Not a good time to buy

HAMISH_MCTAVISH

Procrastinator333 wrote: »

Go re-read my other post. Yes I have spent money on rent instead of interest.

But I'm sitting on a non crytalised profit at the moment. So £30k down is nonsense.

Re-read my post.

I said if they return to peak by year end.....

In which case all your rent is wasted, as it could have been mortgage interest instead of rent. But if prices return to peak without you buying, it is rent as well as mortgage interest.

Procrastinator333

I think we all know your view on prices going forward and I reckon mine are pretty clear. If they go up, I lose, If they go down you lose. Very inciteful.

If they do go up, it is not rent plus interest, you never pay both. If prices go back to peak I have only lost (or gained) the difference between rent & interest.

If house prices are flat, the only cost to the renter is rent. The only cost to the buyer is interest. The repayment element is irrelevant over a short period of time as the renter can save the same amount as spent on repayment.

E.g If rental cost and interest cost are the same.

Day 1 buyer buys house for £100k. Pays £20k in interest. At the end they still have a £100k mortgage.

Renter pays £20k rent. Then in year 4 buys the house for £100k. They have both spent the same money and have the same mortgage value at the end of it.

Yes the buyer can repay, but the renter can save. Over the first 4 years when the repayment element is small, the difference in interest rates saved by the buyer vs interest rates earnt by the renter are negligible. So the only cost to either party is the difference in rent vs interest.

dopester

House prices are so ridiculously valued, compared to the unwinding outlook of so many variables going forwards.

You've had the HPI.

This is partially the unwinding of longwave inflation. However we'd have been able to cope with it better if Captain Gordon and his crew had not thrown a 10 year wild reckless party.

Now they're trying to escape the consequences... but won't be able to, because house prices are going to crash hard.



You arrogant @ss. You've killed us.

julieq

Spartacus_Mills wrote: »

The IMF, as always, was looking back and most of the damage in the seventies was either on the mend or being mended. For 17 months prior to the IMF coming in Healey had been cutting expenditure and Callaghan/Healey did not touch the IMF's money. Inflation was also on the way down. The situation was coming back into control.

This wasn't the 1979 I was in. Where the actual problem was to do with rampant unions and a highly unproductive workforce which no-one before Thatcher dared do anything about.

Anyway it won't be as bad as the bears think. We will have higher taxes, and we'll manage. There will be public sector cuts, and we'll manage. You don't stoke the fires of the apocalypse by laying off a few diversity outreach project key workers.

Spartacus_Mills

Rochdale_Pioneers wrote: »

Noone is saying Labour got everything right - that would be lunacy. But to pretend that 1997 was year zero as many frothers attempt, pretending that Britain has never had it so bad is also lunacy. Its been a tough recession. But for most people not as tough as either 81 or 91. And the blame apparently this time is on Brown for deregulating the city. The same people don't blame the 91 recession of Thatcher for deregulating the city despite the cause and effect being so very similar - right down to an arrogant smug chancellor believeing his own hype of an economic miracle in the forms of Lawson and Brown.

Although you make some fair points I think some of them bear further scrutiny. Manufacturing certainly went through some pain in the early Thatcher years but that was not just down to Thatcherite policy. There was a mix of government policy, poor management, militant unions and massively inefficient organisations. We had the advent of automotation and robotics which saw jobs going as well and Thatcher did her bit to try to grow manufacturing (albeit you could argue far too late) by bringing over to the UK the Japanese amongst others. People like Sony, Panasonic, LG, Phillips all set up in the UK as did large car makers. The likes of Honda, Nissan and Toyota. Major certainly did his bit as well. Thatcher realised you need to make and sell things to keep the economy going as well as having a solid service sector.

The early eighties like the late eighties recession was largely due to an oil price shock. The problem we had in the early eighties was that with oil prices being so high and oil bankrolling our economy the value of our currency was too high for the state of the economy (similar to the scenario prior to black Wednesday) and we were not able to exploit our ability to export as much as we should if the currency had been lower. Thatchers rigid adherence to monetarist dogma also did not help.

We suffered a far worse recession in the late eighties due to the folly of the Lawson giveaway budget. I blame the recession of the late eighties on two things, the oil price shock and the stupidity of Lawsons economics. Cutting the top rate of tax from, IIRC, 60% to 40%, was sheer economic vandalism and this from an economist. Inflation sky rocketed and then so did interest rates. Maybe now there are some who try to re-write history but the Tories were to blame, if not for the recession itself at the oil price shock would have done that anyway but for the depth of the recession and its savage nature which was exacerbated by the policies of the day.

Certainly by 1997 things were alot more stable but then our Johnny was more of a socialist than people think. Alot of the boom was due to taxing and spending. Taxes were raised and government expenditure increased. Certainly Brown inherited, if not a glittering economic legacy, then a very stable one and Clarke was a decent chancellor. Brown squandered it over time and alot of the industries that came over here during the Tories left during Labour as we headed towards a more service based economy. I personally believe manufacturing has not been well served by any government in the last 40 or so years. Some have been less worse (is there such a word) than others.

It is interesting to note that, for the car industry in which I spent some time, we made more cars in this country in 1997 than at any time since the mid seventies and produced them with a tenth of the workforce. However that sadly declined rapidly under Labour (not wholly their fault, although they could have done more to help) due to the high value of Sterling especially against the Euro.

Spartacus_Mills

julieq wrote: »

This wasn't the 1979 I was in. Where the actual problem was to do with rampant unions and a highly unproductive workforce which no-one before Thatcher dared do anything about.

Anyway it won't be as bad as the bears think. We will have higher taxes, and we'll manage. There will be public sector cuts, and we'll manage. You don't stoke the fires of the apocalypse by laying off a few diversity outreach project key workers.

You're right, it was the period prior to the IMF intervention the previous year so I am talking about the period from late 1976 to 1978. The Labour government were taking the necessary steps to eradicate the problem and did not use a penny of the money from the IMF. However the facts often get overlooked.

Rampant Unions and a highly unproductive workforce was only part of it. There was a chronic lack of skilled and able managers as well as weak government policy.

chucky

Procrastinator333 wrote: »

@ chucky, rates for the ftb are pretty high, they could also go down and then you would find youself stuck on the fix. Swings and roundabouts.

so you think rates will be the same in 2/3 years time where FTBs will be able to get better rates than now?

Procrastinator333

At some point rates will go up, but will it be passed on to ftb?

If yes, then that is further downward pressure on the lifeblood of the housing Market.

If no, then rates are the same or lower. 2/3 years we will have a 25% deposit, so should be well in to the better rates anyway.

chucky

Procrastinator333 wrote: »

At some point rates will go up, but will it be passed on to ftb?

If yes, then that is further downward pressure on the lifeblood of the housing Market.

If no, then rates are the same or lower. 2/3 years we will have a 25% deposit, so should be well in to the better rates anyway.

this bold bit i can understand the logic

the first part no because you've decided to take a gamble on both rates and house prices - i can't see both of them going in your favour

julieq

Procrastinator333 wrote: »

I think we all know your view on prices going forward and I reckon mine are pretty clear. If they go up, I lose, If they go down you lose. Very inciteful.

If they do go up, it is not rent plus interest, you never pay both. If prices go back to peak I have only lost (or gained) the difference between rent & interest.

If house prices are flat, the only cost to the renter is rent. The only cost to the buyer is interest. The repayment element is irrelevant over a short period of time as the renter can save the same amount as spent on repayment.

E.g If rental cost and interest cost are the same.

Day 1 buyer buys house for £100k. Pays £20k in interest. At the end they still have a £100k mortgage.

Renter pays £20k rent. Then in year 4 buys the house for £100k. They have both spent the same money and have the same mortgage value at the end of it.

Yes the buyer can repay, but the renter can save. Over the first 4 years when the repayment element is small, the difference in interest rates saved by the buyer vs interest rates earnt by the renter are negligible. So the only cost to either party is the difference in rent vs interest.

Ermm, no. You still end up with a 25 year (say) mortgage. In the first case you pay £20K rent (say) and a 25 year mortgage. In the second case you pay a 25 year mortgage. Difference = £20K. You'd pay a lot more rent than that incidentally in HPI hotspots like the south east, where a three bed house would be north of a grand a month.

The only conditions for ending up ahead is if there are significantly higher interest rates during the 4 year initial period than rent costs (the reverse is true), OR if interest rates are significantly lower during a mortgage taken out after 4 years renting (unlikely) OR if the difference in capital value of a house in 4 years is significantly lower than now (which is a matter of opinion).

On another subject, the idea that the 1978/9 Labour government were getting things under control is laughable, by the winter of discontent (78/79) were about as wild as they could ever have expected to be. Thatcher rebooted the entire country, dimantled restrictive practices and militant unions, and essentially removed a lot of the structural problems. And then she sank back into dogma and ran out of ideas. People didn't like it, because a lot of things they believed were fixed and never changing were challenged and rolled back, but it was ultimately beneficial.