Typical wage £20K. Typical house £150K

the_ash_and_the_oak

Mr.Brown wrote: »

I don't want to argue with one of the more distinguished members of the forum, but...

1. The rates must be available to someone otherwise there would be little point in it. It has artificially increased the amount of cheap credit which is inflating mini bubbles.
2. Get into trouble through borrowing. So borrow more rather than take the pain. Leading to more pain tomorrow. You are right - it's a benefit / downside of a democracy.
3. Printing money? QE? We have been doing it before? Well I have learnt something today. As well as Alexander of course.

You should argue imo

1. Well lets see, who are they available to exactly? afaics they are available to the banks, but not from the banks to the public
2. Would you have preferred the pain today? The pain may be worse tomorrow it may not, but that pain might have led to the end of your job?
3. The money supply expands each year - how?

Mr.Brown_4

the_ash_and_the_oak wrote: »

You should argue imo

1. Well lets see, who are they available to exactly? afaics they are available to the banks, but not from the banks to the public
2. Would you have preferred the pain today? The pain may be worse tomorrow it may not, but that pain might have led to the end of your job?
3. The money supply expands each year - how?

You have beaten me on each point, and I have learned how to concede defeat graciously. I am not an economics expert, just a gut feel person. It just seems wrong to me, and I worry about the future.

the_ash_and_the_oak

Afriend wrote: »

I know this one. The capital part of the repayment is less. What do I win? :j

edit: if it's an interest only mortgage then the outstanding debt at the 25yr stage is less.

You win the argument

Should have checked that one out before posting - the idea was to make them arrive at the end of the mortgage period at the same time with one having less to pay but the other being able to pay more (due to less interest) but taking the length of the mortgage to catch up - lets have the original person paying 2% rates (and 2.5k a year interest)

(would you mind if I changed the original question to reflect that?)

the_ash_and_the_oak

Mr.Brown wrote: »

You have beaten me on each point, and I have learned how to concede defeat graciously. I am not an economics expert, just a gut feel person. It just seems wrong to me, and I worry about the future.

I'm not saying its great - it is wrong - but in a way every course of action is going to be wrong in different ways - given what these courses of action are actually in response to

Afriend_2

the_ash_and_the_oak wrote: »

You win the argument

Should have checked that one out before posting - the idea was to make them arrive at the end of the mortgage period at the same time with one having less to pay but the other being able to pay more (due to less interest) but taking the length of the mortgage to catch up - lets have the original person paying 2% rates (and 2.5k a year interest)

I want a prize. :mad:

wageslave

the_ash_and_the_oak wrote: »

Think this needs unpacking. Lets for arguments sake create a situation where rates were fixed for the length of a 25 year mortgage - for the point of illustration, and someone on a 25k salary (lets make them 25 years old) and have two scenarios

i) they borrow 5 times salary (125k) and pay rates of 4%. They're paying 5k a year in interest, gradually coming down through the lifetime of the mortgage

ii) they borrow 2.5 times salary (62.5k) and pay rates of 8%. They're paying 5k a year in interest, coming down through the lifetime of the mortgage

What is intrinsically better about the 2nd situation in your opinion?

Mr A earns £18k a year. His missus earns £5k on Tesco checkout. They have two kids and are living in private rented accommodation. Traditionally they would have been in social housing but that avenue is closed to them. In consequence they have no security of tenure and Mrs A cant sleep for worrying about it.

They decide to buy a house, it is going to cost them £150k for a modest 3 bed terrace with a bit of a garden.

£150k seems a fair bit of cash but the nice bloke at the building society (who is on commission) assures them they can afford it. And hey it is something to leave behind for the kids. It needs a little work buy Mr A fancies himself as a bit of a handyman.

They live quite happily for a couple of years, put a new kitchen in and buy a bit of laminate. Have a couple of holidays abroad. They are living the dream.

Then one day Mr A is put on short time at work or he may fallen off his bike and broken his leg. I forget which.

They cut back. Only it isn't enough. So they start to run up an overdraft and bung the odd bit of shopping on the credit card they got for going to Benidorm. Before you know it they have bailiffs at the door and Mrs A is back to not sleeping at night.

It doesn't matter how cheap credit is, some people just cant afford to own a house. They live too close to the breadline as it is. All it takes is one little thing to tip them over.

And trust me, there is always, always that one little thing.

nembot

People are arguing semantics here, the facts are - we've never seen growth like we did in the last decade fueled only by easy credit and lenders sheer and unadulterated greed, nothing else... end of story.

It had to end sometime, the lenders still want a piece of the pie, but it's already been eaten. The government wanted another term and between them and the BOE they tried their hardest to tell the masses things are "A, OK".

But things aren't great, certainly in the short term and it does look like this short term, maybe 5 years+

Reading the posts about who should be able to buy a house, absoiutely gets my goat. When I was a child, people could buy houses. The type of house would depend on income obviously. Blue collar workers - terraced, white collar workers - semi detached, executive position - detached and so on and so forth...

The same thing could be said when I first started working, and okay in 1989 some people may of lost a bit of money if they had to sell in the oncoming years, but in terms of todays potential losses, the unlucky people in the last crash got off easy.

I've not seen one person (admittedly, there aren't many here) provide a valid argument for higher prices that doesn't make them look like selfish greedy people (no offence, but that's how it looks from my perspective).

and relax...

the_ash_and_the_oak

wageslave wrote: »

It doesn't matter how cheap credit is, some people just cant afford to own a house. They live too close to the breadline as it is. All it takes is one little thing to tip them over.

And trust me, there is always, always that one little thing.

Ok but wouldn't this also be the case in the 2nd scenario where they have borrowed less money but are paying a lot more interest on it?

If you want to make the argument that people are being effectively forced into buying when they shouldn't be, due to a lack of social housing - then I think thats a better discussion point

the_ash_and_the_oak

nembot wrote: »

Reading the posts about who should be able to buy a house, absoiutely gets my goat. When I was a child, people could buy houses. The type of house would depend on income obviously. Blue collar workers - terraced, white collar workers - semi detached, executive position - detached and so on and so forth...

But here's the thing. If this is true - why are owner occupancy stats higher today then when you were a child?

wageslave

the_ash_and_the_oak wrote: »

But here's the thing. If this is true - why are owner occupancy stats higher today then when you were a child?

Because nembot is talking nonsense.

Working classes buying terraced houses? None that I knew off. The occasional unlucky sod inherited a damp ridden two up two down from a relative and couldn't afford to improve or maintain it.

The rest of us were living in nice cosy council houses and then our parents bought those.

Which pretty much frakked the next generation