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taxmyrs

How Big A Figure Will 200k Be In 25 Years?

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Correct it will be 200k, but will you be able to buy a decent second hand car with it?

I put a 195k offer in on a house today that is for sale at 230k - it was rejected. As we are not in a chain the EA tells me that around 215k we will get us the house. We have a 25k deposit so this would mean a 190k mortgage; repayment at approx 1,100 a month, which would stretch us quite a bit. There is the option of an IO to get us started. I would not consider this except I have a further 25k coming to me in the next 6-12 months, which I could use 1/2 of to start an investment to pay back the capital. Talking to a friend he said his first house was £6,800 25 years ago and is that a big sum to pay back now?

I cannot envision 190k being that small a sum in 25 years but will it? As long as I have the discipline to save/invest well over the 25 years with the addition of inheritance - god forgive when my parents and my partners parents die; they will be approaching 100 by that time. Even thinking of this makes me sick - ****** the housing market!

The house is perfect in every way for our family.

I need some pragmatic help from the learned.

Thanks,

TMA

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Well if wage inflation over the past 7 years has been anything to go by 200K will still be around 120K then.

If credit tightens and commodity inflation goes rampant but wage inflation is held down the way it has been for the past 7 years then it is likely to be about 20K less I would think. When I arrived in Britain 7 years ago I applied for a permanent job that was in real terms a level below what I am on now. Clothes are about the same. Food is about 50% more expensive, Council Taxes have doubled, Television Liscence has doubled. Gas prices have trippled. Rent has trippled.

A level below what I am on now is around 26-30K. The job was offering 24-28K.

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If inflation remains at about 2% then £200k will be equal to about £122k today, in 25years - so still a hell of a lot of cash!! Those people taking out interest only mortgages "because their parents did and the lump sum seemed like nothing after 25years" will be in for a real shock.

Edited by Pete95

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Correct it will be 200k, but will you be able to buy a decent second hand car with it?

I put a 195k offer in on a house today that is for sale at 230k - it was rejected. As we are not in a chain the EA tells me that around 215k we will get us the house. We have a 25k deposit so this would mean a 190k mortgage; repayment at approx 1,100 a month, which would stretch us quite a bit. There is the option of an IO to get us started. I would not consider this except I have a further 25k coming to me in the next 6-12 months, which I could use 1/2 of to start an investment to pay back the capital. Talking to a friend he said his first house was £6,800 25 years ago and is that a big sum to pay back now?

I cannot envision 190k being that small a sum in 25 years but will it? As long as I have the discipline to save/invest well over the 25 years with the addition of inheritance - god forgive when my parents and my partners parents die; they will be approaching 100 by that time. Even thinking of this makes me sick - ****** the housing market!

The house is perfect in every way for our family.

I need some pragmatic help from the learned.

Thanks,

TMA

I'd consider a Japan style scenario and look at what has happened to prices there during the past sixteen years, can you see prices recovering to 1990 levels before 2015? Because I can't, a whole generation ruined and NOT just financially!

As for the UK I firmly believe that house prices in 30 years time shall be no higher in REAL terms than they are Today.

It's your decision.

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If inflation remains at about 2% then £200k will be equal to about £122k today, in 25years - so still a hell of a lot of cash!! Those people taking out interest only mortgages "because their parents did and the lump sum seemed like nothing after 25years" will be in for a real shock.

I take your point, but I think my point is, its not just what it is worth in terms of buying, its also what it is worth in terms of what else you could buy with it. If wages were all of a sudden to catch up with costs I think I would be on 40K to 45K for the value of 24K 7 years ago.

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So at 2% inflation my salary would be around 70k a year in 25 years + hopefully with step increases possibly 80 - 90k a year. Would the 190k seem that much if I invested also over the term?

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I think low inflation is a temporary thing, it's only a matter of time before the like of China & India have higher standards of living and cause inflation to start moving up. So to answer your question, in 25 years time we may well look back and think, "Eeeee, £250k used to buy all those things".

Could that make it perversely a good time to buy? Low inflation for a few years and then watch the debt get eroded?

<_<

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I think low inflation is a temporary thing, it's only a matter of time before the like of China & India have higher standards of living and cause inflation to start moving up. So to answer your question, in 25 years time we may well look back and think, "Eeeee, £250k used to buy all those things".

Could that make it perversely a good time to buy? Low inflation for a few years and then watch the debt get eroded?

<_<

Sorry for being thick, but I didnt do economics. How will a rising standard of living in China and India cause inflation to rise? I know its probably simple to economists, but I'm a software engineer! Thanks

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Could that make it perversely a good time to buy? Low inflation for a few years and then watch the debt get eroded?
If you can afford the repayments when IRs go up...

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Sorry for being thick, but I didnt do economics. How will a rising standard of living in China and India cause inflation to rise? I know its probably simple to economists, but I'm a software engineer! Thanks

Chinese and Indian citizens will be paid more, therefore it will cost westerners more to buy the goods and services produced by them.

frugalista

(also a software engineer!)

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Sorry for being thick, but I didnt do economics. How will a rising standard of living in China and India cause inflation to rise? I know its probably simple to economists, but I'm a software engineer! Thanks

An example would be wage inflation. Cheap wages in Asia allow them to supply us with cheap goods, once their standard of living increases so will their wage demands. Look at India, maybe the cheap outsourcing place now but many outsourcing companies are struggling to make a profit because of high wage inflation and turnover of staff.

If you can afford the repayments when IRs go up...

Yep, and that's the gamble we all have to take. :huh:

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Chinese and Indian citizens will be paid more, therefore it will cost westerners more to buy the goods and services produced by them.

frugalista

(also a software engineer!)

See I told you it would be simple, Thanks! :D

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The BoE is now tasked with keeping inflation low, by inflation they mean wage inflation not your gas bill! If wage inflation increases and causes secondary effects they will raise interest rates, they've made this quite clear.

You're essentially betting on another bout of hyper-inflation.

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Guest Winners and Losers

The BoE is now tasked with keeping inflation low, by inflation they mean wage inflation not your gas bill! If wage inflation increases and causes secondary effects they will raise interest rates, they've made this quite clear.

You're essentially betting on another bout of hyper-inflation.

As you all know, I am no expert, but I think a rate rise will scare the sh!t out of Joe Public.

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Sorry for being thick, but I didnt do economics. How will a rising standard of living in China and India cause inflation to rise? I know its probably simple to economists, but I'm a software engineer! Thanks

Chinese and Indian citizens will be paid more, therefore it will cost westerners more to buy the goods and services produced by them.

frugalista

(also a software engineer!)

:lol:

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I think almost everyone on this site is agreed on the fact that real inflation is much greater than the 22% or whatever is calculated on the HPI. In fact, the real annual increase in cost of living (transport/ energy bills/ council tax tec.) is at least 5%. Does that mean that the current IRs are in effect net negative?? That is to say that even if you are paying 4.5% IR to the bank for your mortgage now, it is still less than your overall annual increase in cost of living. If this anomaly (between the calculated HPI and the real inflation) continues for much longer (say 25 years as in the initial question in this thread), your 200,000 would REALLY not buy that much at all anyway. So I suppose your having paid off your mortgage for your property would put you in a pole position.

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I think an interesting point has arisen.

House prices have risen because inflation expectations are dead.

Everyone expects inflation really. :huh:

NOBODY expects the Inflation! Our chief weapon is surprise...surprise and fear...fear and surprise.... Our two weapons are fear and surprise...and a very loose monetary policy.... Our *three* weapons are fear, surprise, and ruthless efficiency...and an almost fanatical devotion to the Bank of Japan.... Our *four*...no... *Amongst* our weapons.... Amongst our weaponry...are such elements as fear, surprise.... I'll come in again.

Its like the spanish inquisistion no one expects it but then when it turns up during a long period of globaly low interest rates. People expect the Bank of england to go and fetch the comfy pillows. you can't have it both ways. can monetary policy target both asset prices and consumer prices and commodity prices all at the same time? seems not.

Edited by jonpo

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I think almost everyone on this site is agreed on the fact that real inflation is much greater than the 22% or whatever is calculated on the HPI. In fact, the real annual increase in cost of living (transport/ energy bills/ council tax tec.) is at least 5%. Does that mean that the current IRs are in effect net negative??

Depends, more importantly it would make the GDP figures look a bit dodgy.

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I don't think there won't be deflation.

In fact when I bought my gold I thought it would drop 30%. As deflation ripped in, followed by fiat collapse, and gold digital currency takeover. Which shows what I know.

EDIT: OK. I thought it might take 5-10 years. And I accepted there could be another bubble or two, so maybe I do know.

Yes the problem is that everyone expects the Future value of 200K to be 120K, hence why not buy a house now, where as I expect the 25year future vale of the 200K to be around 300K-400K due to a delfationary depression. at the moment the current inflation is causing price expectations to become shifted towards inflation. And this creates the opportunity to inflate houses some more. but as you know the debts cannot be cleansed with even greater amounts of debt without monetary policy becoming less and less credible. if we head into the deflation and rates go back to zero. And we all start spending the "free money again" as before then it will definetly be time to flee to the safety of gold. If Bernake follows Greenspans "formula" then maybe the dollar can be saved as the worlds reserve currency, and fiat maybe fiat money survies to see another deflation.

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10 year fixed at 4.odd widely available right now.

oh, and you need a job. which might be tricky is no one is spending any money because they're crapping themselves about IRs doubling...

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  • 301 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
      • up 2.5%
      • up 5%



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