Is it me? Or has anyone noticed that we are in the largest bubble of all time?

HAMISH_MCTAVISH

Neil_in_Bristol wrote: »

If you're not enriching a landlord, you're probably enriching a banker thanks to the interest portion of your mortgage. (And even if you are enriching a landlord, they're probably passing most of it on to the bank, too!)

Every adult has approximately 60 years where they must pay to house themselves.

You can either spend 25 years paying a mortgage, (or less if you can take advantage of the current record low rates), and then have 35 years rent/mortgage free.

Or you can spend 60 years renting, buying someone else's house for them.

Or a combination of the two.

But the people with the lowest lifetime housing costs are invariably the ones that buy as young as possible, and spend the least amount of time paying for someone else's mortgage rather than their own.

Neil_in_Bristol

HAMISH_MCTAVISH wrote: »

But the people with the lowest lifetime housing costs are invariably the ones that buy as young as possible, and spend the least amount of time paying for someone else's mortgage rather than their own.

That's nearly true. The people with the lowest lifetime housing costs are actually the ones that finish paying their mortgage off earliest. If you can save a chunk of money as deposit while renting, you can reduce the term of your mortgage when you come to buy.

It's can sometimes be better to rent for as few years while you save a decent deposit rather than get a 100% mortgage with an extortionate interest rate. That said, there isn't much choice at the moment!

HAMISH_MCTAVISH

Neil_in_Bristol wrote: »

. The people with the lowest lifetime housing costs are actually the ones that finish paying their mortgage off earliest.

True. Like the ones taking advantage of the once-in-a-lifetime low rates at the moment to overpay.

If you can save a chunk of money as deposit while renting, you can reduce the term of your mortgage when you come to buy.

But as we have seen, rent is more expensive than mortgage interest in 80% of the UK.

So if you live in that 80% of the UK, you're better off getting the mortgage and overpaying.

It's can sometimes be better to rent for as few years while you save a decent deposit rather than get a 100% mortgage with an extortionate interest rate.

100% mortgages are not currently available at all.

Pre-2007 100% mortgages did not have extortionate interest rates, there was no penalty for deposit size.

But you're almost right..... If rent is less than mortgage interest for the same place, AND house prices are not rising at all and not likely to while you'll be renting, then it can in some circumstances make sense to rent and save a deposit.

For 80% of the UK at the moment however, this is not the case.

Neil_in_Bristol

HAMISH_MCTAVISH wrote: »

So if you live in that 80% of the UK, you're better off getting the mortgage and overpaying.

Whle interest rates are at record low rates, that's true (as long as prices don't fall too much).

I think it's important that people don't feel that they should overstretch themselves just to "get on the ladder" at any cost though. I know several people who wish they haven't bought in the last 5 years.

If you can save while you're renting, it's not a waste of time. You're still contributing money towards an eventual house purchase.

It's a shame that many young (and not so young) people don't have the choice at the moment.

franklee

HAMISH_MCTAVISH wrote: »

But as we have seen, rent is more expensive than mortgage interest in 80% of the UK.

So if you live in that 80% of the UK, you're better off getting the mortgage and overpaying.

100% mortgages are not currently available at all.

Pre-2007 100% mortgages did not have extortionate interest rates, there was no penalty for deposit size.

But you're almost right..... If rent is less than mortgage interest for the same place, AND house prices are not rising at all and not likely to while you'll be renting, then it can in some circumstances make sense to rent and save a deposit.

For 80% of the UK at the moment however, this is not the case.

What mortgage rate are you basing that claim on?

A typical rental case round here for a three bed house is a shade over 4% of the house value. E.g. house value 250K, rent 850pcm, rate 4.1% (250000*4.1/100/12 = 854.16 rent pcm).

HAMISH_MCTAVISH

franklee wrote: »

What mortgage rate are you basing that claim on?

It's not my claim, it's based on research by Zoopla.

And they used an interest rate of 5%, which is higher than the current average of 3.6%.

A typical rental case round here for a three bed house is a shade over 4% of the house value. E.g. house value 250K, rent 850pcm, rate 4.1% (250000*4.1/100/12 = 854.16 rent pcm).

Ah yes, the indisputable accuracy of the "round my way" statistic.

It's possible you live in the 20% of the UK where that is not the case...

However it's worth pointing out that buying would still be cheaper than renting in your case.

HAMISH_MCTAVISH

Neil_in_Bristol wrote: »

Whle interest rates are at record low rates, that's true .

Worth pointing out they base it on a 5% rate, not the 2% rate the best trackers are currently.

So record low base rates have not a lot to do with it.

Neil_in_Bristol

HAMISH_MCTAVISH wrote: »

Worth pointing out they base it on a 5% rate, not the 2% rate the best trackers are currently.

So record low base rates have not a lot to do with it.

Mortgage rates of 5% may not be too far away. Always worth allowing for an increase, because they're certainly not going to get any lower.

Fixed rates are already around the 5% mark.

HAMISH_MCTAVISH

Neil_in_Bristol wrote: »

Mortgage rates of 5% may not be too far away. Always worth allowing for an increase, because they're certainly not going to get any lower.

Fixed rates are already around the 5% mark.

I doubt we'll see base rates much north of 3% in the next 5 years.

And we may not see base rates of 5% in the next decade.

How that translates to mortgage rates of course depends on the margin above base your mortgage is, however even Mervyn King has come out this month and said it's unlikely we'll see significant rate rises until the retail cost of borrowing reduces.

quantic

Neil_in_Bristol wrote: »

I think your area is the exception, rather than the rule, unfortunately. Otherwise, why would anyone bother renting?

Bad credit, no deposit, no aspirations...?