An entire generation locked out of property ownership

Cleaver

Graham_Devon wrote: »

Of course you can't see anything wrong with 40 year mortgages.

Neither will Hamish, Cleaver, ISTL, that ghoolie character et all.

Myself, and others preferring to see property prices fall will of course all take issues with 40 year mortgages.

It's the way of the forum

First up, there could be plenty of things wrong with a 40 year mortgage depending on the circumstances of the inidividual(s) taking it out. So please don't say that I "can't see anything wrong with 40 years mortgages", as that's not what I said.

My personal views are:

1) There's nothing wrong with 40 year mortgages if you understand the product you're getting
2) I'd prefer to see property prices fall as I think they are too pricey for a young generation of FTBers (but I don't think they will fall that much).

So do I come out of one of your 'forum teams' and in to another one, or do I need a team of my own to join? Why would someone who wants to see property prices fall automatically take issue with a 40 year mortgage? Are the two things inextricably connected?

Graham_Devon

Cleaver wrote: »

First up, there could be plenty of things wrong with a 40 year mortgage depending on the circumstances of the inidividual(s) takig it out. So please don't say that I "can't see anything wrong with 40 years mortgages", as that's not what I said.

My personal views are:

1) There's nothing wrong with 40 year mortgages if you understand the product you're getting
2) I'd prefer to see property prices fall as I think they are too pricey for a young generation of FTBers (but I don't think they will fall that much).

So do I come out of one of your 'forum teams' and in to another one, or do I need a team of my own to join? Why would someone who wants to see property prices fall automatically take issue with a 40 year mortgage? Are the two things inextricably connected?

Sorry Cleaver. My apologies. I lumped you into this forum ping pong thing we seem to have going over the last month or so (included myself). Same posters disagreeing with the same posters regardless of the content.

To be fair, it's not true of yourself.

dianadors

My mum has rented all her life. She has rented for 52 years and her rent has gone up and up and continues to do so. Since she retired at aged 60 her rent takes up almost all of her state pension. She lives very frugally on her little bit of private pension (£20 per week). She has just the wrong amount of savings that stop her getting benefits for her rent, but won't spend them in case she needs them. I'm sure if you totted up what my mum has paid in rent over the 52 years, with nothing to show for it, you would be horrified. Her friends that did buy are much better off than her.

If the 2 girls in my office continued along the same path (ie one buying with a 40 year mortgage and the other renting - both currently paying £500 per month) then in 40 years time, the one paying rent will retire and still have to pay the rent - which will have increased whilst the other should hopefully have paid her mortgage off.

Of course the spender won't be renting forever as her parents will eventually cave in and pay her deposit for a brand new house.

wotsthat

Graham_Devon wrote: »

Nice to see yuo have actually worked out in detail the comparions between buying on a 40 year mortgage and renting the same house before you patted yourself on the back.

Wasn't that detailed actually but sufficient to show that it's highly unlikely that the person in question would be better off renting.

I wouldn't have wasted time working it out in full detail - you know what it's like when this happens - there would be lots of arguments about the figures. I can think of some who would even argue that the font colour was wrong.

Graham_Devon

wotsthat wrote: »

Wasn't that detailed actually but sufficient to show that it's highly unlikely that the person in question would be better off renting.

I wouldn't have wasted time working it out in full detail - you know what it's like when this happens - there would be lots of arguments about the figures. I can think of some who would even argue that the font colour was wrong.

Previous figures (produced by the media last year sometime) show that based on today (which is all figures can do, as rents could tumble and interest rates rocket etc).

The figures concluded it would take approximately 39 years for the buyer to come out on top of the renter. This obviously didn't include equity, as it was concluded that the equity is not physical money that can be spent, unless the house is given up.

Based on a 40 year mortgage, instead of a 25 year mortgage, and I can only guess that it would take longer than 39 years to come out above the renter.

All the figures were done on averages for that year. It included stamp duty, solicitors fees, mortgage fees, mortgage interest, maintanance, insurances etc.

You are just taking a blase guess that the renter will end up worse off. At some point, yes. But today, I believe you would be better off renting than entering a 40 year mortgage deal....especially if you are entering this based on the mere assumption that things will go swimingly and you'll be able to pay more off.

Cleaver

Graham_Devon wrote: »

Sorry Cleaver. My apologies. I lumped you into this forum ping pong thing we seem to have going over the last month or so (included myself). Same posters disagreeing with the same posters regardless of the content.

To be fair, it's not true of yourself.

What a nice post Graham, thanks. I feel bad for snapping back now.

Don't get me wrong, the very fact that 40 year mortgages exist (existed?) probably shows you that there are issues. Either the person getting the mortgage really needs to look at whether they can afford the house or it shows that house prices are too high. I'm aware that there have been 30 and 35 year mortgages in the past, but 40 years seems so excessive with all the interest you would pay. Anyone taking one out should have a real reason for doing so and understand the risks.

Where I think it could make sense is if, for example, you had a young couple who lived in a high-priced area and were at the start of quite a linear career in a job such as a lawyer or doctor. Although not guaranteed, if both members of the couple look likely to earn more in the future then a 40 year mortgage could enable you to buy a house and have a slightly lower payment per month for a few years before you start earning more and can remortgage to something more sensible. But having said all that, you pay so much more interest on a 40 year product compared to a 25 year product that you have to question whether it would be worth it overall.

IveSeenTheLight

Graham_Devon wrote: »

Sorry Cleaver. My apologies. I lumped you into this forum ping pong thing we seem to have going over the last month or so (included myself). Same posters disagreeing with the same posters regardless of the content.

To be fair, it's not true of yourself.

Is this an indication that you will no longer be categorising posters into groups? If so, I look forward to it.

It's always best to post your comment / debate on your own beliefs / understanding and be prepared to adjust your position as information becomes available.

chucky

let me get this right. what's better?

1. Overpaying on a 40 year mortgage and reducing the capital of your mortgage?

or

2. Overpaying on rent for 40 years and reducing the capital of a landlords mortgage?

wotsthat

Graham_Devon wrote: »

Previous figures (produced by the media last year sometime) show that based on today (which is all figures can do, as rents could tumble and interest rates rocket etc).

The figures concluded it would take approximately 39 years for the buyer to come out on top of the renter. This obviously didn't include equity, as it was concluded that the equity is not physical money that can be spent, unless the house is given up.

Based on a 40 year mortgage, instead of a 25 year mortgage, and I can only guess that it would take longer than 39 years to come out above the renter.

All the figures were done on averages for that year. It included stamp duty, solicitors fees, mortgage fees, mortgage interest, maintanance, insurances etc.

You are just taking a blase guess that the renter will end up worse off. At some point, yes. But today, I believe you would be better off renting than entering a 40 year mortgage deal....especially if you are entering this based on the mere assumption that things will go swimingly and you'll be able to pay more off.

Makes you wonder why landlords bother - they're subsidising renters. They get such a bad press too.

Maybe it's no so obvious that equity shouldn't be included in the calculations - especially if someone else is buying the asset!

ukcarper

Graham_Devon wrote: »

Previous figures (produced by the media last year sometime) show that based on today (which is all figures can do, as rents could tumble and interest rates rocket etc).

The figures concluded it would take approximately 39 years for the buyer to come out on top of the renter. This obviously didn't include equity, as it was concluded that the equity is not physical money that can be spent, unless the house is given up.

Based on a 40 year mortgage, instead of a 25 year mortgage, and I can only guess that it would take longer than 39 years to come out above the renter.

All the figures were done on averages for that year. It included stamp duty, solicitors fees, mortgage fees, mortgage interest, maintanance, insurances etc.

You are just taking a blase guess that the renter will end up worse off. At some point, yes. But today, I believe you would be better off renting than entering a 40 year mortgage deal....especially if you are entering this based on the mere assumption that things will go swimingly and you'll be able to pay more off.

I'd like to see those figure and what they were based on.