House prices suffer biggest drop since 2009 - Nationwide -2.6%

DervProf

Graham_Devon wrote: »

Heres a thought, btw....renoman could have just said "ooops, yer, got that wrong" ???

Now you are being silly Graham.

grizzly1911

RenovationMan wrote: »

Thanks grizzly. Yes, I too was amazed that so many different people came onto this thread to make pedantic posts attacking a throwaway comment I made at the start, it really did detract from the thread. I also agree with you that they should have disagreed with my point of view but shouldn't have kept splitting hairs.

As to the first point (at who this is aimed at), I have DervProf on Ignore, for his own good, and so I don't know if he also posted pedantry.

Anyway, thanks for your support. I'm glad there are still a few people on here who can see sense.

I thought I was on your ignore list too;)

Not really supporting you you are one of the worst culprits.

sabretoothtigger

Graham_Devon wrote: »

Which would be fine, if renoman hadn't said that the interest rates don't make any difference to the 4%!!!

Im not sure how much difference it makes as the bank raises the amount you have to pay. If rates go very high do they let people just switch to interest only, I guess that would be fair

RenovationMan

sabretoothtigger wrote: »

Im not sure how much difference it makes as the bank raises the amount you have to pay. If rates go very high do they let people just switch to interest only, I guess that would be fair

As I said earlier, it doesn't matter about the actual interest rate because you have to pay it even if its 2% or 6%. At the end of the year you will still be 4% through your mortgage.

As someone said on a different thread, people forget that a mortgage isn't just the amount you borrow, but all the interest you will pay over the lifetime of the mortgage. At the end of the 25 year period of a repayment mortgage (if you have made no overpayments) you will have repaid 100% of the mortgage (loan and interest). In the first year of having a mortgage you will have repaid 4% of the mortgage (loan and interest).

Simples.

sabretoothtigger

Thats a good point but I dont think all can pay at 6%. That capital repayment is likely to stall, I doubt the bank can chuck people out who pay just interest?

RenovationMan

sabretoothtigger wrote: »

Thats a good point but I dont think all can pay at 6%. That capital repayment is likely to stall, I doubt the bank can chuck people out who pay just interest?

I thought most FTBers were already at or around the 5% - 6% mark on their mortgages?

Graham_Devon

RenovationMan wrote: »

As I said earlier, it doesn't matter about the actual interest rate because you have to pay it even if its 2% or 6%. At the end of the year you will still be 4% through your mortgage.

Simples.

Aye, the interest rate doesn't matter. So long as they keep paying for a year, then they will be a year through their mortgage after a year.

You're point is excellent renoman!

I'm just waiting in anticipation for you to tell us what happens if they continue to pay for 2 years. How far into their rmortgage will they be at that point? Is it..... 2 years??!

RenovationMan

Graham_Devon wrote: »

Aye, the interest rate doesn't matter. So long as they keep paying for a year, then they will be a year through their mortgage after a year.

You're point is excellent renoman!

I'm just waiting in anticipation for you to tell us what happens if they continue to pay for 2 years. How far into their rmortgage will they be at that point? Is it..... 2 years??!

Indeed, or 8% of the way through their repayment mortgage. As you guys are the ones who made such a song and dance about my post, I find it interesting that you're now turning around and moaning about it.

It's not my fault that you guys were so eager to have a dig that you didn't pause for long enough to understand the simple point I was making.

RenovationMan

RenovationMan wrote: »

Good news for those wanting lower house prices, but I'm still not convinced that it's worth holding on with annual drops of only 2.6 percent. Especially given that someone who had bought a year ago on a repayment mortgage would have reduced their mortgage by 4% by now

People seem to be struggling to understand what is a pretty straightforward concept, so let's do the calculation with an example:

Bloke has a £100k repayment mortgage, taken out for 25 years and over the length of that loan has an average interest rate of 8%:

Year 1:
Interest.......Principal....Balance
£7,952.69....£1,309.10..£98,690.90
Total amount paid out: £9261.79

Year 25:
Interest.......Principal....Balance
£389.16.......£8,872.63..£0.00
Total amount paid out: £9261.79

As we can see, a repayment mortgage taken out over 25 years is reduced by £9261.79 each year. The total amount to be repaid in capital and interest with that 8% avg interest rate is: £231,544.87

231,544.87 / 100 * 4% = £9261.79, which is the amount a FTB will pay in the first year of owning the house.

So, someone who had bought a year ago on a repayment mortgage would have reduced their mortgage by 4% by now.

Anyone can do this with an amortization calculator to determine the ACTUAL amount you'll repay on a mortgage over a 25 year term: http://www.amortization-calc.com/#loan-100000-25-8-1-2012-2

RenovationMan

Just to prove my point that the actual interest rate doesn't matter:

Bloke has a £100k repayment mortgage, taken out for 25 years and over the length of that loan has an average interest rate of 18%:

Year 1:
Interest.......Principal....Balance
£17,981.85...£227.31....£99,772.69
Total amount paid out: £18209.16

Year 25:
Interest.......Principal.....Balance
£1,657.78....£16,551.38.£0.00
Total amount paid out: £18209.16

As we can see, a repayment mortgage taken out over 25 years is reduced by £18209.16 each year. The total amount to be repaid in capital and interest with that 18% avg interest rate is: £455,228.98

£455,228.98 / 100 * 4% = £18209.16, which is the amount a FTB will pay in the first year of owning the house.

So, someone who bought a year ago on a repayment mortgage would have reduced their mortgage by 4% by now.


Is anyone going to be big enough to apologise for all the carry on and sniping? Or is the above incorrect?