anyone else want a CRASH...?

cwcw

You've fiddled my figures there. The mortgage is at 4.89%, not 5%, so in the example there would be a deficit of £18 a month rather than a surplus of £65 a month.

From what I've seen of rental properties in Sheffield, the lower end of the market (i.e. the flats and terraced houses in OK areas), like my flat and the example 3 bed terraced house, are slightly better value to buy than to rent. These are the properties FTBs are looking for. At the higher end of the market, the 3 and 4 bed semis and detached in the best suburbs, renting is much better value than buying, but that's probably because there's much less of a demand for renting at this end of the market so the owners charge relatively low rents to increase demand.

As for crystal balls, the same applies to interest rates in savings accounts. Nobody knows what the future holds, but if you take that approach then this whole thread may as well be deleted.

Alan_M_2

That's not a mortage, it's savings and as I stated there are tax ramifications I was quoting 5% gross and being very conservative.

Bottom line is -£18 or + £65 a month, it's negligable which is the point I'm trying to get across.

It's not that long ago that you could buy a house and a repayment mortgage was about equivalent to rent - in which case you buy every time.

Now when an IO is equivalent to the rent there's no value especially when you consider you have to add a repayment vehicle to those figures after all is said and done.

Where it used to be so clear that buying was absolutely the way to go, that simply is not the situation we find ourselves in today.

cwcw

£18 a month may well be negligible, but it pays for, say, an internet connection, which is exactly the sort of thing that people will start to tighten up on in the event of a crash/ recession.

Also, it's easy to say that you intend to rent (at the same-ish cost of an interest only mortgage) and then use what would have been the capital repayment cost to put into a (lower rate than house price inflation) savings account, but how many people would actually do that, and how many people would just feel that little bit richer and blow it on drinks/clothes/etc? At least a capital repayment mortgage ensures you invest some money each month in an asset which will almost inevitably rise over the long term (albeit with the possibility of blips along the way).

To me in my situation, the £53 a month less I will be paying in the interest element of my mortgage compared to renting a similar property is enough to be worthwhile. The intangible benefits of not being at the mercy of a landlord and being able to do pretty much as I choose with the property outweighs a couple of grand in solicitors fees/ stamp duty.

And yes, I'd love to have been born 5 years earlier and be buying at the start of a boom, but I can do nothing about that. Now is the right time to buy for me, and I can't justify holding off on the basis of predictions that may or may not be correct. It's a risk, but it always will be, and it always has been (including 5 years ago without the benefit of hindsight).

lynzpower

Actually none of the examples that have been given are based on capital repayment mortgages. cwcw you are th eonly one who has suggested that.

Additionally you bank on this 8% annual growth. Do you think this 8% is national, sustainable, measurable & real?

A bog standard savings account pays 4.85 say then - that is national, measurable and real

likewise if you rent & save you dont need to pay money to get access to your "savings" if we are talking in these terms

cwcw

lynzpower wrote:

Actually none of the examples that have been given are based on capital repayment mortgages. cwcw you are th eonly one who has suggested that.

Additionally you bank on this 8% annual growth. Do you think this 8% is national, sustainable, measurable & real?

A bog standard savings account pays 4.85 say then - that is national, measurable and real

likewise if you rent & save you dont need to pay money to get access to your "savings" if we are talking in these terms

I have given examples using interest only AND capital repayment. Rent being "dead money" is equivalent to the interest element of a repayment mortgage, or the entire cost of an interest only mortgage.

The 8% annual growth is local, slightly above the national average, sustainable in the short term but likely to slow down in the long term, and it only becomes measurable/real when selling or remortgaging.

The market leading savings account pays 5.45%, which is only 4.25% NET for a basic rate tax payer, not 4.85%. I agree that it's in a more liquid form than property equity, however, as I inferred in my last post, how many people are committed enough to save the repayment equivalent into a savings account each month? My girlfriend, for one, would blow it on shoes.

lynzpower

you make good points cwcw..

I feel like having a little test with myself & ill set up a little savings account somewhere and put in it all the money next year that I should have spent on maintainence ( ie when I have to call the LL out to do work) and see in a year what Ive saved. Or if the boiler goes, I wouldnt have that money anyway, Id have to borrow it if \I were still a homeowner, so I guess Id have to factor in interest too.

tomstickland

My repayment mortgage is £420 per month (25 years, currently 2 year fix at 4.39%).
Typical rental for same sort of flat: £400-450pcm. About the same.

In my situation, buying made sense, plus there were other factors that made my mind up.

I did once analyse the difference between saving a massive deposit for a few years versus buying and it made very little difference to me. Mainly because I factored in a 5% PA house price growth, the mortgage rate was around 5% and savings rates are around 5%.

cwcw

tomstickland wrote:

My repayment mortgage is £420 per month (25 years, currently 2 year fix at 4.39%).
Typical rental for same sort of flat: £400-450pcm. About the same.

In my situation, buying made sense, plus there were other factors that made my mind up.

I did once analyse the difference between saving a massive deposit for a few years versus buying and it made very little difference to me. Mainly because I factored in a 5% PA house price growth, the mortgage rate was around 5% and savings rates are around 5%.

With a repayment mortgage costing the same as renting you are definitely better off with the mortgage.

PoorDave

As a proper survey of people around the country, we have a problem.

The people who post might have a vested interest in posting. If someone is a renter who wants to prove that renting is a better option (to themself and the people reading), then they're more likely to post it, i reckon, than if they find out when they calculate their position that actually they'd be better off buying right now!

Same true in reverse for owners, i think.

sm9ai

PoorDave wrote:

As a proper survey of people around the country, we have a problem.

The people who post might have a vested interest in posting. If someone is a renter who wants to prove that renting is a better option (to themself and the people reading), then they're more likely to post it, i reckon, than if they find out when they calculate their position that actually they'd be better off buying right now!

Same true in reverse for owners, i think.

True, but I think its fair to say that the majority of places the rent is cheaper than the equivalent IO mortgage. Espicially with new build properties.