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The Times: On The House? Don’t Fall For It

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http://business.timesonline.co.uk/article/...2259093,00.html

The Times

July 08, 2006

On the house? Don’t fall for it
ANTONIA SENIOR PERSONAL FINANCE EDITOR
When did houses stop being our homes and become the panacea for all financial ills? No longer is it enough to view your home as a place to eat, sleep and live. Now it is a pension, a means of cheap credit, a sort of personal bank, which just happens to have beds in it.
Figures released this week by the Bank of England show that we are again turning to our houses for financial succour. We withdrew £12.51 billion from the value of our homes in the first three months of this year, continuing an upward trend in equity release that started at the end of last year.
Got a credit card bill you can’t pay? Fancy that new car but can’t be bothered to save for it? No problem, just whack the bill on the house. Take out a bigger mortgage and your bank gives you a big wad of cash, almost as if it’s free. But it’s not.
Instead, a short-term debt means that you pay back your loan quickly. Your monthly outgoings may take a hit, but over the course of the loan, less of your cash finds its way into the bank’s coffers. For example, borrow £10,000 from the bank over five years and you will pay back £11,449, if you borrow at 5.6 per cent — currently the best rate on the market. But put £10,000 on your mortgage at 5 per cent over 25 years and it will cost £17,538. It’s a comparison only a banker could love.
Over five years, with a fixed rate, you know how much that £10,000 will cost you. But over the lifetime of a mortgage, anything could happen. This week the Bank of England held rates steady for the eleventh consecutive month, but who knows how a future Monetary Policy Committee may react to tomorrow’s economic climate.
The Bank of England attributed the rise in equity withdrawal to a renewed consumer confidence in the housing market. Lulled into the notion that property prices can do nothing but rise, we are too quick to strip any hint of a profit out of our homes. But with rising inflationary pressures, there is a danger that interest rates will move upwards.
Low interest rates are underpinning the resilience of an overheated property market. Soaring mortgage costs and falling house prices could arrive in tandem. Homeowners may yet regret their rush to remortgage
.

The bottom line says it all. Not long now. :lol:

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The Bank of England attributed the rise in equity withdrawal to a renewed consumer confidence in the housing market.

I attribute it to a group of people who have no other idea how to grow the GDP of the country other than to drop rates in order to encourage borrow and spend.

It will end in tears.

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I read in a BBC article yesterday that MEW totalled £251 Billion since the start of the decade, imagine how that consumption will be paid for if houseprices return to 2000 levels! I have also noticed the first signs of the way things are heading from following the stock market (which the housing market lags by 6 months); Private storage companies like Big Yellow and IVA companies such as Debtmatters and Debtfree Direct are still close to their highs in marked contrast to most stocks. This suggests two things, firstly the smart money is moving out of property as people store personal possessions, secondly more and more people are succumbing to a mountain of debt.

Aside from that there's nothing much to worry about. :ph34r:

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I read in a BBC article yesterday that MEW totalled £251 Billion since the start of the decade, imagine how that consumption will be paid for if houseprices return to 2000 levels!

well it aways had to be paid back somehow.

only home owners thought they could simply pass on these debts to the next buyers.

though they went too far, 200% too far and they broke the back of the ftb.

and by the look of it, broke the uk economy.

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I would have thought we'd hear the credit card companies moaning a little more.

If people are taking their credit card debt and moving it on to a mortgage, at the same time while people are still looking for 0% deals, and the companies are being told that they can't rip someone to the tune of £35 per late payment any more, they're surely losing out.

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amazing how many of these articles are appearing from the same sources that only a few months ago wee still telling us we should be jumping on that property train

i have absolutely no doubt that STR was the correct thing to have done - my problem in the future will be finding a place to buy that i like as much as the one i'm renting!

Edited by the end is nigh

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its so true about people looking at housing as an investment vehicle when its not. its just a place to live.

other countries have commented on 'what is british peoples fantasy with ownership'. renting is not such a bad idea after all, for those that are more flexible and not so stuck in their ways. the cheaper short term costs allow you to put cash in other investments and live a better standard of living TODAY. why on earth put all your energy into paying something that will take years to payout ? its just bonkers and shows how mental attitudes towards property could just turn at the flick of a switch; just like it did during the last crash.

Edited by debtfree

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For a whole lotta folk, the ultimate price is immaterial.

I want it!

How much do I have to pay monthly?

That's OK I can afford that!

This is all that counts.

With interest rates low & if they remain low for a substantial period, this could affect the whole consumer culture & everything in future will be bought on credit & never with saved money.

There appear to be subtle shifts towards this end.

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http://business.timesonline.co.uk/article/...2259093,00.html

The Times

July 08, 2006

On the house? Don’t fall for it
ANTONIA SENIOR PERSONAL FINANCE EDITOR
When did houses stop being our homes and become the panacea for all financial ills? No longer is it enough to view your home as a place to eat, sleep and live. Now it is a pension, a means of cheap credit, a sort of personal bank, which just happens to have beds in it.
Figures released this week by the Bank of England show that we are again turning to our houses for financial succour. We withdrew £12.51 billion from the value of our homes in the first three months of this year, continuing an upward trend in equity release that started at the end of last year.
Got a credit card bill you can’t pay? Fancy that new car but can’t be bothered to save for it? No problem, just whack the bill on the house. Take out a bigger mortgage and your bank gives you a big wad of cash, almost as if it’s free. But it’s not.
Instead, a short-term debt means that you pay back your loan quickly. Your monthly outgoings may take a hit, but over the course of the loan, less of your cash finds its way into the bank’s coffers. For example, borrow £10,000 from the bank over five years and you will pay back £11,449, if you borrow at 5.6 per cent — currently the best rate on the market. But put £10,000 on your mortgage at 5 per cent over 25 years and it will cost £17,538. It’s a comparison only a banker could love.
Over five years, with a fixed rate, you know how much that £10,000 will cost you. But over the lifetime of a mortgage, anything could happen. This week the Bank of England held rates steady for the eleventh consecutive month, but who knows how a future Monetary Policy Committee may react to tomorrow’s economic climate.
The Bank of England attributed the rise in equity withdrawal to a renewed consumer confidence in the housing market. Lulled into the notion that property prices can do nothing but rise, we are too quick to strip any hint of a profit out of our homes. But with rising inflationary pressures, there is a danger that interest rates will move upwards.
Low interest rates are underpinning the resilience of an overheated property market. Soaring mortgage costs and falling house prices could arrive in tandem. Homeowners may yet regret their rush to remortgage
.

The bottom line says it all. Not long now. :lol:

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i recieved a letter in the post today from Capital One saying i could borrow up to £100,000 with a Homeowner Loan..thing is i live in a rented flat...DUH!

i just can't believe how horrible this letter is which uses phrases such as 'your invitation code'!

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amazing how many of these articles are appearing from the same sources that only a few months ago wee still telling us we should be jumping on that property train

i have absolutely no doubt that STR was the correct thing to have done - my problem in the future will be finding a place to buy that i like as much as the one i'm renting!

I know what you mean! We are renting in real luxury at only 750 pm. No worries about upkeep, repairs and knowing we are not tied. What is best though is watching house prices fall all around us while our house sale proceeds sit in the bank gathering 5.04% interest. Add on the 8.2% rate of decline in house prices around here and that is a return of 13%--most of which is tax free.

I also agree that the press are turning negative with more horror stories about declining prices than ever. Even the BBC reported on Radio 2 this morning how BTL was ruining people's hope of buying houses and that this was not a good thing. The crowd are turning against the speculators it seems. Its a signal to get out if you can.

Its hard to come up with a single word to describe what it feels like to be in cash when the market is falling all around you. "Groovy" comes to mind. :)

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  • 302 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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