How I intend to make £'000s

Jim_B_3

arkie wrote:

people who own their home would be crazy to wish for a crash.....

Unless, of course, they ever want to move into a better home. The only people who don't benefit in a crash are those home owners who intend to move into a cheaper house and pocket the difference. Anyone looking to start/expand their family, or just move to a nicer house, will save tens of thousands in the event of a crash.

In answer to the various replies to my brief examination of how good an investment residential property is compared to alternatives, I started on the assumption that one had 100k without borrowing. Of course, if you need to borrow, you can really only invest in residential property, but on the other hand you'll end up paying about 200k over the life of the mortgage for your 100k worth of house. Ouch! Mortgages are a sucker's game, it seems.

My motto

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when spouting bons mots about knowledge, check your spelling.

jamesd

82616 wrote:

I...'m desperate to get my own place. Basically i'll be able to afford a deposit of approx 50% of the value of a house in my area (a 2 bed terrace is approx £100,000). I just can't decide if i should rent, or buy.......any opinions???

Buy a place where the mortgage payments are roughly the rent you'd pay. Then you'll be about as well off as you would be if renting but will eventually own the place.

I wouldn't use 50% deposit. More like 10% and invest the rest in stock and share funds, since those will probably grow in value by more than the interest paid on the mortgage, long-term. Or, to be more cautious, 25% and invest the other 25%. Or buy at 50% but then pay the diffence between 100% and 50% mortgage into a stocks and shares ISA in a range of growth funds.

The 25%-25% split is possibly the most cautious at present, since it provides a spread of risk from the housing market and stock markets. And whatever happens, you're continuing to gain by the rent you're not paying.

BT_man

arkie wrote:

my motto

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remember a little knowledege is very dangerous

HOW IRONIC !!!!!!!

You really do not know what you are talking about. :eek:

meanmachine_2

arkie wrote:

low interest rates = easier to borrow money = high house prices = higher debt

house prices crash= banks make it even harder to borrow money = high interest rates= higher rent

my motto

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remember a little knowledege is very dangerous

interest rates = set by the bank of england based on issues almost totally unrelated to housing.

you = very confused man.

cwcw

meanmachine wrote:

interest rates = set by the bank of england based on issues almost totally unrelated to housing.

you = very confused man.

The housing market is a very related issue. It's one of the factors considered when adjusting the base rate.

cwcw

Jim_B wrote:

Anyone looking to start/expand their family, or just move to a nicer house, will save tens of thousands in the event of a crash.

They won't save tens of thousands of pounds. Houses they want to move to will be tens of thousands of pounds cheaper, yes. But the reason for such a price drop will almost certainly be due to lower affordability brought about by higher interest rates, so the tens of thousands of pounds "saved" will actually be spent on servicing higher interest charges over the mortgage term instead.

free4440273

cwcw wrote:

The housing market is a very related issue. It's one of the factors considered when adjusting the base rate.

i agree. ordinarily, that should be the case. but this time round, the BofE has been explicitly saying (this was in the Financial Times this week, i don't have the author's article unfortunately) it will not merely look at house price increases as a measure inflation to adjust rates. i agree, they should but they are not, and they are wrong not to. this is what i meant in my previous post
http://forums.moneysavingexpert.com/showthread.html?t=336172#10

Hereward

Jim_B wrote:

Unless, of course, they ever want to move into a better home. The only people who don't benefit in a crash are those home owners who intend to move into a cheaper house and pocket the difference. Anyone looking to start/expand their family, or just move to a nicer house, will save tens of thousands in the event of a crash...

This assumes that the market crashes uniformly: this very rarely happens. It is quite feasible for the desired property to increase in value as everybody else has had the same idea; alternatively, the property that they currently only is so undesirable that nobody will purchase it without a large discount, which would increase the price difference.

meanmachine_2

cwcw wrote:

The housing market is a very related issue. It's one of the factors considered when adjusting the base rate.

It's an issue, yes.

But arkie's theory that a housing crash would be met with a raising of interest rates is simply barking.

A crash might be met with a tightening of lending, but that's a separate matter.

Property inflation initially gives a filip to spending - then ultimately becomes a drag on spending as more and more people buy/remortgage at these greater prices.

So a "boom" is to be avoided at all costs.

To describe our market as "the best in the world" is bordering on the sick and delusional.

Jim_B_3

cwcw wrote:

They won't save tens of thousands of pounds. Houses they want to move to will be tens of thousands of pounds cheaper, yes. But the reason for such a price drop will almost certainly be due to lower affordability brought about by higher interest rates, so the tens of thousands of pounds "saved" will actually be spent on servicing higher interest charges over the mortgage term instead.

I disagree. For starters, I contend that interest rates alone do not dictate affordability. Secondly, to my mind a home owner is someone without a mortgage, and thus will have the cash to buy their new home without needing to borrow money.