Do nothing ! -- Makes you think

FaTB

This may have been posted before but it bears reading again, especially if there are any new readers on the forum.

Yes it is over simplified, and yes there are many variables, but it does show the importance of timing in a market, and what you can save in interest, if you make over payments on your mortgage.

http://www.nodebtever.com/debt-help/Shave--off-your-mortgage-by-doing-NOTHING-20050621.html

Woby_Tide

I'm not surprised the author saves so much money, the average house starts the article costing £170,000, after a 3 year crash it suddenly only costs £110,000, a saving of £59,500....ooooooo

the next minute the author is buying the average house for £59,500

I'm guessing within 6 years with his projections most people will be trading houses like panini stickers due to them having a coupon value of 0.001p

N9eav

Here here... I am waiting for 3 years time when I will go and buy these cheap houses and rent them out.....

JanCee

Well thats it then time to sell up because in 3 years time, according to these figures, I will be able to buy 10 houses!!!!!!!!

GDB2222

Really, all he is saying is:-

If house prices drop, you are better off not buying now

If you pay the same mortgage payments as you would do now, but on a reduced price property, the mortgage will be paid off much sooner.

Both of these points are obvious and not worth making.

meanmachine_2

JanCee wrote:

Well thats it then time to sell up because in 3 years time, according to these figures, I will be able to buy 10 houses!!!!!!!!

Well duh. That's called playing the market, and property is a market, remember, not a one way bet.

But probably, in three years' time, with soaring inflation, int rates will be far above where they are now, so the cash rich only will benefit.

By the way, think interest rates are on their way down? Don't kid yourself...

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/10/13/ccamb13.xml

N9eav

Forget about the house anyway. If you have a property then think " I am lucky". Pay the £ X a month over 25 years and forget about it. Enjoy the rest of your earnings having fun and maybe have a family. You are only young once, so get all you want now, enjoy your money.


But remember, your home may be at risk if you don't keep up the payments.... so don't borrow too much

FaTB

Woby_Tide wrote:

the next minute the author is buying the average house for £59,500

I have just re read the paragraph you are talking about, and I grant you it is a bit misleading.

But if you look at the interest and total payments stated, I think he is basing it on £110500 buying price, £59500 is the estimated saving, with 3 years of price drops and inflation taken into account.

hobbesandco

I waited a year or two thinking that house prices would go down. Eventually I ended up buying not because I panicked but because I wanted to settle down in the UK. Anyways, I was rather curious about what happened in the property crash of the late 80's/early 90's. I had a look at house prices in the Midlands during that time (I think it was a survey by Halifax or one of the other big banks).

Prices didn't so much crash as stagnate over a period of 6/7 years. It would be wonderful if prices did crash say over 3 years by 25% but last time they really only went down by 10% in nominal terms. If the same thing were to happen again and you were to time the market would you really benefit? I doubt it. Interest rates are sure to go up as well so any benefits you gain by buying when prices are down will be lost because of higher mortgage rates.

I was absolutely convinced that house prices were going to crash here (a la Hong Kong or Japan) but now I'm not so sure. I think the worst-case scenario is that things will be just like last time in the 90's. Either the market will move sideways or prices will go down in nominal terms but not enough to be able to make a killing in this market. I don't think there's any quick money to be made either way unless you research, research, research and you find a house in a wonderful location which hasn't been 'discovered' yet. In short, it will take a lot of hard work.

GDB2222

Data can be found here: http://www.hbosplc.com/economy/includes/RegionalHistoricData07.07.05.xls

W Midlands index dropped from 240 to 215, just over 10% as you say.

London dropped from 251 to 192, which is more like 25%.

Also, the less desirable property dropped most. Studio flats became almost unsaleable, as people were able to afford 'proper' 1 and 2 bed flats instead.

If anything, prices are more expensive now than in 1988, but the interest rate outlook looks better.

FaTB

GDB2222 wrote:

If anything, prices are more expensive now than in 1988, but the interest rate outlook looks better.

I wouldn't bet on that, I think IR's will definately be on the way UP next year, due to inflationary pressures.

People have been lulled into a false sense of security with the recent drop.