UK Households wealthier than ever before

marathonic

Graham_Devon wrote: »

If prices fall 10% they will be in a worse position than the renter.

So falls in prices result in decreases in wealth whilst rises in prices don't result in increases in wealth??? Explain!!!!

Graham_Devon

HAMISH_MCTAVISH wrote: »

If you choose to live in that house yourself, it effectively pays you a 5% imputed rent, or 10K a year, to live there.

You have used this so many times on previous threads, and it's been done to absolute death.

There is an answer to this, but it always ends up in the same response from yourself....that people are confusing the situation.

The answer is....what if you need a new boiler, or the house needs painting, or anything else? Every single time you completely ignore mortgages, mortgage rates and just assume that the house is owned outright and not a bean is ever spent on it.

Once again Hamish, you have had to resort to comparing a house owner, owning the house outright, to a renter with no money. Granted it makes your point, but it's like comparing how much shoppinmg someone with a quid can get against someone with 10,000 quid. You'd claim glory in stating that the person with 10k can buy more.

Graham_Devon

marathonic wrote: »

So falls in prices result in decreases in wealth whilst rises in prices don't result in increases in wealth??? Explain!!!!

I never said that. I agreed that if you give them a 20k paper wealth headstart, they will come out on top in the paper wealth stakes.

Infact, I've not once argued that increases in HPI don't bring increases in HPI. You seem to be randomly making stuff up.

HAMISH_MCTAVISH

Graham_Devon wrote: »

paper wealth

Isn't this really just a term bitter and envious people use about those with assets to make themselves feel better?

I can see the conversation now....

Dev- "Oh, that person owns a 200K house, but it's only "paper wealth"..... If he wants to realise it he has to sell. And then where would he live?"

Hamish- "In a rented house. With 200K in the bank."

Dev- "Grrrrrrrr, muddle muddle, paper wealth, Grrrrrrr, debt, Grrrr"

marathonic

I think every topic to do with homeownership ends up with the same result. All the arguments that can be made are made and then the thread drags out.

With a majority of people in the homeownership bracket in the UK but those renters in the minority more likely to be interested in a thread like this, you are likely to get closer to half on each side of the fence debating on what is a very hot topic and can anger even the most reserved person (on both sides of the fence).

I think this thread has reached the point where further posts aren't really going to add to the topic so this is where I'm going to bow out.

IveSeenTheLight

Graham_Devon wrote: »

Please don't dress this up as "accessing your wealth". It's taking on more debt. Simple as that. Whether the value of your assets have gone up in the meantime is of little relevance, other than getting a better interest rate on the debt. You still can't access it, all you can access it debt.

I don't think you'll ever understand or at least admit to it.
You just see cash and debt, you always forget about the asset.
You can't contemplate that despite equity release, the asset can be sold to clear the debt.

One last attempt.

Assuming 100% mortgages was still available.
£100k property (asset +)
£100k interest only mortgage (debt -)
£0 cash (+).
Nett wealth is £0 as you have no equity in the property

With HPI the property then has 50% HPI over a number of years.
Net wealth is then £50k assuming no cash is saved and no repayment is made

Now you can release that cash and yes you take on more debt

£150 property (asset +)
£150k mortgage (debt -)
£50k cash(+).

Nett wealth is £50k
Now you could choose to hold on to the asset and the debt, else you could also choose to sell the asset to clear the debt.
What's the nett result in this example? That's it,

Does a renter have this option?

Can you now at least agree that you can release and realise equity without the asset debt being 0 or having to sell the property?

If you can't I'm out

IveSeenTheLight

Graham_Devon wrote: »

Ignoring the fact .......

If prices fall 10% they will be in a worse position than the renter.

If interest rates go up, they will be in a worse position than the renter.
.

I see you have chosen to assume that the renter is paying the same as the homeowner in mortgage interest. Generically not so.

I seem to remember many threads which you have been involved in which has proven that the renter generally pays more than the homeowners mortgage interest for the same property.

I don't feel the need to to post links YET AGAIN proving you incorrect YET AGAIN.
I'll simply put this to you, if renting was cheaper than owning ones home, people wouldn't be wanting to be homeowners

wotsthat

Graham_Devon wrote: »

- Your house has a value, but you can't pay the gas bill with it today.

Not unless you draw debt against it.

We can go round and round the houses all you like. You can call me confused, muddling, building strawman arguments.

What you cannot get passed, and appear not to want to comment on is that you have to increase your debt to take money out of the house....or, indeed, sell it. (And you can do that with a car, and in some cases, pensions).

You are keen to write this off in whatever way you can, but that's all you can do. Write it off somehow by trying to detract from the facts and focus on the poster. You can't deny it's fact.

Yes if I borrow money against an asset (any asset) then my borrowings increase but my net wealth position remains the same. It's a fact - remind me what I'm avoiding again?

You know the difference between wealth and liquidity so are just mischief making.

No-one is denying housing equity is less liquid than cash but it's still wealth, and wealth, according to the OP has increased - get over it.

marathonic

IveSeenTheLight wrote: »

I see you have chosen to assume that the renter is paying the same as the homeowner in mortgage interest. Generically not so.

I seem to remember many threads which you have been involved in which has proven that the renter generally pays more than the homeowners mortgage interest for the same property.

I don't feel the need to to post links YET AGAIN proving you incorrect YET AGAIN.
I'll simply put this to you, if renting was cheaper than owning ones home, people wouldn't be wanting to be homeowners

I'll put my figures from a previous thread down to avoid you needing to post a link

The figures are close but won't prompt the standard "what if a boiler breaks down" response - as maintenance is also accounted for.

These are figures for one of the houses I was looking at purchasing.

marathonic wrote: »

Cheapest Rent: £600
House Price: £115,000
Professional Fees: £1,500
Stamp Duty: £0
Deposit %: 25%
Deposit: £28,750
Mortgage: £86,250
Mortgage Rate: 2.90%
ISA Savings Rate: 2.80%

Annual Cost of Buying:
Lost Savings Interest: £847
Mortgage Interest: £2,501
Furniture : £1,140
Maintenance: £1,150
Buildings Insurance: £100
Council Tax (Rates in NI): £1,200
Total £6,938

Annual Cost of Renting: £7,200

Difference: £262


The rent includes rates at £7,200 whilst I'd have to pay them myself in buying.

The lost savings interest would be what I'd get if I put my deposit and professional fees (mortgage and solicitors fee) into the current best buy ISA.


The furniture figure is based on the fact that the rental comes pre-furnished. It's based on buying used furtniture at £5,000 and the need for replacement after 5 years (I've also included an element of interest here as you'd be able to put the £5,000 spent on furniture in a savings account if you rented).


Maintenance is set to 1% of the houses value.


With the above figures, you'd be slightly better off buying. In reality, you could buy used furniture (comparable to a rental) for much less than £5,000 and it's doubtful that a landlord would replace everything every 5 years.


The maintenance includes things such as boiler servicing, replacement of white goods, about 1-2 callouts to tradesmen annually and repainting every few years.


The figures may skew towards renting when interest rates rise as rents are unlikely to rise as much as the interest bill will in the coming years so the focus is to reduce the LTV to 60% and see what sort of 5-year fixes are available.

This skew towards rental would assume no capital appreciation in the property. At the end of the day, the long-term rise in rent prices and property prices should, in theory, rise with inflation with no upper ceiling. There will be an upper ceiling to the rise in interest rates (probably close to the long-term average of 4% base rate). At the moment, 10 year fixed rates are available at 4.19%.

Graham_Devon

Where are you Marathonic?

The house price looks very cheap compared to the cheapest rental possible?

You can get a cheaper rental down here in Devon quite easily. Would be difficult (though not absolutely impossible dependant on area) to match that house price however for a house on par with the rental.

Very generally speaking, £650-700 a month rents you a house which would command around 160k