Any other home buyers in NI?

motorguy

tara747 wrote: »

Bottom line is, none of us knows what the future will bring, but one thing I do know is that my decision not to buy has served me very well in the last 7 years.

Correction, it served you well at the time.

We're in a very different climate now.

tara747

marathonic wrote: »

Predicting interest rates is almost as difficult as predicting movement in rental prices - but at least you only have to factor them until the end of the mortgage term as opposed to a lifetime renter - I wouldn't want to hazard a guess of what rents will be on my 80th birthday in 2064.

Of course, some are only temporary renters - if all goes according to plan. But the fact remains that predictions, be it in rates or rent, are a fact of life.

I'm happy enough to go with a long term average of 4%, i.e. the rate determined by a lot of banks internal economists when looking at interest expectations over a fixed period of 10 years.

Of course, I wouldn't opt for a 10 year fix because I expect rates to remain lower in the short-medium term. Therefore, I can opt for a 2% rate and overpay significantly during the beginning - this will blow the argument that very little is paid off capital in the initial years of a mortgage out of the water.

I wouldn't want to guess what rents will be on my 80th birthday either. I don't intend still to be renting then.

motorguy wrote: »

Clearly buying with cash is everyones preference, however not yet having the cash gathered up to buy is a very different reason for not purchasing than "market conditions are not good".

As i said, i'm very glad you've cleared that up for us in the last couple of pages, as there did seem to be an intimation that your reasons for not buying were because you were reading the market in a particular way, not just because you didnt have the money yet.

I'm not buying yet because I haven't seen the right house at the right price, and I'm not worried about the market rising out of reach.

qwert_yuiop

motorguy wrote: »

Not necessarily.

You could finance a car that is going down in value for say, £500 a month for 3 years. At the end of that term, the asset is yours and has a value.

OR you could rent the car for £500 a month, and have nothing at the end of it.

Daft example but anyway.

You pay interest on the loan. Eg 10%
Car depreciates eg 20 %

Effective cost of loan 30 %

Level of financial acumen - zero

Now,
House mortgage 3%
Appreciation 1% (let's be generous here)

Effective Cost of finance 2% -your dead money. Well, Mr Bank's money in fact.

Or
Cost of mortgage 20% over last 5 years
Depreciation 50%
Effective cost - heartbreak or 70%, take your pick. Well, both, really

motorguy

tara747 wrote: »

I'm not buying yet because I haven't seen the right house at the right price, and I'm not worried about the market rising out of reach.

So we're in a agreement - the housing market has bottomed out, and the reason you're not buying is because you havent seen the right house yet, as opposed to there being any market / economic preventers?

motorguy

qwert_yuiop wrote: »

Daft example but anyway.

You pay interest on the loan. Eg 10%
Car depreciates eg 20 %

Effective cost of loan 30 %

Level of financial acumen - zero

D'oh! So wrong its embarassing!

To use the "£500 a month" scenario

You buy a car at £13,800, you pay 10% flat rate (for talks sake) for the three years = £18200, so £500 a month.

So your total outlay is £18,200. You own the car after year three and assuming 50% depreciation every three years (reasonable) you get back £6,900.

£18,200 - £6,900 returned = £11,300

Rent it at £500 a month = £18,000 for the three years, with nothing in return.

motorguy

qwert_yuiop wrote: »

Cost of mortgage 20% over last 5 years
Depreciation 50%
Effective cost - heartbreak or 70%, take your pick. Well, both, really

And again horribly wrong.

Firstly, do you really think house prices are going to drop a further 50% from NOW? :eek:

Also, even if they did, why would you sell it after just 5 years? Buy a house, live in it, pay it off over the term and then you own it.

tara747

motorguy wrote: »

Correction, it served you well at the time.

We're in a very different climate now.

Not that different.

IMHO, I made the right call not buying at any time during the last 7 years, when all the bulls were calling the bottom every time there was another 5% drop.

Prices are still 9% below their 2005 values. I don't feel that I've lost out at all. Here we are in 2014, and I have a good stash of savings. To me, this represents financial freedom. I can buy a house if I want to, with a relatively low LTV. I can choose to take a year off work and go travelling - it'd put a dent in my savings, but I wouldn't mind. I can emigrate (which looks attractive given the current weather!).

tara747

motorguy wrote: »

So we're in a agreement - the housing market has bottomed out, and the reason you're not buying is because you havent seen the right house yet, as opposed to there being any market / economic preventers?

I am doubtful that the market has bottomed out (but I will keep this opinion under review and see what the next few quarters bring) - and, even if it has, it's unlikely to rise dramatically. All IMHO, of course.

qwert_yuiop

motorguy wrote: »

D'oh! So wrong its embarassing!

To use the "£500 a month" scenario

You buy a car at £13,800, you pay 10% flat rate (for talks sake) for the three years = £18200, so £500 a month.

So your total outlay is £18,200. You own the car after year three and assuming 50% depreciation every three years (reasonable) you get back £6,900.

£18,200 - £6,900 returned = £11,300

Rent it at £500 a month = £18,000 for the three years, with nothing in return.

Pointless example. Mr Hertz makes allowances for wear, tear and depreciation in his charges. And profit.

qwert_yuiop

motorguy wrote: »

And again horribly wrong.

Firstly, do you really think house prices are going to drop a further 50% from NOW? :eek:

Also, even if they did, why would you sell it after just 5 years? Buy a house, live in it, pay it off over the term and then you own it.

1)The important word in the sentence is "last". All right 7 years - since 2007? So interest paid on loan is likely 25 - 28 %?

Therefore effective rate of interest 75- 78%. Horribly accurate. And just plain horrible

2) probably not but well who knows?

3) If you're not familiar with the term "distressed sale" look it up.