Preparedness for when

moneyistooshorttomention

Frugalsod wrote: »

I think that people generally expect rising house prices no matter where they are. Prior to the deregulation of banks in the UK, prices were remarkably stable. They only rose in line with wages. Now they rise far faster than wages and the prospects of buying a home are now outside the range of more and more people. So the baby boomers who have bought buy to lets will eventually discover that there is no one who can afford to buy their property at the inflated values that they want to be able to fund their retirement on. The millennial's that they are hoping will buy their investments are loaded up with student debt that can never be cancelled and so do have the income to afford the ridiculous mortgage multiples to buy the places, because they already have a mortgage called a student loan. Demographics are going to prove that property is not a great investment forever.

Overall...I tend to agree with your analyses. However, as far as I recall, any remaining student debt does get cancelled automatically at a certain age. I cant recall what that age is now, as its not something that impacts on me personally...but I do recall thinking "No need to concern themselves forever with that debt they've had put around their necks...as reaching that age will remove it from them automatically".

On a different tack, as we are steadily locked out from buying homes in our own capital city (by our property being bought up as investments to keep safe foreign capital), then it looks to me as if would-be local London buyers are steadily being forced further and further out and now heading out to other large British cities. To me...I rather think the knock-on effect from that will be people who expect to buy in those cities moving on out in turn and so on .......

I certainly wonder how many of us come, say, 10 years time will have been forced to move out of areas we expect/ed to be able to buy homes in. To me...I just see it as a circle steadily spreading outwards across Britain, as people have to move to a steadily further and further outwards section of that circle to where they expect to live. Add on wanting not to lose whatever level of "safety" we feel about our area and it may be necessary to move "outwards" to retain the same level of "feeling of safety" we have been used to having in our own areas and that is another factor to take into account.

RAS

moneyistooshorttomention wrote: »

Overall...I tend to agree with your analyses. However, as far as I recall, any remaining student debt does get cancelled automatically at a certain age. I cant recall what that age is now, as its not something that impacts on me personally...but I do recall thinking "No need to concern themselves forever with that debt they've had put around their necks...as reaching that age will remove it from them automatically".

Not quite....... for current students in England & Wales: 30 years from the first April after graduation (when you were first due to repay)

So many will be in their fifties before they stop paying their loan.

maryb

Student debt is governed by regulations which can be changed by Statutory Instrument at any time. There was a report earlier this year that the Treasury was looking at making people pay back faster because the numbers were working out that most people would not repay in full. That was squashed but don't assume they can't change the goalposts. Even if they don't, market conditions change. To start with, lenders said it wouldn't count as part of total debt for mortgage purposes because if you don't earn anything you don't make repayments unlike other debt. But now it does count because of the new affordability rules - which actually makes perfect sense.

We have decided that it still makes sense for DD1 to keep her savings to use as a deposit rather than repaying her loan because it would reduce the amount she is on the line for each month if she lost her job. But we don't assume that will always be the case so she will take a short term fixed mortgage and then remortgage when her salary goes up when she qualifies and make overpayments up to the maximum allowed

Frugalsod

While student debt is written off eventually it does act like an additional tax on those graduates. It will also affect your ability to raise a mortgage as it will reduce your disposable income. We never should have brought in student loans and certainly not ones that cannot be written off in bankruptcy. It would have been far better to maintain free university education and if necessary restrict it to a small percentage as they had in the past.

As to attachments to an area, I think that family support would be a substantial part of that. If you lived in an area where you had no family support then your limitations in regard to child care are much more severe. It can also impact your ability to help older family members, as you might be living a long way from them. We already have people commuting hundreds of miles daily for work because that property bubble has moved further afield. How sustainable are many peoples lifestyle if there were a major fuel crisis and commuting by anything other than bicycle or foot was not an option?

My cousin bought his 2 bed flat in London many years ago and has now cleared his mortgage but if he had to get a mortgage for it now he would find it impossible because its value is more than 50 times his income.

RAS

Since I bought my house (well outside the London bubble), my salary has increased by 2.8 times and the "value" of the house by very nearly 5 times.

I would not be able to get a mortage on it with my current salary.

jk0

Anyone see this on Zerohedge?

http://www.zerohedge.com/news/2015-01-08/europes-largest-bank-stock-suspended-admits-need-89-billion-capital-raise

Frugalsod

I have heard loads of news today items about how deflation is bad for the economy. It is claimed that people will be holding off purchases waiting for a better deal. Though how many of us were already doing that because they were already skint? You only have to see in the forums how many debt free wannabees there are to realise that they are having to hold off from spending because of existing debts. How are these people waiting for better prices? They are not even looking to buy additional goods.

I suspect that economists, commentators and reporters are unable to tell which came first. The average consumer is probably overwhelmed with debt and so looking for bargains long before the deflation kicked in. You only have to see how the German supermarket discounters have done so well in the last few years to appreciate that shopping habits have been changed by financial struggles.

Also deflation has been the norm in Greece for 6 years now, and only now are they getting worried.

I suspect that the real reason for concern is that deflation over the long term makes debts more unsustainable and default more likely. This only really exposes the real and persistent weaknesses in the banking system.
During deflation the debt burden increases so that the debt becomes harder to repay. That was why when I worked out that deflation was coming some years ago, to slash my expenses and repay my debts before the inevitable cuts to my income fed through. I am nearly there.

For a government dependent on banks funding them it skews the policy into one that is much more supportive of the banks and creditors in general against the publics interest will mean deflation will be a risk here as well.

Frugalsod

jk0 wrote: »

Anyone see this on Zerohedge?

http://www.zerohedge.com/news/2015-01-08/europes-largest-bank-stock-suspended-admits-need-89-billion-capital-raise

Banco Santander is nearly bankrupt. They are hiding tens of billions of losses on Spanish mortgages. The value of is assets are massively overvalued and banks are still allowed to use mark to fantasy/model valuations rather than mark to market valuations. The UK arm is in better shape than its parent but it is not completely out of the woods.

Softstuff

Student loans over here are funny things. Paid only when you reach a certain level of earnings, written off after a certain age, but (and this is why rather a lot of young Aussies do it) if you leave the country (for good) you don't pay them at all.

Friend of ours had done 2 degrees, he now lives in Canada, no student loans to pay at all and no intention to ever come back.

Perplexed_Pineapple

Evening all, haven't managed to catch up properly yet but thought you might be interested in this old link that I don't think we spotted at the time:
http://www.telegraph.co.uk/news/worldnews/asia/pakistan/10507342/India-Pakistan-nuclear-war-could-end-human-civilisation.html
Interesting reading :eek: