High house prices damage buiness and the economy

Conrad

dryhat wrote: »

If you need to wait for rising house prices to enable you to start a business, either you or your business ideas are 5h1t .

Making the most of an opportunity? Money behind you in the form of equity enables you to take a new path in life.

Why place yourself on the end of a business loan gun barrel when you can quietly draw £50k using your offset mortgage at 2.5%?

Graham_Devon

Conrad wrote: »

What can I say Devon? Pretty much an everyday thing for me to encounter over the last 20 years. If you want an example a chap who withdrew £40k to go it alone as a semi conductor broker. Within a few years he'd built a £50m firm employing dozens.

What is the firm?

And if housing equity didn't exist, would he not have been able to access 40k from the bank?

dryhat

Conrad wrote: »

Making the most of an opportunity? Money behind you in the form of equity enables you to take a new path in life.

Money behind you in the form of equity allows you to borrow more money. But borrowing more money is not, in itself, necessarily a good thing.
As those now in negative equity will attest.

Yes, the money can be put to productive use, but more often it's not.

Wishing and hoping for rising prices so you can borrow more to fuel further consumption is just idiotic and can only end badly.

Conrad

Graham_Devon wrote: »

Right....but that#s nothing to do with housing equity.


Twas to illustrate the 'this is how you raise a business loan' manual, is often not required by those with street smarts in the real world of business. A car loan, like house equity is an alternative used by many. I don't expect they teach this sort of thing in business school.



I was wondering whether the price that people are paying now for housing was worth it, as you stated people can withdraw equity to put into a business.

What price? In the south East where I am most people are very comfortable, and there is a high proportion that run their own biz. Housing equity withdrawal is common place. Even employees have done it - one I know invested in French fishing lake and camping park. This side line is about to become his living and enabled him to get off the wage slave hamster wheel. All thanks to housing equity plus some savings.


Assuming this is the case, surely you'd have examples. Not examples of a car loan, but examples of what you stated?

I've mentioned a couple so far.

Lots of people I know have been stung by housing costs....it doesn't prove anything more than "I know them". And doesn't prove that high housing costs are bad.

Fair enough, all I c an say is in my area it's common to use equity to fund a venture. Another example is a cart racing venue - they are now millionaires thanks to the equity they withdrew to start a new life.

I'm just not sure that a decent proportion of housing equity withdrawal has been used to provide growth through expanding business, thats all.

Devon you wont find a graph documenting this because lender do not generally allow equity withdrawal for business purposes. They know it goes on but officially they cannot be seen to be involved.

It's funny, we buy into the idea of personal experience providing an insight into something like bush craft or trapping a Kudu in Botswana, but somehow a finance brokers examples of life in the world he swims within must be invalid

Replies in red

the_flying_pig

I really, really don't like the argument that there's a systematic market failure that results in under-lending to business [banks falling over themselves to lend money for buying houses, rather than busiess, playing no part in this obviously] & that HPI is a good way [i.e. better than the alternatives] to correct this failure.

Conrad

dryhat wrote: »

Money behind you in the form of equity allows you to borrow more money. But borrowing more money is not, in itself, necessarily a good thing


Agreed.


Yes, the money can be put to productive use, but more often it's not.

Quite possibly the case, who knows really...

Wishing and hoping for rising prices so you can borrow more to fuel further consumption is just idiotic and can only end badly.

Wishing for price rises in order to fund consumption is indeed not to be admired.

Making the most of opportunities is something different.

Cheers ears:beer:

Graham_Devon

Devon you wont find a graph documenting this because lender do not generally allow equity withdrawal for business purposes. They know it goes on but officially they cannot be seen to be involved.

So, in a nutshell conrad, you are basically reverting back to one of your "fraud is beneficial" scenarios?

Conrad

the_flying_pig wrote: »

I really, really don't like the argument that there's a systematic market failure that results in under-lending to business [banks falling over themselves to lend money for buying houses, rather than busiess, playing no part in this obviously] & that HPI is a good way [i.e. better than the alternatives] to correct this failure.

Some people have used equity as a much cheaper, easier and best of all, safer, way to expand or start a business.

Offset mortgages are the meat and bread of many a business owner. For example repaying capital when you can but perhaps then withdrawing some at super low rates to lets say fund some capital equipment.

The danger in a business loan is that PERSONAL GURANTEES and other warranties can effectively render you impotent and put the bank in control of everything which can be incredibly stressful and chaotic where far away decisions made often by idiotic clueless bankers can cause chronic fatigue and worse.

Conrad

Graham_Devon wrote: »

Devon you wont find a graph documenting this because lender do not generally allow equity withdrawal for business purposes. They know it goes on but officially they cannot be seen to be involved.

So, in a nutshell conrad, you are basically reverting back to one of your "fraud is beneficial" scenarios?

Like I said, Anita Roddick started Bodyshop with a 'car' loan, it's what happens in reality.

One might argue that borrowing at lowest possible rate (say on an offset mortgage) and not allowing a Bank to take total control (by way of a business loan and it's warranties), makes sound business sense.

Not for everyone in every case of course.

Y'up some folk are terrible gangsters and frauds for protecting their families interests in this way.

Conrad

Graham_Devon wrote: »

What is the firm?

And if housing equity didn't exist, would he not have been able to access 40k from the bank?

What is your Mums address? C'mon Devon!

Just because one has equity in know way compels a Bank to advance a business loan. In any event the business loan would likely be harder to get, take months of stressful roller coaster ride underwriting, be at high rates, have large fees and gives the bank control over your destiny in ways that just aren't helpful.

Imagine being ill and your business income dries up. Despite having savings your bank manager might start calling things in as he can see the cahsflow reduction.

A mortgage co would have no way of knowing this until the time you fell into arrears and even then FSA rules afford you a lot of time in a way a business loan manager simply might not want to give.

Business loans have their place, don't get me wrong.