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Haliwide Discrepancy

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apologies if this has been posted already!

http://money.independent.co.uk/personal_fi...ticle362429.ece

Sam Dunn: From half-empty to a full house in 72 hours

So which is right, the Nationwide or the Halifax? In fact, neither

Published: 07 May 2006

Two pub evenings with different sets of friends; two discussions about house prices; two utterly different moods.

Last Monday night, there were glum faces all around the table; on Thursday, gleeful ones. Bizarrely, the cause of the joy and pain was the very same: last month's figures for the housing market.

According to Nationwide building society, the market cooled swiftly in April. Blink and you'd have missed an average price rise of 0.1 per cent on March (and annual inflation edging down to 4.5 per cent).

For one couple on Monday night, this stagnant market was proving an expensive nightmare. They were mortgaged to the hilt, they wailed, and the price of their two-bedroom flat - bought for £205,000 as an investment early last year - hadn't budged. Their hope of remortgaging within a year with the new-found equity in their property looked wildly over-optimistic.

Fast forward three nights to a different pub and a different set of financial data. According to the Halifax, Britain's biggest mortgage lender, April had been a stonking month for homeowners. House prices were up 2 per cent from March - the highest monthly rise for two years, and 20 times the estimate at Nationwide. Annual inflation was a nifty 8 per cent, it calculated.

That evening, one of my friends was feeling quite smug. He was sitting pretty on a semi, and his plans to move by Christmas should, he reckoned, net him a cool £15,000 in equity in just 18 months.

From zero to hero in 72 hours, the UK housing market continues to bamboozle many people, who ask how the same month can produce such contrasting sets of statistics.

The answer comes down to the different ways in which the Nationwide and Halifax figures are calculated. These include the precise weeks measured (Nationwide includes the last 10 days of March in its April figure); the type of "average" house looked at; and the size of the sample (the Halifax says its pool is more than five times that of its rival).

Housing market figures can dramatically affect buying and selling decisions, so you might think it important to know which set is right.

In fact, it transpires, neither is, and that the resulting anguish is our fault.

We really shouldn't be getting worked up over these short-term figures, lenders warn. It's the picture over many years that matters. In this case, both Nationwide and the Halifax show broadly similar, slow upward trends - with little sign of an imminent crash, despite countless predictions from so-called experts.

This should be reassuring news for most homebuyers and sellers, but it is alarming to see the eagerness with which the monthly figures are still seized on by many.

On both my pub nights, one common strand emerged in the discussion of house prices: my friends looked on their properties as short-term investments, at the expense of all else.

Pensions? Much less important. Savings? Only if there was any money left at the end of the month. Investing in shares? Hmm, just a little in most cases.

It's no secret we're a nation of home lovers, but until we calm our anxiety over every property price move, we're in danger of not seeing the wood for the trees.

A home is just one of many investments people make in their lives, although to be fair, it is usually the most expensive. But if we could spread our addiction to the housing market to other parts of our personal finances, we'd be in a much better state of financial health.

Now, that's a nation of junkies we could do with.

s.dunn@ independent.co.uk

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For one couple on Monday night, this stagnant market was proving an expensive nightmare. They were mortgaged to the hilt, they wailed, and the price of their two-bedroom flat - bought for £205,000 as an investment early last year - hadn't budged. Their hope of remortgaging within a year with the new-found equity in their property looked wildly over-optimistic.

I do pity anyone whose friends are so dull as to go on about how much their house is worth down the pub.

This couple are an interesting case study. Clearly they can't really afford the place they've bought so their whole plan was to buy and to scrape through by MEWing some of the "inevitable" capital growth. Which is really getting some more debt to cover the payments on the debt you already have...

It's probably a useful lesson in considering all the alternatives and making sure you have a Plan B, whatever you do.

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I do pity anyone whose friends are so dull as to go on about how much their house is worth down the pub.

This couple are an interesting case study. Clearly they can't really afford the place they've bought so their whole plan was to buy and to scrape through by MEWing some of the "inevitable" capital growth. Which is really getting some more debt to cover the payments on the debt you already have...

It's probably a useful lesson in considering all the alternatives and making sure you have a Plan B, whatever you do.

But how does the MEWing of capital growth help? The first thing I thought of when I read this was that the couple had taken up an introductory offer 100% (or near 100%) mortage hoping that after a few years the original purchase price would be less than 85% of the value, and hence they'd be able to go onto a cheaper mortgage.

Billy Shears

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But how does the MEWing of capital growth help? ...

Same way that taking out a new credit card to pay the repayments on your other maxed-out credit cards helps. By providing some cash in your hand so you can deal with the short term problems (while hoping the long term will sort itself out by magic). Probably the mortgage is eating up so much of their income they have bugger-all spending money and MEWing would relieve a bit of pressure.

Edited by Magpie

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little sign of an imminent crash, despite countless predictions from so-called experts.

s.dunn@ independent.co.uk

"so-called experts" he spat, contemptuously...

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I do pity anyone whose friends are so dull as to go on about how much their house is worth down the pub.

This couple are an interesting case study. Clearly they can't really afford the place they've bought so their whole plan was to buy and to scrape through by MEWing some of the "inevitable" capital growth. Which is really getting some more debt to cover the payments on the debt you already have...

It's probably a useful lesson in considering all the alternatives and making sure you have a Plan B, whatever you do.

Yup that really stood out from the article. I have been offered loans a while back from Northern Rock (I think) for 5%. So basically they would be little better off taking a loan out to basically meet their mortgage payments.

Scary stuff!

If they are not moving to a cheaper place then equity is useless but some people just don't get this. I guess it makes moving on to equivilent properties easier because you haven't lost out by sitting on the side lines.

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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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