UK Households wealthier than ever before

dryhat

IveSeenTheLight wrote: »

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.

I'm not confused at all and I'm not arguing.

I know exactly what you're on about.

But when you say "the house price doubles and you release 90k"
what you mean is you increase your borrowing to 180k and have 90k cash to play with.

This is what fuelled the consumer boom of the last decade and I understand exactly how the thinking goes.

But the only way of taking money out of the house and realising the gains without increasing your borrowing is by selling.

The idea of "releasing" the money is just jargon for bigger mortgage.

This is what Dev meant.
I think.

IveSeenTheLight

dryhat wrote: »

I'm not confused at all and I'm not arguing.

I know exactly what you're on about.

But when you say "the house price doubles and you release 90k"
what you mean is you increase your borrowing to 180k and have 90k cash to play with.

This is what fuelled the consumer boom of the last decade and I understand exactly how the thinking goes.

But the only way of taking money out of the house and realising the gains without increasing your borrowing is by selling.

The idea of "releasing" the money is just jargon for bigger mortgage.

This is what Dev meant.
I think.

Your forgetting that you still have the asset.

ITS NET WEALTH WE ARE TALKING ABOUT!!!!!!!

Property is valued at £200k
Mortgage is £90k
Cash is £0
Net wealth is £110k

Property is valued at £200k
Mortgage is £180k (£90k released from the property equity)
Cash is £90k
Net wealth is still £110k

You just have released the cash from the property

Why can't you understand that you can release equity from a property.
It doesn't need to be mortgage free or to sell it to release that equity for other purposes as Graham suggested.

wotsthat

dryhat wrote: »

But when you say "the house price doubles and you release 90k" what you mean is you increase your borrowing to 180k and have 90k cash to play with.

The net wealth position is the same. Seems like an example of showing wealth is wealth rather than an example of prudent behaviour

dryhat wrote: »

The idea of "releasing" the money is just jargon for bigger mortgage.

This is what Dev meant.
I think.

Who knows? I think he meant that as housing equity couldn't be spent on a day to day basis it's value as wealth wasn't relevant.

I'm alright. I've had a little cashpoint fitted to the side of my house - as soon as the land reg data comes out I take the cash out to buy the bunting.

grizzly1911

IveSeenTheLight wrote: »

Your forgetting that you still have the asset.

ITS NET WEALTH WE ARE TALKING ABOUT!!!!!!!

Property is valued at £200k
Mortgage is £90k
Cash is £0
Net wealth is £110k

Property is valued at £200k
Mortgage is £180k (£90k released from the property equity)
Cash is £90k
Net wealth is still £110k

You just have released the cash from the property

Why can't you understand that you can release equity from a property.
It doesn't need to be mortgage free or to sell it to release that equity for other purposes as Graham suggested.

It then depends what you do with it.

If you then go and buy a £30k BMW and a £15k of imported kitchen fittings the nation is is £45k poorer.

Percy1983

If its going with averages, if you cash in you 100k hpi the the next generation have to pay the hpi so have 100k more debt.

hpi gives money to those who don't deserve it and pass the bill to those who don't deserve it.

Graham_Devon

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.

Hardly rocket science is it...

Though humbling to note you too, are confused.

Graham_Devon

IveSeenTheLight wrote: »

You just have released the cash from the property.

You have simply increased your debt.

That is it.

Lets put this another way shall we.

Instead of increasing your mortgage from 70k to 90k and ending up with 20k cash...

... you take out a personal loan for 20k cash.

The end result on your wealth, your debts is EXACTLY the same. You have 20k cash. Your debts have increased by 20k, your personal wealth decreased by 20k.

It makes no odds whether you borrow more from the mortgage, borrow it as a personal loan or transfer it from your credit card..... what you are telling us is that you can borrow 20k and have 20k in cash.

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.

dryhat

IveSeenTheLight wrote: »

Why can't you understand that you can release equity from a property.
It doesn't need to be mortgage free or to sell it to release that equity for other purposes as Graham suggested.

Yes, you can "release equity" from a property.

But what you call "equity release" - I call borrowing.


Only by selling can you get the cash, put it your pocket and say "this is mine"



edit: I can't believe that after 5 years this debt-junkie nonsense about "unlocking capital" or whatever the HPI nutters call it is still prevalent.

marathonic

I think this is one of those arguments that people reveal which side they sit on and, despite realising they're wrong, they're too deep into it to back down.

If a person has a mortgage of 100k on a 200k house and another has a 120k mortgage on a 200k house but has 20k in investments, neither is more wealthy than the other.

Increases in equity DO make people wealthier. Let's say you decide to rent and I buy. If my property increases in value by 50k, I am wealthier. I'm given more options in life because I can release some of that 50k for whatever purpose I see fit.

I could use it to fund a business start-up or, as referred to above, buy a BMW. After buying the BMW, I could sell the house at any time, paying off the mortgage and STILL hold 50k, less the cost of the BMW, in cash.

I could move to a contracting job that requires travelling to various part of the country which would require me to sell up and start renting. I'd then have 50k cash to invest or lodge in the bank.

Am I wealthier than the person that stayed out of the property market - of course.....

Graham_Devon

wotsthat wrote: »

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.

- 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.