to have no concept of ' value' anymore.

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That is exactly how things seem to work now. I was recently in a furniture shop and looking at wardrobes, I saw one I liked but told the salesman that it seemed expensive for what it was. I was told not to worry as they would be hhappy to do me a credit deal so it was only x amount per month. They ignored the fact that I was pointing out to them that I thought the cost for the piece of crap they were trying to sell was too high in the first place.

People are now conditioned to only look at the monthly cost and are blinded to the fact that things are overpriced, and that they are being done. People seem to have no concept of ' value' anymore.

You are right, it's the financialisation of society, whereby the only thing which matters is the ability to service debt.

Unfortunately, the majority of people born after 1980 have no clue about this, as that's the only way of life they know.

Nevertheless, these type of deals were introduced in Spain just before their housing bubble started to deflate. Same in Japan.

Expect more lunacy at the turn of the year, when in the run-up to the election we'll see lunacy taking over. Popcorn at the ready

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The 100% 30 year mortgages came quite close to the end last time. A close relative got one in 2006. The banks have learned from last time, and are at least making sure they suck in some cash to buffer agains the inevitable collapse.

As for who'll take up the offer? The young, desperate and ignorant. I remember coming across two medical students in late 2007. No idea what their mortgage situation was, but they had a four bedroom place in east London they'd just bought and were living in it while renting out as many rooms as possible to pay the mortgage (while hoping their lodgers would stay quiet and out of sight so it didn't cramp their coupled house owning bliss). Obviously had no income. They offered to help me get on the housing ladder by putting me in touch with a broker. Had the missus been alone in viewing the place, no doubt she'd have jumped at it as at the time she was desperate to get on the housing ladder (or snake) without any thought as to the consequences.

I'm afraid most, like other posters have said, simply look at the monthly cost. You have to ask yourself what the cost of houses would be if we had to pay for them in cash. Regardless of demand, it would be a tiny fraction of their current price.

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If they limited all to 25 year mortgage terms they would be left time to save for their retirement.

Might still be a struggle if you are not climbing aboard the house buying ponzi until you're 40 or so as the age of the FTB creeps up. The old days of getting married and buying in your mid 20s would have facilitated saving for retirement - because your mortgage would likely be peanuts by the time you were 40. And, of course, there were more final salary pensions around then.

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Might still be a struggle if you are not climbing aboard the house buying ponzi until you're 40 or so as the age of the FTB creeps up. The old days of getting married and buying in your mid 20s would have facilitated saving for retirement - because your mortgage would likely be peanuts by the time you were 40. And, of course, there were more final salary pensions around then.

I had a free education, bought a house in 1997 after working abroad for a few years then had well paid jobs after that. I should be able to get 3 out of 3 from education/house/pension.

I don't see how the next generation can get 2 out of 3. Most will struggle attempting 1 out of 3.

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It's ironic that while we have regulators such as Andrew Bailey and Martin Taylor expressing concerns over potential risks to financial stability from lengthening mortgage terms, the HomeOwners Alliance is in favour of them.

With the motto of 'We're on your side' and the claim that the HOA is the only organisation in Britain to "represent, champion and serve homeowners and homebuyers", founder and Chief Executive Paula Higgins says:

"We do not see any problem with longer-term mortgages. 25 years is rather arbitrary and it came in when houses were cheaper and people retired earlier.

"In an era of high house prices and longer working lives there are stronger motives for longer-term mortgages and fewer obstacles as long as the loans are affordable during periods of higher interest. If we work until 68, there is nothing wrong with a 40-year mortgage – the point is we should be able to choose."


Of course, Ms Higgins is far better positioned to make such a judgement than the members of the Financial Policy Committee. As her bio describes on the HOA website:

"She is co-owner of a house in North London, where she oversaw a major kitchen extension and other refurbishment."

And she has former BBC journalist Martin Shankleman by her side:

"He is an experienced homebuyer and homeowner, in both Wales and London, and has just finished a major refurbishment of a house in London."

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the claim that the HOA is the only organisation in Britain to "represent, champion and serve homeowners and homebuyers",

:o

"The only organisation".

It seems a bit of an exaggerated claim to say the very least.

Edited by billybong

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