Saturday, April 7, 2007

MEW your way to financial freedom!

Cash in your bricks and mortar

...Or is that eternal slavery? "This country is facing a pensions debacle. Final salary pension schemes continue to close, the performance of money purchase schemes is insufficient and the Government cannot keep supporting an ageing population. However, homeowners do have considerable property wealth and can use this to supplement their retirement income." That's alright then...

Posted by pendulum @ 08:27 AM (445 views)
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6 thoughts on “MEW your way to financial freedom!

  • Oh, I get it,……..I think……we just give up on the old idea of pensions and when I get old, a younger person will buy my house watch it grow 10 times faster than his salary. Then when he gets old, a younger person than him will buy the house and again watch it grow at 10 times salary inflation. …………So, as long as house prices always keep rising, we’ll all be all right!

    Hmmm……..but, won’t the larger mortgages that the younger people have to pay require ever larger monthly payments and won’t that eventually absorb all their monthly salaries?

    – Not if we continuously lengthen the period of the mortgage – pay the same amount, just over a longer period!

    – like 2 lifetimes instead of 1?

    (Are you thinking what I’m thinking?)

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  • Retired Banker says:

    Struggling to repay their mortgage and running-up credit card debt!.

    Mrs Harmsworth is stated to be 73 years old and he appears to be about the same age.

    Why do a couple this age still have an outstanding mortgage?. They have obviously bought a better property than they could
    really afford not that many years ago ( they have both had previous marriages ).

    It is not only young people that are financially irresponsible and will not live within their means.

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  • Prices are what people are willing to pay. If people are willing to rent from the bank for 50 year mortgages, it will happen. I think the UK is getting like Los Angeles. There are those with and those without. How long until companies in the cities refuse job applications from non-home owners because of their increased chance of leaving the job, or stealing, due to living expenses? Will we be seen as lesser people in a much wider scope?

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  • Are houses being talked up like some sort of glorious pyramid selling scheme or what, and we all know what eventually happens to pyramid schemes!

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  • “the performance of money purchase schemes is insufficient”

    Why would it be any worse than a final salary scheme? If the company is paying the same amount in, the pension provider has the same funds available and the same range of investment options available as a final salary scheme. Having had both, I think that I am getting a better deal now with money purchase. My old employer was on a permanent pensions holiday for the final salary scheme, whereas my new employer pays in a fixed amount and the funds are held by a large financial institution not a small employer, which seems much more secure.

    People might be more encouraged to invest in stocks and shares rather than property if the warnings about “You may get back less that what you invested” were less prominent. These warnings are not the same as the warnings on cigarettes – which really are bad – the consensus is that although stocks and shares may indeed go down, you should still buy them, because the overall expectation is that they should go up (notwithstanding S2R1 and 33 year cycles!). So I think these sorts of comments – similar to a recent TV documentary which compared final salary to a Rolls Royce and money purchase to Ford Escort – are damaging to people financially by pandering to the current phobia about shares and affection for property.

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  • Paolo,
    I understand your point but, on the contrary, I would recommend warning also home buyers “You may get back less that what you invested” since homes are now investment vehicles and not just a place where to live. The nice side of it is (from my point of view) is that speculation is at the same time the blessing and the curse of the UK housing market, and that naive speculators will take this house of cards down when HPI fails to meet their expectations (… just a few months, in my opinion)

    Scott,
    the point of Retired Banker is how can be possible for two 73-yo retired individuals to repay (yes, repay!!…) the interests plus principal. Two possibilities… a) the bank that gave them the mortgage is irresponsible, b) there is no expectation for them to repay the principal, and the house will either be sold by them or repossessed by the bank. Then my question is why didnt they sell their house in the first place and move into a small flat? Simple… because they live in the illusion that houses are money printing machines… the longer we sit on a property the richer we are.
    Re your point of companies refusing to hire non home owners… I see much more likely companies will refuse jobs to financially irresponsible debt-overstretched people, with repossessed homes… I cant wait that to happen!

    when they default interest payment

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