Halifax down 0.5% MoM, 15% YoY

HAMISH_MCTAVISH

LydiaJ wrote: »

Err... no. You don't have to pay mortgage interest on money you never borrow, so if you buy the house for a lower price then that's a whole chunk of interest that you never have to pay.

Mortgage interest isn't paid off. It's just paid, leaving you still owing the same as you did before. If you buy the house for a lower price, you can have the mortgage over a shorter term which reduces the interest even more - as per Thrugelmir's calculations.

Thrugelmirs calculations are meaningless. Would have, should have, could have. Most people don't pay off early, most people dont take mortgages for short terms, and most people don't blah blah blah compound investment gold shares pensions foreign exchange blah blah blah whatever fruitcake substitutive nonsense bears come up with this week.

If you buy the house younger in life, you could also overpay substantially when your income increases...... If you bought pre crash on a tracker, you'd be tens of thousands ahead again, if you bought pre crash, you'd be on better interest rates through lower bank margins in most cases, prices in many areas are yet to see 10% of peak, and may never see more than 15% off, etc etc etc.

The point is theres a crash every couple of decades or so, and for a few years, IF you live in an area with stupidly cheap rent compared to mortgage, and IF prices drop by 25% or more in that area, it can be cheaper to rent for a few years and then buy. I don't disagree with that, and never have.

But for the other 15+ years of the cycle, or at almost any time in the cycle in the numerous areas where rent is similar to or more expensive than full repayment mortgages, never mind interest only, buying young and never wasting money on rent is the best plan by far.

Far, far fewer people will benefit from this crash than you seem to think. Particularly when higher post crash bank margins are taken into account.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Thrugeltrolls calculations are meaningless. Would have, should have, could have. Most people don't pay off early, most people dont take mortgages for short terms, and most people don't blah blah blah compound investment gold shares pensions foreign exchange blah blah blah whatever fruitcake substitutive nonsense bears come up with this week.

If the fact that some people don't pay mortgages off earlier make the calculations meaningless, I don't know what that makes the above! You can't just ignore fact to suit.

If you buy the house younger in life, you could also overpay substantially when your income increases...... If you bought pre crash on a tracker, you'd be tens of thousands ahead again, if you bought pre crash, you'd be on better interest rates through lower bank margins in most cases, prices in many areas are yet to see 10% of peak, and may never see more than 15% off, etc etc etc.

What so straight from telling someone their post is meaingless because most people don't pay off mortgages early, into telling us people could pay off their mortgages early?

You would NOT be tens of thousands ahead if you bought pre crash at the time you were referring too, you cannot simply ignore negative equity.

The point is theres a crash every couple of decades or so, and for a few years, IF you live in an area with stupidly cheap rent compared to mortgage, and IF prices drop by 25% or more in that area, it can be cheaper to rent for a few years and then buy. I don't disagree with that, and never have.

But for the other 15+ years of the cycle, or at almost any time in the cycle in the numerous areas where rent is similar to or more expensive than full repayment mortgages, never mind interest only, buying young and never wasting money on rent is the best plan by far.

So long as you stay in the house you have bought until the mortgage is paid off, never re-mortgage and you don't get hit by price falls. Remember, the costs of actually buying a house can add up to 6-10 months rent alone.

Far, far fewer people will benefit from this crash than you seem to think. Particularly when higher post crash bank margins are taken into account.

Disagree.

HAMISH_MCTAVISH

Negative equity today is meaningless. The asset will be worth the same in 2025 whether or not the purchaser bought in 1975, 2005, or 2020, and whether or not he went into negative equity at any time in the loan makes no difference to the final return.

Only purchase price, transaction costs, and interest rates paid over the term of the loan have any bearing as to the final impact on lifetime housing costs. NE is meaningless if you don't sell.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Negative equity today is meaningless.

Nighty night.

Thrugelmir

HAMISH_MCTAVISH wrote: »

Thrugelmirs calculations are meaningless. Would have, should have, could have. Most people don't pay off early, most people dont take mortgages for short terms, and most people don't blah blah blah compound investment gold shares pensions foreign exchange blah blah blah whatever fruitcake substitutive nonsense bears come up with this week.

If you buy the house younger in life, you could also overpay substantially when your income increases...... If you bought pre crash on a tracker, you'd be tens of thousands ahead again, if you bought pre crash, you'd be on better interest rates through lower bank margins in most cases, prices in many areas are yet to see 10% of peak, and may never see more than 15% off, etc etc etc.

The point is theres a crash every couple of decades or so, and for a few years, IF you live in an area with stupidly cheap rent compared to mortgage, and IF prices drop by 25% or more in that area, it can be cheaper to rent for a few years and then buy. I don't disagree with that, and never have.

But for the other 15+ years of the cycle, or at almost any time in the cycle in the numerous areas where rent is similar to or more expensive than full repayment mortgages, never mind interest only, buying young and never wasting money on rent is the best plan by far.

Far, far fewer people will benefit from this crash than you seem to think. Particularly when higher post crash bank margins are taken into account.

Is this the best you can reason ? :rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:

DaddyBear

HAMISH_MCTAVISH wrote: »

It doesn't work like that. At some point you have to pay the mortgage interest anyway. The rent you pay now could be paying that off instead.

You are (usually) just adding to lifetime housing costs by paying rent. The exception can be in the 2-3 years every 20 or so when the market crashes. But even then, or if you delay from too far in advance, it can still end up costing the same or more, and thats before the interest rate differences kick in.


Example....

Person A could have bought house in 2005 for 150K, which was then worth 180K at peak in 2007. With a 100% mortgage at 6% lifetime average interest rate, house would cost roughly double, or 300K.

Person A decided that houses were too expensive in 2005, and instead delayed purchase til 2011. In so doing, they saved £250 per month for a deposit, but spent £700 a month in rent.

So in 2011, person A now can buy the same house for 135K (peak minus 25%), but they now have a 18K deposit. So at a 6% average interest rate will cost roughly 117 x 2 = 234K, plus 18K deposit, for total of 252K.

Plus the rent at 700 per month x 72 months (6 years) = £50400

Total cost by delaying for a 25% discount = £302,400. Or roughly the same when you include the savings interest on the 18K deposit.

If prices don't fall by 25%, and instead increase or even just stay the same, renting loses hands down every time.

It's impossible to win by renting except for a few years in the middle of a crash every couple of decades, and even then it's very, very close. And thats before we count the interest rate differences between pre and post crash lending.

For most people, in 15+ years out of 20, the best thing to do is buy young and never rent.

Ahhhh. This is why you came to MSE. So you can peddle the same flawed examples hoping to persuade the masses to jump into property in the middle of a crash just to support your rediculously overpriced property.
As you so rightly pointed out, there are around 5 years in each cycle when buying is not the best option, well that is now.
Also, if you think 25% is the maximum drop in house prices you are in for a major shock. We have had the drops due to the 'credit crunch', next come the drops due to the recession.

carolt

I think Hamish McTroll needs a better hobby than feeding bears.....

Thrugelmir

carolt wrote: »

I think Hamish McTroll needs a better hobby than feeding bears.....

well at least he could argue a better case on behalf of the bulls.........

I'm always willing to listen to a reasoned debate and revise my views.

Harry_Powell

carolt wrote: »

Otherwise, you'd know that paying mortgage interest pays off not one penny of capital borrowed, and so affects my lifetime housing costs not one jot.

Only paying off capital will do that - but saving in a bank account will do that just as well; or rather better, given that my rent is cheaper than the interest costs would be, thus allowing me to save more.

Hence it's 'massively less' to use your phrase, in both the short AND long term.

I think you live in the SE like me, so even with the current house price falls, isn't this always going to be the case? Our rent is a lot less than a mortgage would be for a comparable place, and even if we save like mad it would be a decade before we could put down a large enough deposit to lower mortgage payments below our rent payments.

It does make you wonder, on a purely financial standpoint, whether it's better to rent in and around London than to buy. Even if you do have a large deposit, it could be argued that the money would give better returns invested elsewhere rather than in 'bricks n mortar'.

Given your statement regarding the savings you're making/enjoying by renting, why are you even considering buying?

Thrugelmir

Harry_Powell wrote: »

I think you live in the SE like me, so even with the current house price falls, isn't this always going to be the case? Our rent is a lot less than a mortgage would be for a comparable place, and even if we save like mad it would be a decade before we could put down a large enough deposit to lower mortgage payments below our rent payments.

It does make you wonder, on a purely financial standpoint, whether it's better to rent in and around London than to buy. Even if you do have a large deposit, it could be argued that the money would give better returns invested elsewhere rather than in 'bricks n mortar'.

Given your statement regarding the savings you're making/enjoying by renting, why are you even considering buying?

The market will ultimatelty revert to normal. Rents will exceed mortgage costs in the future. Currently we have investors hanging on in the belief that property prices will recover rather than incurring a sizable loss on their investment.

As you say why buy now?

Watch the market though as there will be an opportune moment to buy.