Home Equity increases by 2.7% in 2011

DervProf

JonnyBravo wrote: »

Yep all true. It's just you seemed to be bemoaning a lack of reasoned debate only one post after a dig at him. Struck me as a little naive/disingenuous.

I understand the point that you make, but there was nearly an hour and a half between the sensible point I made and the "dig". He had the opportunity to debate/argue the point I made, but chose to ignore it. And the dig I made was hardly offensive, it was a gentle nudge to try and get some reasonable debate going. It was also a reply to one of his rather long winded and patronising posts to another forum member.

Thrugelmir

RenovationMan wrote: »

The banks actually want IO mortgages to stay and for the repayment vehicle to be reviewed every 5 to 7 years rather than every year as the FSA proposes. If the FSA proposals go through then IO mortgages will be too expensive to administer and hence they will disappear.

Repayment mortgages are now accounting for over 96% of all new advances. Perhaps the penny has actually dropped after many years that for the majority of people this is actually the best option. Too many people are now coming to the end of their mortgage terms, close to retirement, with a balance they are unable to settle.

The repayment vehicles would have to be reviewed more often than 5-7 years. That's far too infrequent for correctove action to be taken.

DervProf

JonnyBravo wrote: »

And so back to the topic....

is paying 4% off your mortgage to show a net gain of 2.7% a good thing? Not really, but nor is it really important.
Those of us who have mortgages have to pay them off, we can't control how much the house becomes worth.
Clearly it's better than paying 0% off the mortgage but losing the house!

In my mind, anything paid off a mortgage is a good thing. The exact calculation of equity after that repayment is made is a little academic in most cases. The lender will want the mortgage paid back after a certain period of time, or they may well take the house back. It might well be that in any particular year, more will be paid off the mortgage than gained in equity (say only 2% gets paid back, but the value of the property falls by 7%). This may seem like a net loss to the motgage payer, but they still have a roof over their heads, and in the long term the chances are that the amount they paid back (including interest) will be less than the value of the property at the end of the mortgage period.

I suppose that working out the net gain in equity (assuming there is one) might give a property purchaser a bit of "feel good factor", if they care about such things.

DervProf

Thrugelmir wrote: »

Too many people are now coming to the end of their mortgage terms, close to retirement, with a balance they are unable to settle.

It would be interesting to see how many "too many" actually is, and what the outstanding balances are. Are there any figures published that show these statistics ?

One of my customers is in this exact situation, due to an endowment policy that has failed to perform.

Pimperne1

Thrugelmir wrote: »

Repayment mortgages are now accounting for over 96% of all new advances. Perhaps the penny has actually dropped after many years that for the majority of people this is actually the best option. Too many people are now coming to the end of their mortgage terms, close to retirement, with a balance they are unable to settle.

The repayment vehicles would have to be reviewed more often than 5-7 years. That's far too infrequent for correctove action to be taken.

Don't really agree with this. If people have been canny enough to get on the housing ladder then I doubt they will be naive enough to forget that they still owe something at the end of the term of their IO.

If they do have to sell to pay off the mortgage (a sum which will be a relative pittance) then they may be able to make more on their property than if they had taken out a repayment (ie they may have been able to afford a more expensive property which will be correspondingly more expensive now too).

All of my mortgages are IO - as I am fond of saying "agree the price of a house now, pay for it in 25 years".

DervProf

Pimperne1 wrote: »

If people have been canny enough to get on the housing ladder then I doubt they will be naive enough to forget that they still owe something at the end of the term of their IO.

Can getting on the "housing ladder" be described as "canny" ?

There's enough media coverage about the almost guaranteed wealth that comes from property ownership to conclude that those that do buy property aren't really being "canny".

Canny is selling Northern Rock shares when they were ~£10.

Canny is buying gold a few years ago.

Canny is a word used to make the millions of people who choose or chose to buy a place to live in sound more clever than they really are.

Thrugelmir

Pimperne1 wrote: »

Don't really agree with this. If people have been canny enough to get on the housing ladder then I doubt they will be naive enough to forget that they still owe something at the end of the term of their IO.

Many people don't agree with the policy. However the FSA is doing this. To stop the loose lending policies that have been seen in the recent past, not just to protect borrowers.

Pimperne1

DervProf wrote: »

Can getting on the "housing ladder" be described as "canny" ?

There's enough media coverage about the almost guaranteed wealth that comes from property ownership to conclude that those that do buy property aren't really being "canny".

Canny is selling Northern Rock shares when they were ~£10.

Canny is buying gold a few years ago.

Canny is a word used to make the millions of people who choose or chose to buy a place to live in sound more clever than they really are.

Yes it can.

shortchanged_2

RenovationMan wrote: »

What on earth are you talking about shortchanged? You're better than this. Come on mate, pull your socks up.

I've already given you my 'Valuations for 5 year olds' text, you seemed to understand it but it seems that you're once again struggling. Shame really.

When I bought my house I arranged a 3 year discounted BoE tracker. Hence the reason I have a 3 year equity challenge. WHen the three years are up I'll arrange a new mortgage and I'll know my new valuation price, my new mortgage term and I'll set up my next challenge and signature accordingly.

Which is why your equity challenge is really a bit of farce. Because you may hit your 50% target on it's current valuation but if your property is valued lower at remortgage time then you haven't really hit your target have you.

RenovationMan

shortchanged wrote: »

Which is why your equity challenge is really a bit of farce. Because you may hit your 50% target on it's current valuation but if your property is valued lower at remortgage time then you haven't really hit your target have you.

Or more likely the house will be valued higher at remortgage time and I'll have exceeded my target. Remember, apart from removing the roof, installing 100mm of kingspan and breathable multi-foil insulation and replacing the roof, raising the height of the chimney, fitting more energy efficient chimney pots (and ones that stopped rainwater coming down the chimney) and insulating the chimney with LECA we have also created a 1 bed self-contained apartment with underfloor heating, limecrete floor, 150mm kingspan in the roof, woodwool & sheeps wool internal insulation, a £8k fitted kitchen with quarts worktops, fitted oak wardrobes and a new wetroom. We've also done more but that's enough to get started.

Besides, even if the house valuation is lower than the £450k and I don't achieve my target, it's not like I actually 'lose' anything. I'll have paid off £75k of my mortgage in 3 years. Hardly a disaster is it?