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KentishBear

A View From The Early 30s Herd

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Hi, I've been lurking for a while and following avidly the thoughts of the likes of DrBubb and Dstars and the various other excellent posters here. I thought I'd post my thoughts on my situation and that of my peers for comment - we're early 30-somethings in NW england.

I'd say my property situation was pretty strong - i bought a 1994 2 bed mid-terrace mews in spring 01 for 80k with a 72k mortgage. It is now worth about 140k at current prices, my mortgage is 62k. At the moment my mortgage is £440 a month, renting a similar house would be £650 or so so I think I am doing OK. Job situ looks pretty solid (£1900 p/m after tax, pension and SAYE) - I'm 30 and single and I work for a big pharma in the northwest and even if I got made redundant their packages are v generous.

I have to confess to MEW'ing 4 years ago to buy a nice car (Audi S3) and go on a couple of expensive holidays but I have now paid that off and am actually planning to downsize the car to something more sensible on environmental and economic grounds. This downsizing plus a 25k inheritance from my gran will give me 30k capital which I intend to use to pay off half my mortgage in the spring when my current fixed rate deal expires. I'm not too worried about interest rates really because my mortgage will be so small and I'm intending to overpay on the mortgage for the first time with the aim of paying it off in 3 or 4 years, economic conditions allowing - this might be hard if inflation goes through the roof tho.

I have lots of friends in the area who are recently married and of a similar age and this year they have rushed headlong to upsize from similar houses to mine to large family homes. The rush was to avoid HIPS which i believe has seriously distorted the market this year and probably put off a crash. I have always thought that prices had become excessively high and often tried to counter the 'high prices are good, I've made x,000 pounds on my house' mantra with the argument that you aren't any better off if the more expensive family house you want to buy next has also gone up in value. But with the interest amongst my friends I started to look into the subject and stumbled across this site.

Well to be honest I now feel like I've been incredibly lucky - OK so I was pretty conservative in some of my choices (like always going for fixed rates in case of interest rate rises) but I never really gave serious consideration to the idea of a crash and didnt really think that there was anything amiss in what my friends have been doing. I've been guilty of not making hay while the sun shone during this boom phase and it's only down to luck and an inheritance that I'll be in a strong position. From all I have read about bubbles, CDOs, credit crunches, cheap money, and peak oil it seems like it is a matter of when rather than if things go awry. The arguments seem very strong and whilst I am not sure I believe the most doom-laden, it has certainly encouraged me to re-evaluate some of my decisions.

Is STR an option? I actually quite like my house and can't really be doing with the hassle of moving, yet it could be a good way of clearing the mortgage and cashing in on the bubble whilst there's an opportunity (assuming the crash isn't already underway). But do I really want to be living in the property of a soon-to-be-screwed BTL-er?

Getting rid of the expensive, fuel hungry car and replacing it by something small and fuel efficient seems even more sensible. I was doing this for environmental rather than economic reasons but increasing fuel prices and other inflation also make it a good option. I want to do this sooner rather than later because tightening spending could well also hurt the market for expensive second-hand cars... (as per the boats and horses country life article)

I currently pay into a company pension which is not final salary but rather lets you pay variable amounts in and choose mixes of investment funds - cash, bonds, gilts, euro stocks, uk stocks, asia stocks... Given the possibility of an economic downturn of varying scales I'm wondering whether it's really worth paying the full amount into this. I had been doing so for tax break reasons, but perhaps payiing off the mortgage quicker might be a better idea. I've already moved my fund to a more defensive position - only a third into stocks/shares with two thirds in a mix of cash, bonds, gilts.

My friends I'm more worried about, I have mentioned HPC a bit to general incredulity although have met with some moderate success, especially on the topic of BTL and what that might do to the market. I haven't gone on too much though because they've taken the plunge now and it's too late to go back. There is a plus side in that because they were already home owners already they had decent amounts of equity to put in, so they haven't taken out any really stupid mortgages. Also, they did what they did for sensible reasons - to upsize to start a family. But an HPC would still be pretty messy for them....

So anyway, thanks so much for the insight and keep on debating, and if anyone has any comments on my thoughts above then it would be great to hear them.

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