BOE Base = 2%

Cannon_Fodder

Dithering_Dad wrote: »

*faints again*

Agree with your assessment here, but my figures were aimed primarily at PN, who is spending all of her STR interest and is losing out on any state benefits she would be entitled to without her huge STR pot. I would say that the time has arrived for PN to buy her home - the time for other STRs who aren't dipping into their STR pots is still in the future but they should keep doing calculations because eventually the right time will come for them too - not at the bottom of the market but at the point where it's more financially beneficial for them to buy than to keep renting.

Phew, was that you agreeing with me?


From other "baked beans" and "chippy" posts, I'm guessing the salary situation will be the thing holding PN back from buying at the moment.

Having to spend all the STR-pot interest at the moment, means that on buying a house the STR-pot will shrink and may no longer earn enough interest to live off...?


(Hope you don't mind the third-party discussion PN.)

smartn

Dithering_Dad wrote: »

If we take your example, if a house cost £100k one year and you have £100k saved. If you buy it that year then you will be mortgage free and have no financial outlay to put a roof over your head.

If instead you wait a year and rent a place for £850pm = 12 months x £850pm = £10,200. You are therefore £200 worse off by buying a year later, even though the house price has fallen.

But if you take into account the investment return of that 100K if you put it into a bank even at 2 percent you would be much better off waiting. Not to mention costs of maintaining a house etc which you wouldn't get when renting.

IveSeenTheLight

kennyboy66 wrote: »

* kicks self for being on a fixed rate for the next 21 months *

You could look at paying the ERP if you get a deal that is worth it.
My ERP is only 2% so I find that the cost to pay that ERP may be saved in only a few months of lower rates

mitchaa

smartn wrote: »

But if you take into account the investment return of that 100K if you put it into a bank even at 2 percent you would be much better off waiting. Not to mention costs of maintaining a house etc which you wouldn't get when renting.

When i was renting, i painted, put flooring down, put a shed in the back garden, installed a phone line, sky tv etc etc. When i handed the house back to the EA, i lost 80% of my 1.5x deposit due to a couple of carpet stains.

The only additional expenditure i have over renting is my buildings insurance and an annual boiler check. New house, roof is fine, central heating is fine, windows and doors are fine. All under 10yr warranty anyway. Kitchen/Bathroom/decor all new.

Its a total myth about maintenance costs, perhaps in the long run 20/30yrs when you need to replace a tile on the roof it comes into play but in the short term, it shouldn't even be considered in the equations here.

Rents rise, mortgages tend to decrease, factor that in.

IveSeenTheLight

Kez100 wrote: »

OK, trying look at it glass half full. Your new home (one day) might cost £100,000. It was £200,000k at peak so was worth £170,000 at start of November and £165,750 at the end. Your savings have dropped in the month from whatever, say £150,000 to £149,000 because your interest didn't cover all your expenses.

Still a win situation and more preferable (financially) to the alternative which was living in your depreciating last home, surely?

PN said dhe was losing £500 per month with the 1.5% interest rate drop.
With 3% dropped in the last 3 months, she's effectively earning £1,000 per month less in theory
since the start of the year, BoE has dropped from 5.75% to 2% so in essence she earns £1,250 per month less or £15,000 per year.

It's worth remembering that this savings was made from HPI gain previously so you have to congratulate here on getting out at the top but maybe have a little less sympathy if the notion of HPI wealth is unearned wealth

Dithering_Dad

Cannon_Fodder wrote: »

Phew, was that you agreeing with me?


From other "baked beans" and "chippy" posts, I'm guessing the salary situation will be the thing holding PN back from buying at the moment.

Having to spend all the STR-pot interest at the moment, means that on buying a house the STR-pot will shrink and may no longer earn enough interest to live off...?


(Hope you don't mind the third-party discussion PN.)

I know, isn't it strange that we're agreeing? To be fair we are bound to agree on something eventually. I even find myself nodding along while reading !!!!!!'s posts, very, very occasionally.

Yes, PN - hope you don't us discussing this, but it is an interesting financial example.

p.s. before anyone moans about my inflation calculations, yes I know the're simplistic and incorrect, but I don't have time to set up a spreadsheet showing the true value of HPC over 5 years coupled with inflation.

Suffice to say that if inflation is increasing by 5% and house prices are falling by 10%, then the actual rate of HPC is 5%. If my calculations are correct, of course

smartn

mitchaa wrote: »

Thats a myth, when i was renting i painted, put flooring down, put a shed in the back garden, lost 80% of my 1.5x deposit etc etc

The only additional expenditure i have over renting is buildings insurance. New house, roof is fine, central heating is fine, windows and doors are fine. All under 10yr warranty anyway. Kitchen/Bathroom/decor all new.

Its a total myth about maintenance costs, perhaps in the long run 20/30yrs when you need to replace a tile on the roof it comes into play but in the short term, it shouldn't even be considered in the equations here..

Rents rise, mortgages tend to decrease, factor that in.

Can't see why you'd do all that work on a rental place myself unless you intended being in there a long time. Also, you cant assume all houses are new and most need a fair few quid spent each year on them averaged out over the years. Wish I could maintain my house for no cost!

Pobby

Dithering_Dad wrote: »

Aw, cheers msquandary.

I think homeowers need to remember that they bought a house in order to put a roof over their family, despite any gains and falls in the market, the roof is still there. I never really had the money that my house 'gained' in the HPI and by the same token I'm not losing the money that my 'lost' in the HPC. The money was never really there to lose or to gain. My only focus is, and has always been, on how large my mortgage is and how much I can pay off it.

I think hopefull FTB's need to remember that there is more to the financial calculation than just percentage falls.

Another one here supporting a DD post. Of course you never gained in HPI, only if you had more than your own property to cash in and as houses fall it again makes no difference to you. Even in negative equity there`s no problem unless you have to sell.

I recall someone saying that their mother had a house that was worth £300k but only had a £150k mortgage. Rubbish. Easily done if you had bought in around 2000. Perhaps then she had a 100% mortgage.

So here we are in the next stage. 2% interest rates. DD and I, by the way DD is old enough to be my son....lol, were saying we were planning to retire with our other halves on 30k a year in todays terms.

I`m not so sure this will happen for me right now. Our very diverse, about 7 pots in all of varying amounts, in pensions had taking a kicking. My other stuff is in a split of 35% equities and 65% cash. Something at my age I felt fairly comfortable with.

On the cash side, oh well, 2% interest rates, say no more. My equities, having had a sickening statement today have taking a beating.

Just hoping that these very low rates will do a few things.

Stave the worst of a recession off. Keep people in their own homes and keep jobs.

On a selfish side I am hoping to see the markets recover in a few years to allow me to retire with some comfort. I worked out today that I could go some years beyond 65 by drawing state benefits and utilising my cash savings and leave the pension and the combined (cash,guilts and equity) bonds to be drawn on a later time.

ad9898_3

Haven't read the whole thread yet, so apologise if it's already been mentioned. There was a banking analyst on Radio Five a couple of hours ago, he said the lower rates go towards zero the worse it is for banks as far as lending money goes, as their profits are really being squeezed.

He was saying that to make the same profit huge amounts of new lending would be required, which they can't do even if they wanted to as there is no more money to lend, so they will be tightening lending criteria for new borrowers even more.

So basically it's good news for people on trackers or perhaps who already have mortgages, but bad for everyone else, including FTB's, less FTB's, less sales, more downward pressure on prices, which in the end is good news for FTB's, if you get my drift.

Kez100

IveSeenTheLight wrote: »

Its a pity you are not getting it related so quickly.
I received a letter within a couple of days confirming the interest I paid at the start of December was 1.5% less.
I fully expect to get the letter confirming the further 1% drop in January

It works the other way. Increases have always lagged behind too.