Halifax -0.4%.... £159,486

chewmylegoff

Eellogofusciouhipoppokunu wrote: »

Sorry if you feel that way. For my part, I refuse to get into discussions where the 'proof' is a highly dubious mathematical example that is skewed to the opponent position's argument. As I said in my retort, if the example guy spends 5 years in his house and is so destitute that he is unable to save up to increase his deposit on the next house then he really shouldn't be moving up the ladder.

In the real world, if house prices were falling and you wanted to take advantage of it (or just ensure that you don't fall into negative equity) then you would save like mad to increase the deposit on the next place or to overpay on your current one.

Once the deposit requirements are out of the way, it's far better to have a lower mortgage than a higher one and in your example, the 25% gain as opposed to the 25% loss leaves the test guy with a mountain of a mortgage that would cost him tens of thousands more to service over the lifetime of the mortgage.

With a 25% fall, the difference in price between his current house and the new one he is buying is £75k. With 25% HPI the difference is £125k. At a conservative 5% interest rate, the HPC mortgage would cost him an extra £312 per month above his existing mortgage. The HPI mortgage would cost him £520 per month.

I like that I'm the one living in a fantasy world when you seem to think one can buy without a deposit. If property prices fall do you think banks will require smaller or larger deposits? There is a clue in what has happened over the last 5 years.

Still, when house prices are falling at least the person who cannot buy because they dont have a big enough deposit can look at a spreadsheet and see that the theoretical mortgage payments on his imaginary house are lower.

Whilst you're right that the mortgage costs more with HPI, you also end up with an asset which is worth much more at the end of it, rather than a capital loss which you appear to ignore in your theorising about the overall cost.

Eellogofusciouhipoppokunu

chewmylegoff wrote: »

I like that I'm the one living in a fantasy world when you seem to think one can buy without a deposit. If property prices fall do you think banks will require smaller or larger deposits? There is a clue in what has happened over the last 5 years.

Still, when house prices are falling at least the person who cannot buy because they dont have a big enough deposit can look at a spreadsheet and see that the theoretical mortgage payments on his imaginary house are lower.

Whilst you're right that the mortgage costs more with HPI, you also end up with an asset which is worth much more at the end of it, rather than a capital loss which you appear to ignore in your theorising about the overall cost.

As I said to DervProf, some people are so bought into the HPI con that they can't see past the illusion. You'll figure it out one day, son. There is a clue in what has happened over the last 5 years and in the 10 years preceeding them - cause and effect.

As an aside, Dervprof made the initial comment but then seems to have distanced himself from the discussion. Do you think that your examples have changed his mind on all this? That's the last time I side with someone on here!

N1AK

chewmylegoff wrote: »

in reality, rising house prices are better if you want to trade up, because it ensures that you have anough of a deposit to actually get the mortgage that you want.

Stagnant to moderately increasing house prices are good for the people who got caught towards the end of the boom and lost massive equity. For just about everyone else stagnant (or marginal falls) is better:
> First time buyers
> People who bought pre-2006, so the house price is the same or higher)
> People who bought post-2009 who may wish to buy a more expensive property at some point

I suppose Estate agents lose out on larger commissions; and more legitimately people who are heavily invested in property, who intend to liquidate those investments and spend them (rather than pass them on) would also benefit from increases.

DervProf

Eellogofusciouhipoppokunu wrote: »

As an aside, Dervprof made the initial comment but then seems to have distanced himself from the discussion. Do you think that your examples have changed his mind on all this? That's the last time I side with someone on here!

I haven't made a conscious decision to distance myself from the discussion, I`ve just been busy doing other things.

I still stand by my opinion that the media's message "HPI = good news for homeowners" is far too simplistic, and I feel that it simply reinforces the common belief that HPI is without question a good thing. I`ve seen the value of my property increase over the years, and plenty of my friends and family have also experienced the same thing. The fact is that if my house was now worth only a little more than I paid for it (rather than over 3 x what I paid for it), I'd hardly be bothered, and it would not make any real difference to my standard of living. In fact, I'd be more likely to consider a move, as I would not face having to take on a bigger mortgage or put such a big dent in my savings. Some say that HPI helps the wider economy, and in many ways it does. I'd argue that high HPI can reduce the number of moves people make, and it's the process of moving that really helps the economy. Of course high HPI can provide short burst of activity in the property market, but it often ends with market crashes that really mess up some people's lives.

I think we really need to get away from "property worship" in this country. Yes, home ownership is a good aspiration for people to have, but the expectation of "profit" once you start paying a mortgage needs to be reduced in my opinion.

mcc100

Eellogofusciouhipoppokunu wrote: »

Who told you that it was bad news for home owners?

Falling house prices are a good thing for most homeowners as it makes it easier to climb the next rung of the ladder. The only people negatively affected are people who have recently bought and might have fallen into negative equity. Even then it just means they are unable to move house (but then if they recently bought, they shouldn't be looking at moving anyway) and it makes it harder to arrange a mortgage (but then people should take a longer view on their mortgage deals than just a year or two).

Falling house prices are good news for all the reasons you subsequently listed in your post and the couple of reasons I have posted above. Hopefully the next time someone tells you that falling prices are 'bad news' to home owners you'll now be prepared with an instant retort instead of having it rankle.

Don't forget BTL'ers.

chewmylegoff

Eellogofusciouhipoppokunu wrote: »

As I said to DervProf, some people are so bought into the HPI con that they can't see past the illusion. You'll figure it out one day, son. There is a clue in what has happened over the last 5 years and in the 10 years preceeding them - cause and effect.

As an aside, Dervprof made the initial comment but then seems to have distanced himself from the discussion. Do you think that your examples have changed his mind on all this? That's the last time I side with someone on here!

Unless I am very much mistaken it was you who suggested that falling prices help people to climb the ladder, which was the specific point I was taking issue with.

zagfles

chewmylegoff wrote: »

Unless I am very much mistaken it was you who suggested that falling prices help people to climb the ladder, which was the specific point I was taking issue with.

If the fall just wipes out previous rises, then it definitely helps.

Say someone bought in late 90's for £100k. House now worth £250k. £70k mortgage outstanding. Salary about £40k.

They want a house currently valued at £400k. They can't afford a £220k mortgage. So they can't "move up".

If prices fell 50% their house would be worth £125k, desired house would be £200k.

They'd only need a £145k mortgage, which they could afford, and they'd have a deposit over 25%, easily enough.

chewmylegoff

zagfles wrote: »

If the fall just wipes out previous rises, then it definitely helps.

Say someone bought in late 90's for £100k. House now worth £250k. £70k mortgage outstanding. Salary about £40k.

They want a house currently valued at £400k. They can't afford a £220k mortgage. So they can't "move up".

If prices fell 50% their house would be worth £125k, desired house would be £200k.

They'd only need a £145k mortgage, which they could afford, and they'd have a deposit over 25%, easily enough.

So this appears to be an example of 25% HPI rather than falling prices...

zagfles

chewmylegoff wrote: »

So this appears to be an example of 25% HPI rather than falling prices...

It's a fall from current levels, even if it's a rise from the original value. Therefore it is an example of falling prices helping people move upmarket, which you "took issue" with.

It would be even better had the fall completely wiped out the previous rise as then only a £130k mortgage would be required.

And for those who are actually capable of saving for a deposit rather than relying on HPI to create them one (some people really are you know), eg someone putting away £6k a year for 15 years would have paid off their £90k mortgage on their £100k house, then the bigger the fall in house prices the better, even way below the original price.

Graham_Devon

chewmylegoff wrote: »

So this appears to be an example of 25% HPI rather than falling prices...

Sounding like Hamish there.

And just like with Hamish, it paves the way for an easy answer.

You make it sound as if the poster was actually impying with 25% HPI it made it easier. Which they obviously werent, hence the strawman argument.

Do the sums with 0% HPI. It's more beneficial to the person trying to move up.