Brighton

[Miklo]

After 15 years of renting I've finally snapped and started looking at flats in Brighton. Most EAs were obviously very breezy, and there was the usual disdain for my budget (£135K). It was all studio flats at that price, the onebeds start at £140/145K.

When I shoved my crystal ball at them, most took the line that the studio flats and onebeds are most immune from price fluctuations, as they suit both FTBs and downsizers. They are the 'bread and butter', as one put it. They couldn't see any trigger for a downturn. One agent took a different line, saying that everything is overpriced, and the cheaper flats will start levelling off by the end of the year. No-one could see a crash: one argument was that the ratio of wages to mortage payments is not comparable to the late 80s, and also that interest rates will not be allowed to go to 8/9%, as that would screw everybody. I couldn't argue; I don't understand finance. Most of what I think I know has come from this board, and consequently I'm getting very jittery about the whole operation.

I hate this mess. I hate living in a country where everything is a commodity, and the society is a casino. I hate my own envy and desperation. I just want to live somewhere I can paint the door and put up shelves.

[Guest Cletus VanDamme]

IRs at 8% are entirely possible, although 7% is more likely.

If you really, really, must buy now, then it would make sense to pay that extra 10 grand and get the 1 bed. Studios will get absolutely hammered if we have a crash.

BTW, I do empathise with your situation. After 10 years of renting, I finally bought. Fortunately for me, that was in 2000. If I was in your position now I would feel the same. But the rental costs vs house price equation really doesn't stack up at the moment.

Basically, in 2000 my partner and I decided that, if we were going to stay in London, then if we were going to buy, we wanted to get a house. If we couldn't afford a house, we were going to stick to renting. It did mean compromising on location (Zone 5, Enfield). So, if prices were then what they are now, we would have stayed renting.

Edited May 8, 2007 by Cletus VanDamme

[Miklo]

If you really, really, must buy now, then it would make sense to pay that extra 10 grand and get the 1 bed. Studios will get absolutely hammered if we have a crash.

My urgency is for one reason, and not a good one: the mortgage is my mother's, as I can't get one (self-employed < 1 year, no deposit). If we pass on this, she won't get offered again. The alternative for me is to rent in Brighton, save the difference between the rent and the mortgage (Christ, slowly learning), and buy when I've saved a deposit in 3+ years. That assumes a crash. No crash, and I'm screwed.

That is why everyone, apart from the disembodied voices on this board, is telling me to take this opportunity. I feel incredibly edgy.

[Guest Cletus VanDamme]

My urgency is for one reason, and not a good one: the mortgage is my mother's, as I can't get one (self-employed < 1 year, no deposit). If we pass on this, she won't get offered again. The alternative for me is to rent in Brighton, save the difference between the rent and the mortgage (Christ, slowly learning), and buy when I've saved a deposit in 3+ years. That assumes a crash. No crash, and I'm screwed.

That is why everyone, apart from the disembodied voices on this board, is telling me to take this opportunity. I feel incredibly edgy.

Seems to me then it would be better for your mum to remortgage her own place and put the cash in high-interest accounts (e.g. 6.25% national savings bonds) for you to use as a big wedge of deposit in 3 years.

But you're right, it's best not to listen too much to anonymous posters on an Internet forum. So take some time out from this site and do some research and think things through.

[Charlie Don't Surf]

My urgency is for one reason, and not a good one: the mortgage is my mother's, as I can't get one (self-employed < 1 year, no deposit). If we pass on this, she won't get offered again. The alternative for me is to rent in Brighton, save the difference between the rent and the mortgage (Christ, slowly learning), and buy when I've saved a deposit in 3+ years. That assumes a crash. No crash, and I'm screwed.

Buy and you are screwed whatever. Sounds like you would be pretty stretched on your mortgage - so you will spend the rest of your working life in constant fear of not being able to meet your next outrageous mortgage payment as the IT sector slowly sails off to India.

I don't have too much sympathy about you having to buy - my situation is I have a 6 month old son and a missus who occasionally likes to throw a wobbly about buying somewhere. That is pressure.

What are you thinking of buying in Brighton. It is well known as perhaps the most insanely overpriced town. If you really believe you have to buy a house then maybe you should re-assess your life and move somewhere that you can at least buy a squalid little house for that much money.

Anyway, it's your gamble. IMO if you want to be in the 'don't miss the boat camp' I'm afraid it left about 5 years ago!

[Miklo]

I don't have too much sympathy about you having to buy - my situation is I have a 6 month old son and a missus who occasionally likes to throw a wobbly about buying somewhere. That is pressure.

You're quite right, and I hope I didn't sound whiny. But you only deal with the pressures you're under, however weak they seem to others. I'm finding it difficult behave rationally, which is exactly what is feeding this boom.

Brighton's a lovely place. Horses for courses. But overpriced - yes, indeed.

[TeddyBear]

What is your mum's situation? If you can't keep up on the payments, is she still earning an income that might cover them or might she lose her home?

What type of building is it, who is the freeholder (company, someone else in the building?), how long is the lease, what are your service charges likely to be?

[Disillusioned]

My urgency is for one reason, and not a good one: the mortgage is my mother's, as I can't get one (self-employed < 1 year, no deposit). If we pass on this, she won't get offered again.

Why won't she get offered again?

[Miklo]

What is your mum's situation? If you can't keep up on the payments, is she still earning an income that might cover them or might she lose her home?

She has a freelance income, but it is winding down. She could not meet the repayments. If I couldn't keep them up, we'd have to sell the flat, and I'd have to swallow the remaining debt, assuming the house has lost value. No-one I speak to seems to take this scenario seriously.

And when I say "swallow the remaining debt", I don't know if or how that's even possible. My mother could probably liquidate £15-20K, but if the lender called in more than that I presume she would lose the house. I don't treat this blithely, which is why I'm posting. But again, nobody - including my mother - is treating this as a possible scenario.

What type of building is it, who is the freeholder (company, someone else in the building?), how long is the lease, what are your service charges likely to be?

It's a modernish block tacked onto a Victorian terrace. 10 or so flats inside. Lease 109 years. Service charges currently £600/year.

Why won't she get offered again?

In a few weeks she's 65. It's a 12 year mortgage. Our understanding is that she's too old to be offered another mortgage again.

Edited May 8, 2007 by Miklo

[Disillusioned]

Please forgive me for my blunt-ness, but this is my take on your situation:

You want to own your own place and that is understandable. I, and a lot of other people on this site do. To me, it seems that you want to own your own place so much that you are wondering about risking your mothers future and your own future to do so. If you buy, it seems you are going to struggle to pay the mortgage, whatever happens to house prices. This is probably not a good situation to be in.

If you waited a few years you would have lost the opportunity to get the mortgage through your mother, but you would have saved a reasonable deposit and, who knows, your less-than-1-year-old business may be booming doing really well. If property prices are still high, which I very much doubt, then you will be able to afford one on your own or with a lower degree of help from your mother who you say is downsizing a bit. If prices have dropped then you'll be laughing.

[Miklo]

If you waited a few years you would have lost the opportunity to get the mortgage through your mother, but you would have saved a reasonable deposit and, who knows, your less-than-1-year-old business may be booming doing really well. If property prices are still high, which I very much doubt, then you will be able to afford one on your own or with a lower degree of help from your mother who you say is downsizing a bit. If prices have dropped then you'll be laughing.

You're very polite, and the advice is much appreciated. ;-)

I'm really not happy about risking my mother's property - it was very much her idea. I have gone along with it because everyone involved sees it as effectively zero-risk. I'm now staring at the precipice and don't like the view. But like everyone else who turns to this board, I'm surrounded by people who see property as a rising balloon that must be grasped. I want to believe otherwise, not just for myself, but for this whole desperate country.

I really appreciate the feedback. It's giving me the strength to plan an exit from this situation. I'm currently investigating Cletus's advice on retaining the mortgage and investing it in risk-free bonds.

[Guest Cletus VanDamme]

I'm currently investigating Cletus's advice on retaining the mortgage and investing it in risk-free bonds.

Not advice, just a comment. I don't give advice. If you want advice, ask FP.

[Miklo]

I've pulled out of the purchase. I'm going to rent, and save the differential. Thanks to everyone for their comments - they were incredibly helpful.

[Guest Cletus VanDamme]

I've pulled out of the purchase. I'm going to rent, and save the differential. Thanks to everyone for their comments - they were incredibly helpful.

What victory could e'er be won,

If ev'ry one would save but one

Or fight endanger'd to be lost,

Where all resolve to save the most?

[TeddyBear]

Glad you have made a decision. It did sound very risky for your mum. Even if houseprices continue to rise, there's no saying what might happen in you or your mum's individual situation.

It's all about being disciplined now. Save that extra money you would have been putting into a mortgage religously and get yourself that deposit!

[Disillusioned]

I've pulled out of the purchase. I'm going to rent, and save the differential. Thanks to everyone for their comments - they were incredibly helpful.

Good luck with the business.

[Disillusioned]

I've pulled out of the purchase. I'm going to rent, and save the differential. Thanks to everyone for their comments - they were incredibly helpful.

...and, of course, go and protest to Gordon Brown on Thursday: http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

[Disillusioned ftb]

...and, of course, go and protest to Gordon Brown on Thursday: http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

I think you mean Sunday is the protest day in Brighton

Thursday is Interest rate Day

[Goldfinger]

I've pulled out of the purchase. I'm going to rent, and save the differential. Thanks to everyone for their comments - they were incredibly helpful.

I do the same. I save the differential in gold. Don't trust the £ too much. Inflation might eat all the interest you're earning.

Be aware and alert: it is very, very difficult to find investments that only preserve purchasing power (not even mentioning

investments that potentially increase your p.p.).

[Bear Monger]

I do the same. I save the differential in gold. Don't trust the £ too much. Inflation might eat all the interest you're earning.

Be aware and alert: it is very, very difficult to find investments that only preserve purchasing power (not even mentioning

investments that potentially increase your p.p.).

Forgive my financial ineptitude but how will buying gold protect your money from inflation? Gold in the 80's could be bought and sold for about the same price as today - just under $700. But if I bought gold back then for $700 and sold today for the same price, wouldn't my capital have been eroded by inflation i.e. $700 is worth much less today than 25 years ago?

[Dr Doom]

Forgive my financial ineptitude but how will buying gold protect your money from inflation? Gold in the 80's could be bought and sold for about the same price as today - just under $700. But if I bought gold back then for $700 and sold today for the same price, wouldn't my capital have been eroded by inflation i.e. $700 is worth much less today than 25 years ago?

Yes that is true. My view is that the 700 price today is really a false one,

a result of the market rigging that central banks and market makers are involved with.

I'm a great believer in markets, and I think the rig here will eventually fail

and the USD/GBP denominated gold price will go through the roof.

At the same time the purchasing power of these fiat currencies will fall through

the floor, as it did in Weimar Germany, Argentina, Zimbabwe, etc, etc.