UK Households wealthier than ever before

chucknorris

StevieJ wrote: »

Why is he still using his Foxy name if he wants to go under the radar?

I have never quite been able to work out what his problem is, he certainly has issues.

chucknorris

Graham_Devon wrote: »

Clearly I (and many others stating the same thing on this thread) understand.

If you simply cannot grasp the fact that your bricks going up in value mean NOTHING unless you sell it, then theres nothing I can do here, is there.

Plenty of people are saying it to you. Being obtuse is all you have left.

A lot of assets can't realise profit or equity until you actually sell them and lock that profit or equity in. But it doesn't mean that the notional profit is valueless, it is at least representative as part of your overall wealth.

Personally I only count half the value of my home in my spreadsheet and that is because my wife still owes me for the other half, I don't count my half. But that is only because I can't see the day that I would downsize. But it still isn't worthless because we don't have to pay rent or mortgage interest.

wotsthat

Graham_Devon wrote: »

If you simply cannot grasp the fact that your bricks going up in value mean NOTHING unless you sell it, then theres nothing I can do here, is there.

If your house goes up in value by £100k then at some point that £100k is going to be spent by you or your next of kin. That's far from NOTHING. You can say the same thing about a £10 note - it's worth nothing until you sell it - until then it's just a piece of paper. One's more liquid than the other that's all.

It's as if you're mind is stuck in a day trading mentality. Building wealth is a long game - it's not just about instant gratification.

Still think you're on a wind up.

Graham_Devon

wotsthat wrote: »

If your house goes up in value by £100k then at some point that £100k is going to be spent by you or your next of kin. That's far from NOTHING. You can say the same thing about a £10 note - it's worth nothing until you sell it - until then it's just a piece of paper. One's more liquid than the other that's all.

It's as if you're mind is stuck in a day trading mentality. Building wealth is a long game - it's not just about instant gratification.

Still think you're on a wind up.

And if your house has gone up 100k, your next of kin (if your children) are going to be paying for that until they are handed it, in terms of having to pay more to buy their own place. More on rent.

As I said, not all good. You just see the 100k and rub your hands together.

Next of kin is a different kettle of fish though. To be fair, my points revolved around people living today (hence using bills as an example), not how much cash you leave when you die.

If we include how much cash you have when you are dead and no longer need the assets, then sure, you win the argument...and probably the majority of financial arguments to be had on this forum.

chucknorris

Graham_Devon wrote: »

And if your house has gone up 100k, your next of kin (if your children) are going to be paying for that until they are handed it, in terms of having to pay more to buy their own place. More on rent.

We don't have children but if I did, I would give them a large enough deposit so that they could fund the mortgage (and maintenance costs) by renting out two bedrooms to whoever they wanted to. I think that this would be an excellent way to introduce them to managing financial affairs.

IveSeenTheLight

Graham_Devon wrote: »

Clearly I (and many others stating the same thing on this thread) understand.

If you simply cannot grasp the fact that your bricks going up in value mean NOTHING unless you sell it, then theres nothing I can do here, is there.

Plenty of people are saying it to you. Being obtuse is all you have left.

Graham,
You clearly have not understand the point put to you, let me try a different way.

Lets say a FTBer, buys a £100k house, with a £10k deposit and a £90k mortgage.

Their net wealth is £10k, are you agreed?

Over a period of time, they pay down part of the mortgage (say £20k) and also benefit from HPI so the valuation is £120k.

Can you agree that their net wealth is now £50k? Property value £120k, mortgage £70k.

Lets presume at that time they wish to release some equity to put in a new kitchen / bathroom, so release £20k
It may be that the property value increases by only £10k as a result, so their net worth is then £40k, but they have a new kitchen / bathroom.

Lets extrapolate that they keep on regularly releasing equity but maintaining the mortgage at £90k until death.
At the point the estate gets passed on and the nett wealth is the property value minus the mortgage debt.

The wealth is transferred.

The wealth throughout has been able to be released, WITHOUT increasing initial debt

Does that make it clearer?

dryhat

IveSeenTheLight wrote: »

Graham,

Lets say a FTBer, buys a £100k house, with a £10k deposit and a £90k mortgage.

Their net wealth is £10k, are you agreed?

Over a period of time, they pay down part of the mortgage (say £20k) and also benefit from HPI so the valuation is £120k.

Can you agree that their net wealth is now £50k? Property value £120k, mortgage £70k.

Lets presume at that time they wish to release some equity to put in a new kitchen / bathroom, so release £20k

It's this idea of "releasing" 20k which is causing the confusion.

You have not "released" anything.

You had a 90k mortgage, which you paid down to 70k, borrowed 20k back and now you've got a 90k mortgage again.

wotsthat

Graham_Devon wrote: »

And if your house has gone up 100k, your next of kin (if your children) are going to be paying for that until they are handed it, in terms of having to pay more to buy their own place. More on rent.

As I said, not all good. You just see the 100k and rub your hands together.

Next of kin is a different kettle of fish though. To be fair, my points revolved around people living today (hence using bills as an example), not how much cash you leave when you die.

If we include how much cash you have when you are dead and no longer need the assets, then sure, you win the argument...and probably the majority of financial arguments to be had on this forum.

Yes, possibly, but you're diverging from the point; now instead of talking about wealth (because you've lost the argument) you want to talk about the impact of increasing house prices on future generations. It's the subject of a different debate but whilst my kids will have to pay the market price for buying or renting they'll be glad their dear old dad had the foresight to plan for the long term compared to someone that knew the price of everything and the value of nothing.

Talking about HPI not being able to pay bills today is the classic strawman diversion. You can say that about things that even you would define as an asset...

- my car has a value but I can't pay the gas bill with it today
- my pension has a value but I can't pay the gas bill with it today

In fact I might build my own strawman. The only thing you can pay the gas bill with is cash therefore only cash has value.

undetterred

Its like watching a cat playing with a bird,Grayham is the bird.

IveSeenTheLight

dryhat wrote: »

It's this idea of "releasing" 20k which is causing the confusion.

You have not "released" anything.

You had a 90k mortgage, which you paid down to 70k, borrowed 20k back and now you've got a 90k mortgage again.

I understand, you are confused with the concept of releasing wealth from an asset.
The impact is that you own a lower percentage of that asset.

My example was that you owned 10% of the asset at the start of the mortgage, so lets presume that house prices doubled and you paid down £0 on the property.

Arguably, you could then release £90k and still own 10% of the property, reduced from 55% of the property through HPI.

The impact is that the mortgage interest increased, however you have released wealth from the asset.

This is something that renters don't have as an option and the rents are likely to increase over time regardless of whether the property value increases or not.