BBC: Homes 'May rise in value in 2009'

Cannon_Fodder

chucky wrote: »

many woman want to work and just don't want to be stay at home mums or become house wives.
they want to have careers, be ambitious and do things for themselves.

it's modern life. times have changed. people just have to deal with it like it or not, be it right or wrong.

Right or wrong, that has nothing to do with "not to rely on joint incomes is dumb @ss"...

No-one has suggested "don't have a second income if you choose".

The "dumb @ss" agree-ers, are implying that you should have no CHOICE over what you spend that second income on, because you are relying upon it for your mortgage.

Thrugelmir

julieq wrote: »

Because you're ignoring the cost of renting which is comparable to the cost of servicing a repayment loan at 5% (for the sake of argument, could be more, could be less).

And you have to pay that cost for 50 years, including in retirement, so you have to provide enough savings for retirement to cover that. Good luck to you if you can manage it.

Or you buy a house at some point, in which case the only question is when you time the purchase. And that is a gamble with a 25 year window for interest rates to go up down and all points in between.

If interest rates going up in the next few years bothers you (and it shouldn't because you're working over a 25 year term so you can't really second guess anything), then it makes more sense to move that 25 year window forward to maximise the low interest at the start.

I'm not looking at at a 25 year or 50 year view. I'm looking at now. When for a lot of people renting is cheaper than purchasing an equivalent property. So a renter actually becomes a net saver.

Therefore saving for a deposit and renting, is better option than buying.

Low interest at the start is irrelevant. Its the cost of interest over the term of the loan that matters. The shorter the loan period the less the total interest cost. We seem to be fixated with 25 year products. The only people that benefit are the lenders.

Cannon_Fodder

Harry_Powell wrote: »

What if you're single, are you suggesting that you shack up with someone simply to ensure that if you lose your job, there is a second income available to keep you from going under?

I don't see a problem with basing a mortgage on joint incomes. Even if one person loses their job, the other can usually cover the mortgage, especially if they make cut backs and go interest only for a while until the partner finds their feet.

Relying upon the joint income, does not mean "able to cope when 1 income goes away" - it means RELYING upon joint incomes.

Your theory would suggest that couples need to become a threesome in the event of a job loss, to cover the lost second income.

Your singleton would need two mates to house-share - which is exactly what the FTBs have been reduced to, because of relying upon joint incomes. Not choosing, not an option, RELYING.

Mortgages have life cover for the death angle.

PPI is at best a 2-year intervention, at worst a scandal that does not stand up to scrutiny.

Harry_Powell

Cannon_Fodder wrote: »

Relying upon the joint income, does not mean "able to cope when 1 income goes away" - it means RELYING upon joint incomes.

Your theory would suggest that couples need to become a threesome in the event of a job loss, to cover the lost second income.

Your singleton would need two mates to house-share - which is exactly what the FTBs have been reduced to, because of relying upon joint incomes. Not choosing, not an option, RELYING.

Mortgages have life cover for the death angle.

PPI is at best a 2-year intervention, at worst a scandal that does not stand up to scrutiny.

It's your theory, not mine that we should build 1xsalary redundancy (literally!) into our financial decisions. I see no different between two people buying a house together and relying on two incomes to finance it than I do with one person buying a house on their own and relying on their one income to finance it. Except perhaps that if one person loses their income in a couple, they're more secure in their home than if they're a single person who loses their job.

You're saying that couples should not rely on two incomes to buy a house, so naturally you logically you should also be saying that single people should not rely on their single income to buy a house.

So, are you?

p.s. thanks for responding to my post, I feared it was going to get lost amongst all the housewife nonsense.

IveSeenTheLight

Thrugelmir wrote: »

I'm not looking at at a 25 year or 50 year view. I'm looking at now. When for a lot of people renting is cheaper than purchasing an equivalent property. So a renter actually becomes a net saver.

Therefore saving for a deposit and renting, is better option than buying.

Low interest at the start is irrelevant. Its the cost of interest over the term of the loan that matters. The shorter the loan period the less the total interest cost. We seem to be fixated with 25 year products. The only people that benefit are the lenders.

This makes sense if the following are considered: -

1) That rent is compared to only the interest part of a mortgage payment

2) The local house price market is assessed (i.e. some areas are still falling, others are rising).

You could see a saving of rent by say £1,000 per year against the comparable mortgage interest but see how prices rise by £2,000

It'll all depend on the property type you are interested in, where the location is and the demand and supply for that local area.

julieq

Thrugelmir wrote: »

I'm not looking at at a 25 year or 50 year view. I'm looking at now. When for a lot of people renting is cheaper than purchasing an equivalent property. So a renter actually becomes a net saver.

Therefore saving for a deposit and renting, is better option than buying.

Low interest at the start is irrelevant. Its the cost of interest over the term of the loan that matters. The shorter the loan period the less the total interest cost. We seem to be fixated with 25 year products. The only people that benefit are the lenders.

You have to take a lifetime overall view really, I'd have thought?

But you have to do very well to pay back the cost of the rental, which in most cases will be comparable to the amount you'd pay in mortgage repayments. If you intend ultimately to buy then you're really just time shifting the start and paying rent at a similar level for the privilege.

I really don't understand the logic that suggest this is a better option. Unless the house is going down in value so that the amount you end up paying reduces over the term of whatever loan you have, it makes no sense at all to pay rental to a landlord where you could be paying off a mortgage. If you're determined to sink savings into a house, then you can sink them equally well using overpayments (or offsetting) AND be bringing nearer the day where you don't have to pay for your house, rather than trying to save and pay rent (which doesn't advance the date at which you stop having to pay, it just time shifts it).

mewbie_2

julieq wrote: »

same old argument

Look. House drops 10% in a year. Blows your rent argument back where it belongs.

Thrugelmir

julieq wrote: »

You have to take a lifetime overall view really, I'd have thought?

But you have to do very well to pay back the cost of the rental, which in most cases will be comparable to the amount you'd pay in mortgage repayments. If you intend ultimately to buy then you're really just time shifting the start and paying rent at a similar level for the privilege.

I really don't understand the logic that suggest this is a better option. Unless the house is going down in value so that the amount you end up paying reduces over the term of whatever loan you have, it makes no sense at all to pay rental to a landlord where you could be paying off a mortgage. If you're determined to sink savings into a house, then you can sink them equally well using overpayments (or offsetting) AND be bringing nearer the day where you don't have to pay for your house, rather than trying to save and pay rent (which doesn't advance the date at which you stop having to pay, it just time shifts it).

Lets bookmark this. And come back at a later date. As the future becomes clearer.

Harry_Powell

To be fair, julieq did put the caveat "Unless the house is going down in value" in her post.

However, her position that you're better off owning a house and making overpayments is better than renting a house and building savings only really holds water when we have HPI, which I doubt we will see for a long while.

If you had two people, one who paid £1000 in rent and put £1000 in a savings account, and the other who paid £1000 in interest only mortgage payments and made a £1000 overpayment onto their mortgages, you could have the following scenarios:

1. HPC.
The person who is renting is the clear winner if house prices continue to fall because his buying power increases as house prices fall. The OO sees his house investment erode with the falling market.

2. Stagnation.
Neither wins because they're both saving the same £1000 pm, one in a bank and the other in his equity. After 5 years, the OO has only 20 years left on his mortgage, but conversely the renter has a bigger deposit and could easily buy the house with a 20 year mortgage instead of a 25 year one. Net financial effect is zero between the two options.

3. HPI. Clearly the renter loses out here because his buying power is eroded as house prices increase. The Renter has to pay more to buy the same house, whereas the OO's mortgage remains fixed.

Thrugelmir

Harry_Powell wrote: »

To be fair, julieq did put the caveat "Unless the house is going down in value" in her post.

However, her position that you're better off owning a house and making overpayments is better than renting a house and building savings only really holds water when we have HPI, which I doubt we will see for a long while.

If you had two people, one who paid £1000 in rent and put £1000 in a savings account, and the other who paid £1000 in interest only mortgage payments and made a £1000 overpayment onto their mortgages, you could have the following scenarios:

1. HPC.
The person who is renting is the clear winner if house prices continue to fall because his buying power increases as house prices fall. The OO sees his house investment erode with the falling market.

2. Stagnation.
Neither wins because they're both saving the same £1000 pm, one in a bank and the other in his equity. After 5 years, the OO has only 20 years left on his mortgage, but conversely the renter has a bigger deposit and could easily buy the house with a 20 year mortgage instead of a 25 year one. Net financial effect is zero between the two options.

3. HPI. Clearly the renter loses out here because his buying power is eroded as house prices increase. The Renter has to pay more to buy the same house, whereas the OO's mortgage remains fixed.

Quick points.

Your basic assumption is that rent = interest. Unless you have at least a 25% deposit. Then its reasonable to expect interest costs to be higher bearing in mind that product fees are payable to on the mortgage.

The renter incurs none of the other costs of home ownership. Maintenance, decoration, roof repairs etc.

Overpaying is unlikely to be option for those first starting on the ladder.

Locally I would estimate gross rental yields to be around 4.5% to 7%. There's a lot of similar property, 2/3 bed. So easy to compare.

So with regards to prices locally. There's no room for significant increases in house prices. As rental yields should be higher than this level. I'm putting my investor hat on when I make that comment.

I'm buying investment trusts with 5% to 7% yields and corporate bond funds yielding around 8.75% through tax efficent wrappers. So property holds no attraction currently.