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Owning A Home Is Like A Knighthood

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If your house belongs to you, why do you pay 5% of your salary to the Local Council and 30% to the building society?

You rationalise by saying that the house will belong to you in the end. If you want to own it then why do you MEW, or have an interest only mortagage or a 40 year mortgage?

You are hoping that inflation will eat away at the debt. In a low inflation economy however a big debt becomes a millstone round your neck, not a shrinking liability. If high inflation does return, the interest rates will add £5k a year to your mortgage bill. You lose either way.

The worst news is that disposable incomes are declining. People are trapped between rising taxes and global competition. If you ask for too much salary, your job gets outsourced.

Home owners' desire to call their homes their own is being exploited mercilessly. Local Councils have discovered that people don't complain about massive council taxes whilst the value of their homes are rising. The lenders have also disovered that property is the perfect bait to get people saddled with huge debts.

When interest rates start rising, you will all be poor and many of you will lose your homes.

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Even if you manage to pay your house off there are always going to be council taxes and when you are old and need healthcare you will have to sell your property to pay the bills.

I have an aunt who is "broke." She is about 70 and lives in a nice 3 bed semi on a farm and pays the landlord farmer 75 pounds a month rent with the LA picking up the rest. No council tax as she is on a pension and has no assetts to speak of. She has enough to live on and no worries. The house would be worth about 250k if it were on the market.

Had she scrimped and saved to pay off the same home as she is living in she would be no better off other than to be in the position to say "I own all that I survey." Perhaps home "ownership" is overrated in a society where the government is the ultimate landlord and everyone else is a renter to one degree or another.

I have "owned" my own gaffs since 1977. I have been renting for the last 3 years and have enjoyed a much higher standard of living with a lot of cash in the bank (formerly in the stock market and got out just in time!). I pay 750 a month for renting a house worth about 350k and feel "wealthy" because I am debt free.

Is ownership all that it is cracked up to be? I am seriously begionning to wonder. 3 years out of my own home and I am beginning to see things in a different light. Especially as I watch prices drop like a stone all around me. while my investments climb upward relentlessly and risk free.

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well i used to hate the housing market. i still do thinking about it, but recently because of the fairly land prices ive discovered - LIFE.!!!

the free ability to go to where ever, when ever. no need for me to pay off a huge debt to the bank. no watching the IR with fear for me. no need for overtime and seconds jobs here. no, i just go to cornwall 4 times a year. lakes about 10 times. europe 1 or 2 times. my flat has quality furniture. i have a positive bank balance and a saving lump sum in euros. a brand new vehicle. if i see something in a shop. if i want it - i buy it.

household bills are small compared to my weekly savings. i have NO FINANCIAL stress.

all i dont have is a terrace house and yard. no parking. worries.

if it wasnt for the recent HPI perhaps i would have been chained to a mortgage already. for 25 years.

im begining to like carefree renting. i rent from a HA. its a sweet deal. got a garden. parking and low secure rent.

would i want to change ? these days, maybe i dont.

id rather be spending the cash myself. not allowing some smug boomer to be blowing it for me.

you keep the old bricks and chains. ill keep the freedom.

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Guest mattsta1964

well i used to hate the housing market. i still do thinking about it, but recently because of the fairly land prices ive discovered - LIFE.!!!

the free ability to go to where ever, when ever. no need for me to pay off a huge debt to the bank. no watching the IR with fear for me. no need for overtime and seconds jobs here. no, i just go to cornwall 4 times a year. lakes about 10 times. europe 1 or 2 times. my flat has quality furniture. i have a positive bank balance and a saving lump sum in euros. a brand new vehicle. if i see something in a shop. if i want it - i buy it.

household bills are small compared to my weekly savings. i have NO FINANCIAL stress.

all i dont have is a terrace house and yard. no parking. worries.

if it wasnt for the recent HPI perhaps i would have been chained to a mortgage already. for 25 years.

im begining to like carefree renting. i rent from a HA. its a sweet deal. got a garden. parking and low secure rent.

would i want to change ? these days, maybe i dont.

id rather be spending the cash myself. not allowing some smug boomer to be blowing it for me.

you keep the old bricks and chains. ill keep the freedom.

There's a lot to be said for being a tenant now. Property isn't gonna pay out like it did for our parents generation

The very best thing of all is that the money you pay in rent is spent back into the economy as debt free money rather than paying interest on a mortgage which sucks money out of the economy or is re-lent back into the economy at interest. If only people could grasp this concept! We would all enjoy a much better standard of living.

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There's a lot to be said for being a tenant now. Property isn't gonna pay out like it did for our parents generation

The very best thing of all is that the money you pay in rent is spent back into the economy as debt free money rather than paying interest on a mortgage which sucks money out of the economy or is re-lent back into the economy at interest. If only people could grasp this concept! We would all enjoy a much better standard of living.

May be why Germans are better off than we are. There are more renters.

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I am a STR who is finding it much cheaper to rent even though I would be unmortgaged if I bought.I presently pay £170 pcm for a room in a shared house.A flat which has recently come to my attention would cost £700 per year ,service charge;£1000 per year,council tax;£1000 per year say on internal refurbishments;£600 per year,heat and light and so on.I would also lose interest on the 160k purchase price,about £6000 per year.In other words it makes no financial sense to buy.However,I am a property junky;I have been stessing myself out since 1985 buying and selling houses.I know sooner or later I will be sucked back in.If it be the aforementioned 160K flat I will at least have 120k left in cash,ie. I will have become a down sizer.

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Guest mattsta1964

May be why Germans are better off than we are. There are more renters.

Absolutely.

Just imagine how much money would be pumped into the economy if the majority rented. There would be much more debt free money in the economy, people would spend more freely, the win lose house price lottery would be history. now, apart from the rich, the only winners in the UK property market are the lenders.

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i have to stress you HAVE to rent from a local authority or association.

if you rent from a BTLr then your not saving anything.

before i was offered my current flat all the other options were just BTLs with ramped up rents. just as bad/or worse than buying.

you have to wait for the right rental. im paying only £210pcm for a 1 bed flat in nice area with small garden. better than a two bed terrace. same sized BTL rental was £450.....with no long term security. i was on the list for almost 2 years. but its been worth it. i did up the garden. completely redocrated. carpeted. knowing that it was as good as mine own. cant be booted out. cant ramp up rents. HAPPY...!!

so the monthly £240 goes right into euros. along with my former house deposit for either a time when prices return to 3.5x salary or i leave for spain with the savings in 15 years or so and join the boomers who are there with YOUR money.

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i have to stress you HAVE to rent from a local authority or association.

if you rent from a BTLr then your not saving anything.

before i was offered my current flat all the other options were just BTLs with ramped up rents. just as bad/or worse than buying.

you have to wait for the right rental. im paying only £210pcm for a 1 bed flat in nice area with small garden. better than a two bed terrace. same sized BTL rental was £450.....with no long term security. i was on the list for almost 2 years. but its been worth it. i did up the garden. completely redocrated. carpeted. knowing that it was as good as mine own. cant be booted out. cant ramp up rents. HAPPY...!!

so the monthly £240 goes right into euros. along with my former house deposit for either a time when prices return to 3.5x salary or i leave for spain with the savings in 15 years or so and join the boomers who are there with YOUR money.

Boomers have suffered under Gordon's Miracle Economy also:

http://www.thisismoney.co.uk/mortgages/art...mp;in_page_id=8

Baby boomers priced out
Simon Lambert, This is Money
1 July 2006
ALMOST a quarter of the baby boom generation do not own their own home with many of them unable to afford to buy.

Those who have MEWed to buy in Spain have no doubt added to their debt pile just like the rest. The only ones who seem to be debt free as a large group are the WW2 generation born in the 30-early 50's. Boomers much like the Xers are a spend and borrow generation. The Miracle Economy has not created any wealth just the illusion of it as determined by what the market will pay for a house. Deduct the debt and there is not much there.

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i know, but i just love skinny dipping and boomer bashing.....

you'll see me amongst the silverbacked spanish 60 somethings. sailing by to southern italy thinking of the grey town centre of modern chorley. contemplating a dish of frshly caught tuna steaks within some rocky beach bay. anchored in clear med water. tipping the rubbish into the sea when no ones looking. listening to a wind up radio.

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Just imagine how much money would be pumped into the economy if the majority rented. There would be much more debt free money in the economy, people would spend more freely, the win lose house price lottery would be history.

If you rent a BTL place and the rent is used to pay the mortgage whats the difference. The money still ends up going to the bank.

In europe lots of people rent buildings owned by local governments so the money gets recycled. That wont happen in the UK.

Edited by DONT PANIC !!! DONT PANIC !!!

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This should be retitled "The Capitulation Thread"

Do I sense a whiff of unease in your post? The wisdom of renting today's overpriced market can hardly be questioned. Mortgage interest is money down the drain. It costs a lot more to service a mortgage (even before yuo start paying off the capital) than pay rent.

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Guest mattsta1964

If you rent a BTL place and the rent is used to pay the mortgage whats the difference. The money still ends up going to the bank.

In europe lots of people rent buildings owned by local governments so the money gets recycled. That wont happen in the UK.

That is certainly true in todays market but if we had adopted a sensible housing strategy 25 years ago, affordable state housing, much higher taxes on second homes, etc, we wouldn't be in the right royal mess we are in now

It will take decades to put right the damage that has been done. The level of debt in the UK is eyewatering.

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That is certainly true in todays market but if we had adopted a sensible housing strategy 25 years ago, affordable state housing, much higher taxes on second homes, etc, we wouldn't be in the right royal mess we are in now

It will take decades to put right the damage that has been done. The level of debt in the UK is eyewatering.

1.2 trillion pounds of it and growing by billions every day. The US are at 11.1 trillion $ which is less than us after factoring in the nearly 5 X population size.

When you think about it, only debt could inflate a house from 150k to 450k in 10 years. Its not "value" as Warren Buffett would say, but price with a serious disconnect from the fundamentals. Most things have come down in price, in relative terms, over the same period leaving house prices exceptionally high measured against everything else, as Mervyn King recently pointed out. The other great financial mind of recent times, Alan Greenspan, described irrationally exhuberant house prices as "froth markets" that will experience some pain as they adjust to the fundamentals.

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Do I sense a whiff of unease in your post? The wisdom of renting today's overpriced market can hardly be questioned. Mortgage interest is money down the drain. It costs a lot more to service a mortgage (even before yuo start paying off the capital) than pay rent.

No unease here, dog.

However, I do detect a faint whiff of wishful thinking in your post...

When interest rates start rising, you will all be poor and many of you will lose your homes.
The wisdom of renting today's overpriced market can hardly be questioned. Mortgage interest is money down the drain. It costs a lot more to service a mortgage (even before yuo start paying off the capital) than pay rent.

In some cases, yes. But have you factored in the effect of rising inflation?

If you buy today at fixed rate you may well be better off in a few years even if house prices fall because interest rates will have risen. In other words, your monthly mortgage if you buy in a few years' time could be HIGHER even though the house cost less. (because of the higher interest rate)

If you continue to rent, then your rent could go up each year with wage inflation (WI currently running at 4% pa)

If inflation does take off, then wages and rents could go up even faster as the currency devalues.

Also, if you stretch to a repayment mortgage then the amount of 'dead money' interest you pay each month gradually goes down. In a few years this should fall below the 'dead money' you pay each month in rent.

IMO unless you think house prices are going to plummet by over 20% (nominally in £££) then renting is not going to provide any long term benefit (to your wallet)

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Guest mattsta1964

1.2 trillion pounds of it and growing by billions every day. The US are at 11.1 trillion $ which is less than us after factoring in the nearly 5 X population size.

When you think about it, only debt could inflate a house from 150k to 450k in 10 years. Its not "value" as Warren Buffett would say, but price with a serious disconnect from the fundamentals. Most things have come down in price, in relative terms, over the same period leaving house prices exceptionally high measured against everything else, as Mervyn King recently pointed out. The other great financial mind of recent times, Alan Greenspan, described irrationally exhuberant house prices as "froth markets" that will experience some pain as they adjust to the fundamentals.

I read the link to the article suggesting the USA is technically bankrupt. As our per-capita debt is even greater in the UK, does that mean UK PLC is approaching bankruptcy too?

What level does our national debt have to increase to before we can't meet the interest repayments? Food for though isn't it? Especially if interest rates go up to 7-8%. I wonder what state we'd be in if they shot up to 15% like they did under Lamont. Now that would be interesting!!!!!!

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Also, if you stretch to a repayment mortgage then the amount of 'dead money' interest you pay each month gradually goes down. In a few years this should fall below the 'dead money' you pay each month in rent.

The age-old HPC argument of high house price (low interest rate) vs. low high price (higher interest rate).

Very good points WaP, but you have to look at the actual capital amount of the loan. In the current situation this is clearly extremely high. High capital loans in a low wage inflation environment are millstones around the necks of borrowers.

With a low capital loan it is much much easier to pay off a larger %ge of the capital: the large amount of interest payable therefore shrinks proportionately. The larger your deposit, the much better off you will be.

Savers & STR's rewarded! ;) (but don't tell Bruno!)

IMPO it's pretty clear which direction interest rates are headed so I'm going to site back, wait patiently and see what happens...

Edited by Badlad1967

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The age-old HPC argument of high house price (low interest rate) vs. low high price (higher interest rate).

Very good points WaP, but you have to look at the actual capital amount of the loan. In the current situation this is clearly extremely high. High capital loans in a low wage inflation environment are millstones around the necks of borrowers.

With a low capital loan it is much much easier to pay off a larger %ge of the capital: the large amount of interest payable therefore shrinks proportionately. The larger your deposit, the much better off you will be.

Savers & STR's rewarded! ;) (but don't tell Bruno!)

IMPO it's pretty clear which direction interest rates are headed so I'm going to site back, wait patiently and see what happens...

Sure, anyone would rather owe £1000 at a monster rate of interest compared to £200k at a tiny interest rate. Simply because they could pay off the loan with an 'extra' payment of £1000.

But the buying/renting choice is a little less straightforward as the goalposts keep moving (IRs, HPI, wages, rents, inflation)

IMO there won't be much in it (FTB vs rent) over the next few years leading up to the election (assuming FTB goes fixed rate)

If inflation does start to ramp up then the renter/saver will lose out. If rates go up with a big step then the FTB is protected by the fixed rate loan but faces negative equity if he loses his job etc.

It depends how badly you want your own house.

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Sure, anyone would rather owe £1000 at a monster rate of interest compared to £200k at a tiny interest rate. Simply because they could pay off the loan with an 'extra' payment of £1000.

But the buying/renting choice is a little less straightforward as the goalposts keep moving (IRs, HPI, wages, rents, inflation)

IMO there won't be much in it (FTB vs rent) over the next few years leading up to the election (assuming FTB goes fixed rate)

If inflation does start to ramp up then the renter/saver will lose out. If rates go up with a big step then the FTB is protected by the fixed rate loan but faces negative equity if he loses his job etc.

It depends how badly you want your own house.

OK. Hmmm....

Don't agree that the buying/ renting is less straightforward to be honest. At the moment, an FTB (or any other buyer for that matter....) is going to be saddled with a large debt. At the moment interest rates are low in the UK, but have been and probably will continue to, move up. This large capital debt is not going to go away unless wage inflation takes off - IMPO this is extremely unlikely as employers will outsource and offshore (as is happening at my company albeit very limited).

A fixed rate mortgage will not protect the mortgagee for the length of the mortgage. I haven't heard of lenders offering a "fix it for life" arrangement, unlike in the US. Nevertheless, this arrangement hasn't stopped house prices in the US from slipping as a house is worth only what someone can/ will pay for it. So the person buying the house is going to be in a different position to the current owner - they will have the large capital debt with a higher interest rate. Not so good! :(

My main point being: saddling yourself with a large debt at the moment, with the global trend in interest rates going up and HPI iffy at best, is really not the best financial move someone could make. I don't share your confidence that Gordon or the BoE will be able to keep interest rates artificially low in the run up to an election. In any case, the point is moot as if lenders think that the risks are increasing, they will increase their lending rates regardless of what the BoE base rate is. There is evidence of this happening already.

Question: what does negative equity have to do with the mortgagee losing their job? I don't understand how the two are linked.

Wanting my own house? Yep - I sure will buy in again at the right time in the cycle. But no, I'm not so obsessed with property so much that I have to give up living for "owning" some bricks and mortar. Locally landlords have been decreasing rents for a reliable tenant so I have no reason to sacrifice my financial freedom to buy house.

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OK. Hmmm....

Don't agree that the buying/ renting is less straightforward to be honest. At the moment, an FTB (or any other buyer for that matter....) is going to be saddled with a large debt. At the moment interest rates are low in the UK, but have been and probably will continue to, move up. This large capital debt is not going to go away unless wage inflation takes off - IMPO this is extremely unlikely as employers will outsource and offshore (as is happening at my company albeit very limited).

A fixed rate mortgage will not protect the mortgagee for the length of the mortgage. I haven't heard of lenders offering a "fix it for life" arrangement, unlike in the US. Nevertheless, this arrangement hasn't stopped house prices in the US from slipping as a house is worth only what someone can/ will pay for it. So the person buying the house is going to be in a different position to the current owner - they will have the large capital debt with a higher interest rate. Not so good! :(

My main point being: saddling yourself with a large debt at the moment, with the global trend in interest rates going up and HPI iffy at best, is really not the best financial move someone could make. I don't share your confidence that Gordon or the BoE will be able to keep interest rates artificially low in the run up to an election. In any case, the point is moot as if lenders think that the risks are increasing, they will increase their lending rates regardless of what the BoE base rate is. There is evidence of this happening already.

Question: what does negative equity have to do with the mortgagee losing their job? I don't understand how the two are linked.

If the homebuyer buys today and loses his/her job in a few years (and interest rates go up and HPI goes negative) they may well have to sell up and face negative equity.

A fixed rate mortgage will not protect the mortgagee for the length of the mortgage. I haven't heard of lenders offering a "fix it for life" arrangement, unlike in the US.

You can get (or you could a month or two ago) a 10yr fixed rate at 4.7%. It is extremely unlikely that the homeowner will get hurt by higher rates in 10 years' time (assuming repayment mortgage) due to 10yrs' wage inflation (plus promotions) coupled with the fact that the debt will have shrunk by 25% due to 10yrs' capital repayments. (you only pay interest on what is left of the loan)

Don't agree that the buying/ renting is less straightforward to be honest. At the moment, an FTB (or any other buyer for that matter....) is going to be saddled with a large debt. At the moment interest rates are low in the UK, but have been and probably will continue to, move up. This large capital debt is not going to go away unless wage inflation takes off - IMPO this is extremely unlikely as employers will outsource and offshore (as is happening at my company albeit very limited).

Saddled with a large debt in terms of £££. Who knows how much 'value' the £ will have in 5 years from now. That's why it's not straightforward.

With inflation the debt will shrink in value. Borrowing today at 4.7% fixed for 5 or 10 years could (and I emphasise 'could') be the best strategy. If the rate of inflation goes up then so will wages (and interest rates)

This is what 'usually' happens (based on the last few decades)

Edited by Without_a_Paddle

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If you rent a BTL place and the rent is used to pay the mortgage whats the difference. The money still ends up going to the bank.

In europe lots of people rent buildings owned by local governments so the money gets recycled. That wont happen in the UK.

Yep, that ended here in the 80's when thatcher decided it was a good idea to allow all the council houses to be bought privately - another example of short term political opportunism leading to high social costs for future generations.

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If your house belongs to you, why do you pay 5% of your salary to the Local Council and 30% to the building society?

You rationalise by saying that the house will belong to you in the end. If you want to own it then why do you MEW, or have an interest only mortagage or a 40 year mortgage?

You are hoping that inflation will eat away at the debt. In a low inflation economy however a big debt becomes a millstone round your neck, not a shrinking liability. If high inflation does return, the interest rates will add £5k a year to your mortgage bill. You lose either way.

The worst news is that disposable incomes are declining. People are trapped between rising taxes and global competition. If you ask for too much salary, your job gets outsourced.

Home owners' desire to call their homes their own is being exploited mercilessly. Local Councils have discovered that people don't complain about massive council taxes whilst the value of their homes are rising. The lenders have also disovered that property is the perfect bait to get people saddled with huge debts.

When interest rates start rising, you will all be poor and many of you will lose your homes.

This is just another of those 'at this point in time' opinions!

It's openly noted that rents have risen little in the last few years, while house prices have rocketed.

There are folk who now are stating they live in a £350k house for £750 pcm.

There were folk living in a £175k house paying £750 pcm just a few years ago, so decided to buy as the cost between rent & mortgage was of little difference, leading to terms such as 'rent is dead money', as the cost of renting exceeded the cost of buying & maintenance combined, without the long term benefit of home ownership.

Right now at this point in time it makes more short term sense to rent rather than to buy as rents are low but house price is extremely high.

In a few years again this situation may reverse.

If you were saving great deals of money by renting instead of buying, unless you intend to blow it all on rich living, you still need a good investment vehicle & there is really no guarantee of any investment paying great dividends...........

But generally house prices rise, so do rents (historical facts, for all the critics) & unless you are a total pillock with your money you should be in a better financial position 20 years down the line by buying at a reasonable cost than to have been renting the full term.

Those either canny enough or lucky enough to buy at 'trough' prices should be comfortable, the unfortunate who buy at 'peak' prices will most likely suffer more financially.

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Boomers have suffered under Gordon's Miracle Economy also:

http://www.thisismoney.co.uk/mortgages/art...mp;in_page_id=8

Baby boomers priced out
Simon Lambert, This is Money
1 July 2006
ALMOST a quarter of the baby boom generation do not own their own home with many of them unable to afford to buy.

Those who have MEWed to buy in Spain have no doubt added to their debt pile just like the rest. The only ones who seem to be debt free as a large group are the WW2 generation born in the 30-early 50's. Boomers much like the Xers are a spend and borrow generation. The Miracle Economy has not created any wealth just the illusion of it as determined by what the market will pay for a house. Deduct the debt and there is not much there.

"Meanwhile, one in ten first-time buyers were looking at going above the £250,000 threshold for 3% stamp duty and incurring at least a £7,500 cost."

Do they think they're playing monopoly? 7,500 is a lot of dough! Maybe they're bankers. <_<

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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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