I Cannot See Value

carolt

Good post, Charterhouse.

But don't expect the usual suspects to bother to read it let alone comment on it.

scarter - you seem to continually base your assumptions on rent and mortgage payments being equal. In that scenario, then, yes, buying makes more sense.

But the reality on the ground in mearly all the UK now is that mortgage interest payments (let alone repayment mortgage costs) are still higher than rental payments.

So in that case, your maths simply doesn't make any sense.

The renter can save not only the amount the buyer is paying towards repayment costs, but also the difference between his rental costs and his friend the buye's mortgage interest costs.

After - let's say 2 years - he has more in his account than the buyer has knocked off his mortgage.

The only way the buyer will be ahead is if house prices have risen in that time.

But as surely you can understand (even if Hamish is rather challenged on this point, as on so many) - is that the chances of the conditions of the last 30 years being precisely duplicated in the next 30 are precisely zero. Relying on HPI to bail you out - short term, certainly - makes no sense.

To give an example - round here a 3 bed could be bought from £250,000 ish - at a 6% mortgage, which is a reasonable rate to be considering for a FTB - that's £1629.72 per month repayment, or "1250 interest only.

But the same property will rent for £1000-£1100.

So as a renter, I save £150-250/month already. Plus maintenance costs, buying costs, etc.

I mean don't get me wrong - I can see lots of non-financial advantages to buying over renting.

But without factoring in HPI, the maths is clearly favouring renting over buying.

Let alone the gibberish nonsense figures of buying costing 30% of renting that Hamish pulled out of his over-generous hat.

ukcarper

Graham_Devon wrote: »

Not having a pop here.

But you have chosen a pretty low interest rate for 25 years for the mortgage.

And a pretty high rental rate.

All I know is that where I am, a 160k property could not command an £853 rental per month, as a 160k property would likely be a nice 2 bed, or a basic 3 bed.

They go for around 550-700.

That massively alters your figures.

I think what would be easier is to look at the average mortgage rate over the last 25 years to figure out what you should base your rate on. It's the only fair way to do it, as the FTB today would NOT be able to get a rate of 5%.

Just to show what difference the average type figures I see around me would make...

Loan of £160k @ 7.5% = £1196 per month (roughly 5% BOE base rate)

IGNORING THE FACT THAT INTEREST RATE WILL FLUCTUATE OVER THE YEARS

Total paid = 12 x 25 x £960 = £358800

Rent at 4% = £700 per month

IGNORING THE FACT THAT RENT WILL RISE STEADILY OVER 60 YEAR PERIOD

total paid = 12 x 60 x £853 = £504,000


Then add in maintanance, moving costs.

Still cheaper to buy, but no where near the 30% used.

I'm on the side of buying but you seem to have missed the main flaw in scaters argument i.e. the renter could invest the difference between his rent and the buyers mortgage.

Graham_Devon

ukcarper wrote: »

I'm on the side of buying but you seem to have missed the main flaw in scaters argument i.e. the renter could invest the difference between his rent and the buyers mortgage.

I was just picking up on the figures used, as they were firmly massaged towards the buyer.

£853 rent for a 160k property?

5% mortgage rates?

Having a laugh!

jetta_wales

even if the difference is only 150k or so (by one of the many many examples and sets of calculations here) then though you might not think that's a big difference (I do though) it is still a difference, add to the pleasure of owning, the choice you have and the fact that you can do wat you like to property when you want withnody ever coming into your home with a clipboard and ticking boxes and writting down every tiny mark and stain then threatening to boot you out if you don't pain it over tht mark not before you leave but right now that month. And the feeling of self sufficiancy, security and freedome you have when owning your own home then why would you ever want to rent for life, put up with all of the above and still be 150k down at the end of the day? More if you live longer.

Graham_Devon

jetta_wales wrote: »

even if the difference is only 150k or so (by one of the many many examples and sets of calculations here) then though you might not think that's a big difference (I do though) it is still a difference, add to the pleasure of owning, the choice you have and the fact that you can do wat you like to property when you want withnody ever coming into your home with a clipboard and ticking boxes and writting down every tiny mark and stain then threatening to boot you out if you don't pain it over tht mark not before you leave but right now that month. And the feeling of self sufficiancy, security and freedome you have when owning your own home then why would you ever want to rent for life, put up with all of the above and still be 150k down at the end of the day? More if you live longer.

That goes without saying.

The issue is Hamish's stance that it's 70% cheaper to buy. Like with many other things, will not budge on it, and keeps saying it over and over again even though it's clearly, very wrong.

I have bought, and will buy again. So it's not like I have taken a "side" here. I just hate obviously wrong nonsense being spouted time and time again in response to any kind of debate people are having.

Same goes with the affordability....comparing the 1990 to today. 2 complete ends of the spectrum, but thats always ignored.

Same goes with property ownership.....comparing ownership now with decades previously and stating categorically it is therefore more affordable now. While completely ignoring the fact shared ownership, right to buy etc etc has all enabled more owners on paper....but that is as far as it goes...paper.

All this stuff it spouted time and time again in response to debate. Time and time again everything else is ignored. It really starts to annoy...

chucky

Graham_Devon wrote: »

The issue is Hamish's stance that it's 70% cheaper to buy. Like with many other things, will not budge on it, and keeps saying it over and over again even though it's clearly, very wrong.

this thread has gone on and on without any real conclusion - the two aren't really comparable anyway in the as there are too many variables involved.

out of interest how does Hamish get his 70%? - wouldn't this move in favour of the mortgagee through the length of the mortgage as you pay it back?

also it moves even more in favour of the home owner dependent on the size of the LTV. so a 90% mortgage is more expensive than a 75% one.

it's really not something you can compare unless you're comparing the same property and a fixed period of time.

chucky

Graham_Devon wrote: »

Same goes with the affordability....comparing the 1990 to today. 2 complete ends of the spectrum, but thats always ignored

Same goes with property ownership.....comparing ownership now with decades previously and stating categorically it is therefore more affordable now. While completely ignoring the fact shared ownership, right to buy etc etc has all enabled more owners on paper....but that is as far as it goes...paper.

when should you be comparing against then?

Graham_Devon

chucky wrote: »

when should you be comparing against then?

Well how about the long term average?

Rather than the highest point ever, compared to the lowest point ever?

Don't you find it funny that Hamish picks 1990 to compare today too?

Why 1990? What resemblence does this have to today? It doesn't. It just the complete extreme of today and he can make a point from it.

Graham_Devon

chucky wrote: »

out of interest how does Hamish get his 70%? - wouldn't this move in favour of the mortgagee through the length of the mortgage as you pay it back?

I think, and I must point out think....he is taking house prices from some time ago, when they were cheaper and comparing to rental today.

I.e start point for house is some years ago, start point for rental is today.

Ends up around 30%. There's no other way you can get to that point otherwise.

chucky

Graham_Devon wrote: »

Well how about the long term average?

Rather than the highest point ever, compared to the lowest point ever?

Don't you find it funny that Hamish picks 1990 to compare today too?

Why 1990? What resemblence does this have to today? It doesn't. It just the complete extreme of today and he can make a point from it.

because they are two recessions?

do you know the long term averages for both rentals and house buying/mortgage interest payments nationally?

where i am the general rule of thumb is that if a one-bed is selling for £350k the rent is £350 per week. this all varies on the spec of the flat of course but that would be the case in general.