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Debate House Prices
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I'm not buying

Procrastinator333
Posts: 1,694 Forumite
3 years ago, my wife and I ended up in the position where we could have bought. I said no, because in short, house prices just looked stupid. We would have had to have taken a huge mortgage for a small flat somewhere. No thanks.
So we rented and there is no way that can be argued to have been the wrong decision.
I think house prices are going to stagnate at best, or more likely fall somemore. We are therefore going to carry on renting. Renting for us has not been wasted money. When we moved house a while back, the place we looked at was both for sale and rent. Up for £290k or £1100 rent. Assume we could have got the place for £250k, which at the time was probably about on the money looking at other properties and former sale prices.
An interest only mortgage would have cots about 6% - £15k. Instead we are paying rent of £13.2k. As long as house prices are flat or falling and ftb mortgages are at that sort of rate, it is simply cheaper to rent. Maybe not true for all, but it is for us.
Why do I believe house prices will not rise - Rather than looking back I'm looking forward. If labour stay in power, they will simply spend too much, they just can't help it. The gilt market, which has already priced our debt with yields in excess of the likes of Spain and Italy will go nuts. Besides the fact that our national debt servicing cost will rocket, puching up more taxes / cuts etc, such a rise would feed through in to interest rates whatever the BOE does. In this scenario, a lost decade or a continued recession are still on the cards imo.
On the other side of the coin you have the tories who want to cut spending in their first 50 days in power. Ultimately, just about all government spending goes on either employing people, or paying companies that employ people. Either way, that is further cuts to the economy. The private sector simply won't grow by enough to make that up and again we end up stagnating or back in recession imo.
If there is a way out of this mess, it is on a tightrope somewhere between the middle of these two policies. I have no idea where it is and I don't believe any party will be capable of walking that tightrope.
This combined with the exhaustion of fiscal stimulus and I don't think good times are ahead.
So we will continue to rent and save and see where it all goes. If I'm right, then happy days, saved another mountain of cash (or more likely my DW will perusade me to spend it anyway and we just have a bigger house).
If I'm wrong, then well I'm wrong. There is no crystal ball, but at the very least I'm not doing a thing until a few months post election.
I have rarely posted on here before, but reading thorugh I reckon I'm about to get flamed! Come get me Hamish! :eek:
So we rented and there is no way that can be argued to have been the wrong decision.
I think house prices are going to stagnate at best, or more likely fall somemore. We are therefore going to carry on renting. Renting for us has not been wasted money. When we moved house a while back, the place we looked at was both for sale and rent. Up for £290k or £1100 rent. Assume we could have got the place for £250k, which at the time was probably about on the money looking at other properties and former sale prices.
An interest only mortgage would have cots about 6% - £15k. Instead we are paying rent of £13.2k. As long as house prices are flat or falling and ftb mortgages are at that sort of rate, it is simply cheaper to rent. Maybe not true for all, but it is for us.
Why do I believe house prices will not rise - Rather than looking back I'm looking forward. If labour stay in power, they will simply spend too much, they just can't help it. The gilt market, which has already priced our debt with yields in excess of the likes of Spain and Italy will go nuts. Besides the fact that our national debt servicing cost will rocket, puching up more taxes / cuts etc, such a rise would feed through in to interest rates whatever the BOE does. In this scenario, a lost decade or a continued recession are still on the cards imo.
On the other side of the coin you have the tories who want to cut spending in their first 50 days in power. Ultimately, just about all government spending goes on either employing people, or paying companies that employ people. Either way, that is further cuts to the economy. The private sector simply won't grow by enough to make that up and again we end up stagnating or back in recession imo.
If there is a way out of this mess, it is on a tightrope somewhere between the middle of these two policies. I have no idea where it is and I don't believe any party will be capable of walking that tightrope.
This combined with the exhaustion of fiscal stimulus and I don't think good times are ahead.
So we will continue to rent and save and see where it all goes. If I'm right, then happy days, saved another mountain of cash (or more likely my DW will perusade me to spend it anyway and we just have a bigger house).
If I'm wrong, then well I'm wrong. There is no crystal ball, but at the very least I'm not doing a thing until a few months post election.
I have rarely posted on here before, but reading thorugh I reckon I'm about to get flamed! Come get me Hamish! :eek:
0
Comments
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This post seems like your trying to justify a bad decision.
In hindsight, you could have had 3 years of your mortgage payed off and now (assuming your initial fixed rate would have expired) be making substantial overpayments benifiting from the low interest rates.
House prices have risen nearly 10% in the last 12 months, and the bottom of this cycle has now passed. Sure, I expect to see some further dips over the next year or two, but to fall another 20% and pass the previous Feb 2009 bottom is wishful thinking from the HPC brigade.
Renting vs Buying is always an individual's choice and (in the real world outside this forum) has very little to do with predicting future house prices.
People rent because they do not want to commit to a mortgage, people buy because they want to settle.0 -
We bought 3 years ago, originally on a fixed rate mtg at 5%, which has since become a very sweet base rate tracker. We have been paying extremely low interest on our mortgage for the last year or so. The difference between the market rent for our house and the mortgage interest we actually pay is about £600+ pcm. Therefore we are up about £7k so far.
So we bought and there is no way that can be argued to have been the wrong decision.
We all view the world from our own perspective.In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:0 -
This post seems like your trying to justify a bad decision.
In hindsight, you could have had 3 years of your mortgage payed off and now (assuming your initial fixed rate would have expired) be making substantial overpayments benifiting from the low interest rates.
House prices have risen nearly 10% in the last 12 months, and the bottom of this cycle has now passed. Sure, I expect to see some further dips over the next year or two, but to fall another 20% and pass the previous Feb 2009 bottom is wishful thinking from the HPC brigade.
Renting vs Buying is always an individual's choice and (in the real world outside this forum) has very little to do with predicting future house prices.
People rent because they do not want to commit to a mortgage, people buy because they want to settle.
I'm fairly neutral here but shouldn't you be comparing prices with 3 years ago with now
and as he was talking about the costs of an interest only mortgage he wouldn't have paid nothing off his mortgage
as far as interests rates are concerned, whether you benefit from the 'low' rates depends very much on the luck of which mortgage product you took out and they certainly don't apply to everybody0 -
I used the example of an interest only mortgage as it is not correct to compare a repayment mortgage against rent alone. To expand the example to a repayment one you would then have to factor in the additiopnal amount you save which is ultimately used as a larger deposit when you do buy.
E.g. Assuming flat house prices, no deposit on day 1, interest only to keep it simple.
Buy day 1 for £250k. At end of year you have paid £15k in interest. Outstanding mortgage £250k
Rent for 1 year as in my example with the rent at £1,100. I then have £1.8k for the deposit and if I buy the exact same house under flat house prices the mortgage value is then only £248.2k. Hence after 1 year I own more of the house by renting instead of buying.
E.g.2 You can expand this to repayment mortgage. Same example, but say it is £18k, £15k int, £3k repayment. In order to compare it to renting, you should now put £18k less the cost of the rent in to the deposit pot for the end of year 1.
If you had bought, at the end of year 1 you would have a remaining mortgage of £247k. However by renting for a year and then buying you only have a mortgage of £245.2k.
The number you spend on repayment /saving is irrelevant as whatever the number, in the above example, you still have a lower mortgage by £1.8k at the end of year 1 and own the same house.
The simple outcome is that if prices are flat or falling, and the rent is less than the interest, you are better off renting and buying later.
Of course this is theoretical and I agree with you Dan, that kind of rational is irrelevant to most. But unfortunately I'm a bean counter and I like that saving.
@jonbvn - Agree, the maths has clearly worked the other way for you and that creates a strong argument for buying, but again, being the bean counter, I would say your house has lost 15% of it's value or whatever the number is, therefore with hindsight you would actually have a smaller mortgage today if you had rented and bought now instead. I appreciate that is a bit of an unfair argument. The price is not the be all and end all for most and that hindsight is a wonderful thing. Plus here I am saying i'm not buying and by the time I do maybe I will have missed the boat completely.
@Dan, not buying 3 years ago was a bad decision?! If I bought any property I may have done 3 years ago, today, I would have a far lower mortgage than I would have done if I had bought and made payments on it for 3 years.0 -
Also work in to the equation if the op was buying the same house today. It may be 20% cheaper than 3yrs ago so he has saved a possible 50k ( plus add in any repairs to the bought house), less the money for the rent £39,600 = £10,400. So if op was buying the house today for 200k the mortgage would be smaller & from figure above he would be quids in.
Moneysaver0 -
Being rich in money tickets is one dimensional. How about being rich in other ways - scuplting your dwelling, building long term relationships in your immediate community and neighbours, putting down roots, being at one with your own little castle.
Is a £10 k saving either way over 4 years really worth it?
Does the 'potential' saving really out weigh life's other treasures?
In any event rates have come right down for exisiting mortgage holders, so we cant be sure renting would have been on balance 'better' in a monetary sense, and even if it is, we are'nt talking life changing sums here.
I don't know if money hoarding is the OP's God, but if it is he needs to think twice.0 -
People rent because they do not want to commit to a mortgage, people buy because they want to settle.
A lot of poeple bought & jumped on the bandwagon, thinking they could make a killing in the property game. People thought is was a way to print money.
I have been renting for over 3yrs & have saved a few bob. I am now just waiting for the right house to come along & buy it cash. Whereas if I had bought over 3yrs ago at the over inflated prices that everyone was paying, I would have had to take out a mortgage & paid it for years to come.
p.s. I have had 2 mortgages in the past, I was just not getting into bidding wars when the housing market went crazy, houses were not worth the money over 2yrs ago.
Moneysaver0 -
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moneysaver wrote: »Also work in to the equation if the op was buying the same house today. It may be 20% cheaper than 3yrs ago so he has saved a possible 50k
Moneysaver
Graphs or it's not true!
The OP hasn't talked about a deposit so maybe renting is the only realistic option.
If you work out renting for 25 years and buying and considering house values historically increase substantially over that period it looks like your trying to play the long odds game.
It will be very much up to luck if you come out on top.0 -
For a lot of people house buying is a long term decision and one that can't really be easily evaluated over three years. You don't really need to mark-to-market the value of your assets if you aren't planning on buying them
Renting has advantages as it is cheaper and more flexible. Buying locks you in, but offers more security and when done from within a relationship enhances the commitment expressed in that relationship. The decision between the two depends really on personal circumstances and preferences. For people who want to move around, don't want to commit or have access to cheap rental property this is probably the right choice. But a simple evaluation of prices and costs over a few years seems too simplistic.0
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