Sunday, January 31, 2016
UK home buyers go full 35 year house boom retard
The rise of the 35-year mortgage: First-time buyers extend their home loans, but is better cash flow now really worth the £9,000 in extra interest?
What next, 50 year loans for 25yr olds? The big elephant in the room is in immigration led population boom that could see an extra 4 million residents of London by 2050. That is a 50% freaking rise on an already jam packed metropolis. Will there even be room on the pavement? Crossrail 2 and 3 are now looking like a under reaction.
Posted by libertas @ 11:45 AM (1991 views)
6 thoughts on “UK home buyers go full 35 year house boom retard”
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libertas says:
Actually, I suppose it is progress from interest free? If it achieved affordability and you over-payed then you would end up with a 25yr mortgage in any-case with a safety net to pay less if times got bad.
On other news, UK interest rates have PLUMMETED since the Japanese cut to negative rates.
2yr rates have collapsed from 0.744% late last year to just 0.346% today. The charts look like a plunge to negative is imminent and any time consistently far below 0.5% will FORCE BOE to cut rates again, because they compete with rather than lead the market.
And what is happening on the mortgage market? Rates are COLLAPSING:
http://www.thisismoney.co.uk/money/mortgageshome/article-3418261/Flood-cheaper-mortgage-deals-expected-Bank-England-postpones-rate-hike.html
As such, we are positioning ourselves to make use of this easy money, seeing that rates cannot stay at 0.5% for much longer, but cannot go up in this commodity driven deflationary cycle (pipeline deflation is severe right now) to where we are looking to max out our home improvement loan potential (equity withdrawal) to fund house extensions. With the safety net of having two rooms we could let out for about £1400.
In my mind that is the best strategy right now. Get a property on a 30% deposit, then borrow additional cash for home improvement to bring it to a defecto 85% mortgage with the preferential rates of a 70% mortgage, noting that once the home improvements are done, the mortgage company will revalue the property and claim you have a 60% or even 50% mortgage. Use some of that cash to build a room capable of semi-independent renting to make benefit of the £7k tax exemption for lodgers and you are maxed out on what the house can yield.
tenyearstogetmymoneyback says:
I’m guessing you mean Interest Only – The people going for a 45 year mortgage with repossession or equity release the only option when they reach retirement. Agree that 35 years sounds far more sensible in comparison.
cornishman says:
libertas said…”2yr rates have collapsed from 0.744% late last year to just 0.346% today”
So interest rates on 2yr bonds have halved in a month. Does that mean that bond prices have doubled in a month? In what world is that sustainable?
Looks like an exponential blow-off top to me.
However, since the biggest players in the market can just move the goalposts – I suppose that anything is possible going forward…
khards says:
When we took out our mortgage we went for a 30 year tracker. This acts like a credit card and essentially allows us to repay as much as and when we like as the minimum is around £360pcm as 2.1%.
In reality we could repay in under 10 years, but then why would I when I can make better use of the money. Even shoving it in Zopa gives a better return over the cost of the mortgage interest!
If rates go up then, I cash in my chips and repay some debt to lower the interest costs. HOWEVER if everyone else thinks like this there would be a MASSIVE crash.
libertas says:
Cornishman, I think your statement about bond prices shows your mis-perception that zero has any real meaning. As if a halving of the distance between 0.7 and 0 would cause a doubling of prices. This absurd idea is an example of why so many people missed the prospects of negative rates that I have harped on about for ages.
Yes, this is an exponential blow off phase like any other, but the shift to negative rates has only just begun if the deflationary commodities era is here to stay with exponentially more efficient and effective ways to extract minerals and manufacture with them. We still are awaiting the 3D printing revolution.
cornishman says:
libertas, I was under the impression that if the price of a bond doubles then it’s yield will halve – and vice versa. Maybe we’re not talking about the same thing.
I still think that your extrapolation of trends in a straight line for the next 10 years is misguided, though. There will come a time long before then when the people with money will say enough is enough and they will find a way to refuse to pay the negative interest rate.