For babyboomers housing "has been free"

CLAPTON

onlyroz wrote: »

Nope it's the people who own the care homes.

in which case the boomers' wealth will be passed down much sooner for which you may rejoice

onlyroz

wotsthat wrote: »

Not that many people die in care homes though and those that do tend to have only a brief stay.

The average life expectancy after an Alzheimers diagnosis is 10 years. According to this the average cost of nursing care is £37.5k a year. It won't take long for the funds in a £250k house to be eaten up entirely.

In our own case my mother-in-law has been in a nursing home for 3 years and according to my brother-in-law she will "out-live us all". On the death of my father-in-law her house was sold for around £230k. We certainly don't expect to receive much of an inheritance when she eventually passes.

princeofpounds

It's a fantastic idea, you employ your own care worker - the accomodation you provide is a large portion of the wage costs! You keep the house, that increases in value, the annexe adds value too.

It is a great idea. Except that in 90% of houses the planning permission bureaucrats would never allow it.

thequant

onlyroz wrote: »

On the death of my father-in-law her house was sold for around £230k. We certainly don't expect to receive much of an inheritance when she eventually passes.

Tough titty, or do you expect me the tax payer to pay for your inheritance ?

If you care for your mother so much (or rather the inheritance), why dont you try looking after her instead of expecting the state to pick up the tab?

onlyroz

thequant wrote: »

Tough titty, or do you expect me the tax payer to pay for your inheritance ?
If you care for your mother so much (or rather the inheritance), why dont you try looking after her instead of expecting the state to pick up the tab?

Where did I say that I expected an inheritance? I have no problems with the house being sold to pay for her care.

N1AK

onlyroz wrote: »

Nope, my mother-in-law's house is being used to pay her care home fees and my parents' house might go the same way, unless they spend it on holidays first.

It's one of the most amusing ironies that the people who 'like' house price increases the most don't seem to recognise that the biggest beneficiary by far is the government. More expensive houses mean more stamp duty, more asset to pay for care and more for inheritance tax.

wotsthat

onlyroz wrote: »

The average life expectancy after an Alzheimers diagnosis is 10 years. According to this the average cost of nursing care is £37.5k a year. It won't take long for the funds in a £250k house to be eaten up entirely.

In our own case my mother-in-law has been in a nursing home for 3 years and according to my brother-in-law she will "out-live us all". On the death of my father-in-law her house was sold for around £230k. We certainly don't expect to receive much of an inheritance when she eventually passes.

People don't get shipped off to care homes as soon as there's a diagnosis of Alzheimers. The median stay in a care home is only about 18 months and only a minority of people end up in care.

My Aunt probably lived about 10 years after her Alzhemiers diagnosis- only the last four were spent in care and she was classed as a long term resident.

Going into care kills off all but the most persistent.

Perelandra

wotsthat wrote: »

The boomer stuff is a simple way of grabbing the attention of people who don't understand how compounding works.

This is the key point for me.

The way I understood the article was:

"If you look at the total amount of interest paid (even including the 15% years), and look at the total gain in the asset value, Boomers are net neutral- the two offset each other".

Now, that may or may not be true- the article doesn't give any details of the calculation. Assuming that it is, though, you'd also need to adjust for inflation- or more properly investment returns- since the real value of an interest payment of £1000 in the 80s/90s would be different to the real value of £1000 as some part of a property's "value" today.

So I thought I'd do some number crunching of my own.

If I take an average house of a property bought in 1985, I'd like to look at the total (adjusted for compounding) interest payments over that time, and compare that with the total (compound adjusted) gain in their property value over that period of time.

I've made the following assumptions:

Interest rate paid = BOE + 2% (2% = bank margin)
Repayment term = 25 years
Compounding Factor = BOE + 3%
(this is a rough factor, aimed at trying to give a crude indexing that can be used to simulate investment returns, but I've tried various different figures, and all positive adjustments give, the same ultimate 'not free' conclusion)
Monthly payment = Interest + capital repayment
(capital repayment each month is fixed in real terms. This is not realistic, but my maths doesn't extend to varying this with a wildly fluctuating interest rate!)
House purchase = Average 1985 (Halifax, all UK) at 100% mortgage

The results:

The total amount of interest paid over the period, in 1985 prices = £34,185. Total paid (house + interest) = 69,246

The total value of the property today, in 1985 prices (adjusted for my compounding above, not house price index of course) = 48,357

Or alternatively, stated in today's money terms, the purchase has an asset worth £177k for, that they've paid £255k for.

So it hasn't been "free" (that would require them to have only paid £177k). In addition, they will have had to pay to maintain that property, which isn't factored into the original article's costs (cost of maintaining a physically deteriorating property).

Without the maintenance cost, they've effectively occupied that property for 29 years at £245 per month. That seems cheap. With the maintenance costs (£200 a month?), that would increase it to £445 a month.

So still cheaper than alternatives. But hardly "free".

onlyroz

wotsthat wrote: »

People don't get shipped off to care homes as soon as there's a diagnosis of Alzheimers. The median stay in a care home is only about 18 months and only a minority of people end up in care.

My Aunt probably lived about 10 years after her Alzhemiers diagnosis- only the last four were spent in care and she was classed as a long term resident.

Going into care kills off all but the most persistent.

This might be true now but as life expectancy increases then so will incidences of advanced dementia.

As for the point at which people go into care, this largely depends on whether there are other family members able or willing to perform some of the care needs. My MIL was looked after by my FIL until he died (and his death was most certainly accelerated due to the stress of looking after my MIL). And these days children live further away from their parents and so are less able to provide help.

So all-in-all I can only see the proportion of people going into care increasing in the future.

kwmlondon

CLAPTON wrote: »

ultimately the inheritance will be passed down to the young

THE young, I think it will be SOME young. It will do a great job of making sure those with a foot on the rung of society get a leg up, while those who are trying to better themselves have it much more difficult. Private tuition for the 11+, savings for university, driving lessons, all things that striving people trying to raise themselves out of poverty will not be able to access, but those lucky enough to have parents with assets will ensure they do better.