Young unable to buy as rents soar

AndyGuil

IronWolf wrote: »

Of course it is, teasers on mortgages typically last 1-2 years, after which interest rates frequently double. But I guess that's tomorrows problem right? Or you'll be able to refinance your mortgage at 1.5% interest rates in two years?

I thought you were joking...

Let's take the £425k example again. Let's assume a very modest 8% HPI (it tends to average more)
Remortgage for remaining 23 years, fixed for 24 months - £1363 pcm again with the Post Office.

10% HPI - £1335 PCM this time with HSBC.

Graham_Devon

AndyGuil wrote: »

I thought you were joking...

Let's take the £425k example again. Let's assume a very modest 8% HPI (it tends to average more)
Remortgage for remaining 23 years, fixed for 24 months - £1363 pcm again with the Post Office.

10% HPI - £1335 PCM this time with HSBC.

These are all assumptions though.

You can't claim it's cheaper to pay the mortgage than rent, with the use of introductory rates and assumptions regarding the future.

Especially in todays climate where so many of those who assumed now find themselves stuck unable to re-mortgage.

AndyGuil

Graham_Devon wrote: »

These are all assumptions though.

You can't claim it's cheaper to pay the mortgage than rent, with the use of introductory rates and assumptions regarding the future.

Especially in todays climate where so many of those who assumed now find themselves stuck unable to re-mortgage.

A 2 year fix is not an introductory rate and you can just refix it after 2 years.

1. It is cheaper because I have just shown it is using a few examples (literally the first two I picked out).
2. You build equity through repayments.
3. You build equity through HPI.

Graham_Devon

AndyGuil wrote: »

A 2 year fix is not an introductory rate and you can just refix it after 2 years.

Another assumption.

Followed by errr.. assumptions.

1. Based on assumptions and introductory rates.
2. Assumption that property prices always go up and prices won't reduce faster than your repayments (happened in the very recent past).
3. Assumption that HPI will always be positive.

AndyGuil

You aren't stuck to one mortgage for the entire period. Reassess the mortgage especially if you are fixed and go to another fix after the fixed period is up or you can consider a tracker.

IronWolf

Graham_Devon wrote: »

These are all assumptions though.

You can't claim it's cheaper to pay the mortgage than rent, with the use of introductory rates and assumptions regarding the future.

Especially in todays climate where so many of those who assumed now find themselves stuck unable to re-mortgage.

I'm glad someone understands!

So its cheaper to buy than rent as long as house prices always increase at 5 times the rate of inflation and you constantly remortgage every 2 years onto teaser rates....

AndyGuil

Graham_Devon wrote: »

Another assumption.

Followed by errr.. assumptions.

1. Based on assumptions and introductory rates.
2. Assumption that property prices always go up and prices won't reduce faster than your repayments (happened in the very recent past).
3. Assumption that HPI will always be positive.

You only need to look at historical figures for London to see all three are true.
"1. It is cheaper because I have just shown it is using a few examples (literally the first two I picked out).
2. You build equity through repayments.
3. You build equity through HPI."

AndyGuil

IronWolf wrote: »

I'm glad someone understands!

So its cheaper to buy than rent as long as house prices always increase at 5 times the rate of inflation and you constantly remortgage every 2 years onto teaser rates....

Fixed rate mortgages aren't there to just "tease" people into a product with an ultra high interest rate after the fixed period. Just chop and change after the period, fix for longer or a get a tracker. One day you won't pay anything as the mortgage will be paid off.

Graham_Devon

AndyGuil wrote: »

You only need to look at historical figures for London to see all three are true.

Really?



Chart wrong, considering they "always" go up?

And looking at nominal prices, we get another chart that is apparently wrong?



You would have shot yourself in the foot with your assumptions in both 2006-8 and 2009-10.

Your assumptions could have, indeed, had you trapped if you bought anywhere after 2005.

IronWolf

AndyGuil wrote: »

Fixed rate mortgages aren't there to just "tease" people into a product with an ultra high interest rate after the fixed period. Just chop and change after the period, fix for longer or a get a tracker. One day you won't pay anything as the mortgage will be paid off.

Of course they are, they are there to trap people into a mortgage. Here's the small print from the top 3 mortgages on compare the market.

After the offer period charging an initial rate of 1.48%, this mortgage will revert to the Standard Variable Rate (SVR), currently at 3.99%. Early repayment charges apply.

After the offer period charging an initial rate of 1.49%, this mortgage will revert to the Standard Variable Rate (SVR), currently at 3.94%. Early repayment charges apply.

After the offer period charging an initial rate of 1.74%, this mortgage will revert to the Standard Variable Rate (SVR), currently at 4.49%. Early repayment charges apply.

It's a dangerous assumption that house prices will forever increase, you should only buy a house if you can afford the repayments, not if you depend on house price increases and a remortgage in 2 years.