I'm not buying

Dan:_4

Thrugelmir wrote: »

Hardly outdated. Very possibly the way forward.

Its the Building Societies that demutalised to be become banks twere the ones that failed with their business models.

In fact none now remain, other than in brand name or propped up by the taxpayer.

Banks themselves need deposits themselves not low interest rates.

Building societies cannot compete with the top 4 banks, the likes of Tesco Banking and Virgin money are more likely to feature on our high streets in the future, rather then the small local building society.

chucky

Thrugelmir wrote: »

Hardly outdated. Very possibly the way forward.

Its the Building Societies that demutalised to be become banks twere the ones that failed with their business models.

In fact none now remain, other than in brand name or propped up by the taxpayer.

Banks themselves need deposits themselves not low interest rates.

you don't even believe that yourself - if it was the way forward why have so many building societies failed and are failing?

HAMISH_MCTAVISH

Procrastinator333 wrote: »

A lot of people are on svr's, they are not really benefitting. You can bet any rate rise will be passed on. Or any significant shift in the gilt market. There are also a lot of people stuck on svrs who can't remortgage.

Ultimately, it is a personal preference, probably driven in the main by the point in life at which you find yourself. Never going to reach an agreement on this.

As the focus of this thread has shifted away from the notion that renting can be cheaper, I'm assuming that fact is no longer being debated? :T

Quite surprised Hamish hasn't been back, maybe he hasn't been at a comp for a while.

Maybe if I taunt him a bit he will be back>>> Hamish >>>> to you.

I'm only messing, keen to here your thoughts, do you concede the point or is there an aspect of my calculation you disagree with?

No, I've already shown you why many, or even most, buyers in 2007 are now equal to, or ahead of, buyers in 2010, provided they took advantage of the better mortage deals then, and compared to the much worse deals which are the only ones available now.

And every month that passes, makes it harder to be ahead by delaying purchase.

Not to mention, as a delayed purchaser, you could have bought in early 2009, and have gained 10% in HPI by now. A year from now, that could be 15% or 20%. Delaying in the face of a declining market can, in some circumstances, pay off. But in the face of a rising market, as we have had for a year now, it's just impossible to make it pay.

Procrastinator333

I'm assuming the post at the bottom of this is the one you are refering to by "you showed me".


1) You take the housing statistic that most supports you view, nationwide, giving a 6.4% drop. Not very objective. Try taking an average of the 2 main indices. Halifax has a 10.7% drop.

2) Your formula is wrong, you are double counting. Your equation for comparing the 2 is as follows:

Money saved on house price vs Rent + Margin lost compared to today + Margin lost compared to future.

That is simply gibberish. The person doesn't pay both rent and the lost margin. The lost margin is a benefit that is reflected in the lower rate on the opposite side of the correct equation.

It should be:

Rent less money saved on house purchase vs Interest cost + int rate saving going forward.

The correct comparison is as follows:

Halifax, £189k to £169k.

Nationwide, £173 to £162k.

So avg drop Jan 07 to Dec 09 is £15.5k or 8.6%

Rental costs of 5.5%, or £30k (based on average of Jan 07 price - £181k)

Using the product you suggested (lifetime tracker BOE+0.5%): Average base rate of last 3 years was 3.59%. Therefore they would have paid an avg rate of 3.59% + 0.5% = 4.09%.

Saving on house purchase £15.5k

So buy after 3 years and have a remaining mortgage of £165k

Or consider buying. You have paid interest of 22.2k. But the saving of interest over rent can be used to pay down mortgage. So you have a remaining mortgage of £173.2k.

The only thing this calculation doesn't include is the benefit you are adding because someone is on a BOE +0.5% going forward.

Yes I agree going forward, the 07 buyer is going to catch up unless rates change or prices fall again, but as at today, they are ahead by £8.2k.

How do you like them apples. :rotfl:
If you think my example is wrong, please tell me is it the Dec 09 buyer or Dec 07 buyer whose outstanding mortgage is incorrect as @ Dec 09?

HAMISH_MCTAVISH wrote: »

:rotfl:

No, I liked your post. Good argument, nicely put.

And new posters should be encouraged.

We have to be nice to moneysavers, even if we can demonstrate their actions didn't actually save them any money.;)

I'll take the average nationwide house price as an example. My own area is currently significantly up on the January 2007 price, other will be lower.

So, 3 years ago this month, the average house price was £173,225. (January 2007, Nationwide).

The most current data we have today is Dec 09, which was £162,103.

So, simple enough, you gained around £11,100 on the purchase price by delaying purchase for 3 years.

However, you also added lifetime housing costs by doing so. The average rental yield in 2007 was 5.5%, it's north of 6% today, but lets take the 2007 figure for now.

5.5% of £173,225 is £9527 per year in rent, for 3 years, is a total expenditure of £28,582.

But of course, there is also the matter of mortgage interest. Now the simple fact is that mortgages today are at least 2% higher, in terms of bank margins above base, than those of 2007. And of course, base rates have fallen considerably since 2007, and a purchaser then has been able to take advantage of the lowest rates in history.

Whilst these margins will decrease, they look likely to stay divergent for the next few years anyway, plus of course the three years so far.

So the 2007 buyer is around 2% per year better off per year for, lets say, the first 5 years of the mortgage than the 2010 buyer. So roughly a £3465 gain per year, for 5 years, or another £17,322, from bank margin alone. And of course the already achieved base rate falls of 5%, which we can safely assume for at least the last year anyway (although likely all of this year too), for another 5% gain of around £8660. (There is a partial base rate fall in 2008 as well, but ICBA calculating it)

So, on a positive note for delayed purchasers, there is the roughly £11,000 savings on the house price.

But it has cost them £28,000 in rent.

plus

£17,000 on mortgage margins.

plus

£8660 in reduced base rates already achieved (actually more like 11K or 12K to date, but CBA calculating precisely)

For something approaching a £42,000 gain by buying then versus now.

Now, we can argue the details, or the amounts, and everyone will, of course, be slightly different.

But on the averages, and with any type of variable rate mortgage, or even a 2 year fix reverting to SVR from a major lender, it's very, very hard to make delayed purchase stack up even as a breakeven, never mind any kind of significant gain.

It was easier back in February, as the falls were bigger, and the rent expenditure smaller. It may be easier in the future, if we have further large falls, greater than the costs of additional rent, but it's very hard to make it work as things sit today.

Thrugelmir

Procrastinator333 wrote: »

I'm assuming the post at the bottom of this is the one you are refering to by "you showed me".


1) You take the housing statistic that most supports you view, nationwide, giving a 6.4% drop. Not very objective. Try taking an average of the 2 main indices. Halifax has a 10.7% drop.

2) Your formula is wrong, you are double counting. Your equation for comparing the 2 is as follows:

Money saved on house price vs Rent + Margin lost compared to today + Margin lost compared to future.

That is simply gibberish. The person doesn't pay both rent and the lost margin. The lost margin is a benefit that is reflected in the lower rate on the opposite side of the correct equation.

It should be:

Rent less money saved on house purchase vs Interest cost + int rate saving going forward.

The correct comparison is as follows:

Halifax, £189k to £169k.

Nationwide, £173 to £162k.

So avg drop Jan 07 to Dec 09 is £15.5k or 8.6%

Rental costs of 5.5%, or £30k (based on average of Jan 07 price - £181k)

Using the product you suggested (lifetime tracker BOE+0.5%): Average base rate of last 3 years was 3.59%. Therefore they would have paid an avg rate of 3.59% + 0.5% = 4.09%.

Saving on house purchase £15.5k

So buy after 3 years and have a remaining mortgage of £165k

Or consider buying. You have paid interest of 22.2k. But the saving of interest over rent can be used to pay down mortgage. So you have a remaining mortgage of £173.2k.

The only thing this calculation doesn't include is the benefit you are adding because someone is on a BOE +0.5% going forward.

Yes I agree going forward, the 07 buyer is going to catch up unless rates change or prices fall again, but as at today, they are ahead by £8.2k.

How do you like them apples. :rotfl:
If you think my example is wrong, please tell me is it the Dec 09 buyer or Dec 07 buyer whose outstanding mortgage is incorrect as @ Dec 09?

Its all down to timing of purchase and comparable property to rent.

1979 -1988 house prices rose in real terms 61%
1989 -1998 house prices fell in real terms 22%
1999 -2009 house prices rose in real terms 62%

Where are we heading in the next 10 years?

Procrastinator333

Thrugelmir wrote: »

Its all down to timing of purchase and comparable property to rent.

1979 -1988 house prices rose in real terms 61%
1989 -1998 house prices fell in real terms 22%
1999 -2009 house prices rose in real terms 62%

Where are we heading in the next 10 years?

I'm guessing you haven't read the thread? Fair enough really, it is rather long and goes off on several tangents. However the start point was simply that I was better off by not buying for the last 3 years and that I'm waiting until post election for any decision on buying.

As stated and agreed several times in the thread, buying will always be better long term. However there are times, like the last 3 years when you would have been better off renting.

As obvious as this is to most, there are some who disagree.

silvercar

As stated and agreed several times in the thread, buying will always be better long term. However there are times, like the last 3 years when you would have been better off renting.

You base all this on averages, even if it is true for you, there will always be areas where the opposite is true. I can show you nice 3 bed semis in my area that have increased in the last 3 years, smaller properties that have fallen in value. You can't apply national averages to individual situations and say it follows for everyone.

Procrastinator333

silvercar wrote: »

You base all this on averages, even if it is true for you, there will always be areas where the opposite is true. I can show you nice 3 bed semis in my area that have increased in the last 3 years, smaller properties that have fallen in value. You can't apply national averages to individual situations and say it follows for everyone.

Where did I say it applies to everyone?! (wish there was a head in hands smiley)

I have said it applies to me and it applies to the average person. At least read the thread.

E.g. a couple of pages back there was a chap who ran his numbers (or his dd) and they were the other side of the coin. Good for them. But they are not the norm as shown by the averages.

Having read this forum, most of the stuff that gets posted would leave many to believe that the second you can get a mortgage you must go buy a property straight away. Every day you wait you are loosing money.

That is simply rubbish.

It is not true for me, it has even been profitable for me to wait. The average person would also have seen this benefit.

EDIT: Ok, see where you referring to by me applying to everyone - should have finished sentence properly in that previous post, "the average person would have been better off", not that "you would have been better off."

Apologies for the head in hand smiley request.

Conrad

Procrastinator333 wrote: »

However there are times, like the last 3 years when you would have been better off renting.

Debatable, and who cares anyway, if you'd offered me £20,000 in 2007 to rent for 3 years, I would'nt have taken the offer. I enjoy my own home and still manage to invest for the future.

Chosing to rent in order to potentialy make some cash is for me a pretty mundane endeavour.

Surely there's more to life?

Thrugelmir

Procrastinator333 wrote: »

I'm guessing you haven't read the thread? Fair enough really, it is rather long and goes off on several tangents. However the start point was simply that I was better off by not buying for the last 3 years and that I'm waiting until post election for any decision on buying.

As stated and agreed several times in the thread, buying will always be better long term. However there are times, like the last 3 years when you would have been better off renting.

As obvious as this is to most, there are some who disagree.

Yes. I knew people that STR'd in previous property ups and downs. The reason I didn't was that I had bought my house as a home not as an investment. Houses aren't like cars. Finding the one that suits you isn't always so easy. So you buy when you can afford to do so. If you don't the opportunity is lost. Where I currently live property changes hands very infrequently.

Thats why I said timing is key.

The decades merely illustrate that the property market doesn't move as people portray. Property like any market moves into overbought and undersold terriority.

You may be quids in now. House prices may fall. But will increased interest costs compensate for the lower purchase price? Its cheaper to buy at £150k paying 4% interest than £130k at 6% interest over 25 years. In general people don't think like this. As its not a logical thought.