Home Equity increases by 2.7% in 2011

wotsthat

DervProf wrote: »

I`ve often thought that there are times when lending rates for business investment (apart from property investment) could do with being detached from mortgage rates. That would leave the BoE with an easier task of balancing the behaviour of the property market and the wider economy.

I don't think that's a good idea. Interest rates charged to borrowers should reflect the costs whoever or whatever they are. A special rate seems to indicate that some would think mortgage lending = bad and business lending = good i.e. some sort of morality tax.

Of course if that's not complicated enough you seem to be advocating two separate rates for business one for nice companies that don't invest in property and a, presumably, much higher one those disgusting companies that invest in property.

If investment in property is so bad why should the BoE control it - shouldn't the government just ban it. Same with advocating special rates for business lending - if it's so special why don't the government just provide subsidies?

Kennyboy66

DervProf wrote: »

Obviously, but in RM's scenario....



That's a very, very sweeping generalisation, and seems like the "analysis" that you'd read in The Express.

And he might claim that on average, people on 25 year mortgages pay off 4% of their capital each year, but in any one year (and he's using 2011) you can't even say that people on 25 year mortgages pay an average 4% off their capital, as it depends very much on the distribution of remaining time on those mortgages.

For a 25 year term @ 5% interest, you are paying back less than 4% of the remaining capital each year in years 1-9 and then more than 4% in years 10-25.

For the same term and interest rates it is only in year 15 where you would pay back more than 4% of the original capital.

The standard length of a mortgage in UK is 25 years, but the average length is only 7 years as people then move. Many people subsequently take another 25 year mortgage, particularly moving from 1st home to second home.

The distribution of the mortage market is thus skewed to the earlier years of a 25 year term.

DervProf

Kennyboy66 wrote: »

For the same term and interest rates it is only in year 15 where you would pay back more than 4% of the original capital.

So. for most people who bought in the past decade, it is unlikely that....

RenovationMan wrote: »

Not a bad return in these difficult times.

applies to them.

Anyway, for the majority of people, I doubt that they bother calculating or even thinking much about their % equity at the moment. I suspect that most mortgage payers are just getting on with keeping their jobs and paying their mortgages.