MSE News: Guest Comment - Glimmer of hope for first time buyers

HAMISH_MCTAVISH

tara747 wrote: »

You miss the point Hamish. The more restricted the mortgage market, the lower house prices will fall! Simples.

The mortgage market has been severely restricted since Feb 2009, yet prices have risen by 10% or so since then.

Every sensible person agrees that FTBs should save a deposit to buy a house.

Every sensible person agrees that FTB-s should spend as little time possible paying someone else's mortgage instead of their own.

We who have been prudent and saved (and continue to do so) will be in a better position to buy if mortgages are harder to get and house prices fall as a result.

Ahhhh, so you support millions of people being prevented from buying houses so a few people who you determine are "prudent" can buy them at a lower price.

Why does that not surprise me....

Would that be the same generation which is currently graduating from higher education with huge student loans to pay back, and poor job prospects? Riiiight.

Math isn't your strong point, is it?

The leading edge of that generation have already turned 30. None of the new higher student fees generation have graduated yet. They're a decade or so away from average FTB age anyway.

I can see them being major players in the housing market in the next few years at current prices. :cool:

I can see them being still in Uni in the next few years..... They're a decade away from being average FTB age.....

But as has already been pointed out elsewhere, the new regime will actually result in lower repayments and a greater ability to get a mortgage!!! :cool:

From the Adam Smith Institute:

-The truth of the reforms is that there will be a fall in graduates' annual repayments, with the threshold for repayments being raised to £21,000 from £15,000.

-annual repayments are completely income-dependent and set to fall

-The proposed rise in the threshold of repayment would make it easier to get a mortgage

-The article's calculation gives the figure of current annual debt repayments for a graduate on £30,000 per year at £150 per month. What it fails to mention is that with the Browne review and government's proposals, this will fall to £105 per month.

House prices will fall further, precisely because of the financial woes of the early-20s generation.

Yeah, riiiiight...

The recession of the early 90's, with worse youth unemployment than today, didn't stop the housing boom of the late 90's. Just like the recession of 2007 won't stop the housing boom of the mid 2010's...;)

Better luck next time.:rotfl:

brit1234

HAMISH_MCTAVISH wrote: »

The mortgage market has been severely restricted since Feb 2009, yet prices have risen by 10% or so since then.

Yes but weren't interest rates cut to 0.5% at the same time.

HAMISH_MCTAVISH

brit1234 wrote: »

Yes but weren't interest rates cut to 0.5% at the same time.

More relevantly, the supply of properties fell off a cliff that winter, with the number available on Rightmove falling from 1.1 million to just 600,000.

Demand fell, then prices fell, then supply fell until equilibrium was reached and prices stabilised, before recovering.

Absolutely textbook economic theory.

Procrastinator333

HAMISH_MCTAVISH wrote: »

Every sensible person agrees that FTB-s should spend as little time possible paying someone else's mortgage instead of their own.

Not until they have a 20% deposit and access to lower interest rates. With prices falling / stagnating, it is not a good financial decision to buy before having a 20% deposit.

HAMISH_MCTAVISH

Procrastinator333 wrote: »

Not until they have a 20% deposit and access to lower interest rates. With prices falling / stagnating, it is not a good financial decision to buy before having a 20% deposit.

The decision around deposit level and interest rates varies massively according to rental yields and local area price performance. And besides, this rate-apartheid for FTB-s is an abomination that will ultimately reduce over time.

But regardless, in general terms, the best thing anyone can do is spend the least amount of time possible paying someone else's mortgage instead of their own.

And if that involves using a gifted deposit, or borrowed from BOMAD, etc, then that's exactly what they should do.

Procrastinator333

HAMISH_MCTAVISH wrote: »

But regardless, in general terms, the best thing anyone can do is spend the least amount of time possible paying someone else's mortgage instead of their own.

Do the math. Instead of using McTavish "general terms" that always point to buy now think later. For as long as there is such a large difference in rates it will make sense financially to build that deposit before buying. It isn't just the saving while you are waiting to buy, but the saving in those first years having bought witha mortgage that will then be at a lower rate because of it. .

HAMISH_MCTAVISH

Procrastinator333 wrote: »

Do the math. Instead of using McTavish "general terms" that always point to buy now think later. For as long as there is such a large difference in rates it will make sense financially to build that deposit before buying. It isn't just the saving while you are waiting to buy, but the saving in those first years having bought witha mortgage that will then be at a lower rate because of it. .

And as we have established in numerous threads, that "math" involves the costs of rent in the meantime as well.

For example, in my area, house prices are up over 4% year on year, rental yields are around 6%, and so buying even with a very expensive mortgage rate makes more sense than waiting.

I do concede that IF you only have a very small deposit then at the moment it MAY make more sense to save a bigger one due to the current rate-apartheid, but only IF you live in one of the 27% of areas in the UK where prices are falling and/or IF you live in the 20% of the UK where rent is lower than mortgage interest.

But if there's another way to get a deposit, like BOMAD or gifted, then for most people, in most of the UK, they should stop paying their landlords mortgage and start paying their own.

Procrastinator333

HAMISH_MCTAVISH wrote: »

And as we have established in numerous threads, that "math" involves the costs of rent in the meantime as well.

For example, in my area, house prices are up over 4% year on year, rental yields are around 6%, and so buying even with a very expensive mortgage rate makes more sense than waiting.

I do concede that IF you only have a very small deposit then at the moment it MAY make more sense to save a bigger one due to the current rate-apartheid, but only IF you live in one of the 27% of areas in the UK where prices are falling and/or IF you live in the 20% of the UK where rent is lower than mortgage interest.

But if there's another way to get a deposit, like BOMAD or gifted, then for most people, in most of the UK, they should stop paying their landlords mortgage and start paying their own.

It also likely applies to the portions of the country where prices are neither rising or falling. And your 20% figure for rent being less than the cost of a mortgage, is that from zoopla? If so, they also showed that prices fell 17% YoY didn't they?

IR_Fudger

Procrastinator333 wrote: »

It also likely applies to the portions of the country where prices are neither rising or falling. And your 20% figure for rent being less than the cost of a mortgage, is that from zoopla? If so, they also showed that prices fell 17% YoY didn't they?

Well, from a thread a little earlier, it seems that £rent > £mortgage is not always given as you have noted...

chelle_belle wrote: »

Hi,
3 years ago i used my £12k savings as a deposit on a 1 bed house in Norfolk for which i got a repayment mortgage for £108k. I've been renting out that property for 3 years although the rent doesn't cover the mortgage by about £150 a month (mortgage=£650, rent=£500). I bought the property at the time as it seemed the only way to get on the property ladder in an affordable area.

But hey. The ladder is the stairway to heaven right?

Jimmy_31

HAMISH_MCTAVISH wrote: »

And as we have established in numerous threads, that "math" involves the costs of rent in the meantime as well.

For example, in my area, house prices are up over 4% year on year, rental yields are around 6%, and so buying even with a very expensive mortgage rate makes more sense than waiting.

I do concede that IF you only have a very small deposit then at the moment it MAY make more sense to save a bigger one due to the current rate-apartheid, but only IF you live in one of the 27% of areas in the UK where prices are falling and/or IF you live in the 20% of the UK where rent is lower than mortgage interest.

But if there's another way to get a deposit, like BOMAD or gifted, then for most people, in most of the UK, they should stop paying their landlords mortgage and start paying their own.

It seems that you base a lot of what you say on the (fact) that potential FTBs are paying rent to a landlord.

I am a potential FTB and do not pay rent and i am guessing there are thousands upon thousands of potential FTBs who dont pay any rent either.