MILLIONS of Young People WANT & NEED Higher House prices!!!

MARTYM8`

thequant wrote: »

Dispels the myth that increasing house prices are bad for our younger generation.

As has been pointed out - that only applies if they are financially illiterate

You currently own a flat which cost £150,000. Prices double - and its now worth £300,000. Wow - quids in.

But you have kids and now need a house. That house used to cost £300k - now its £600k.

So instead of needing to find another £150k to buy your family home you now need £300k. So in that sense they are £150k WORSE OFF.

Presumably who ever wrote this article failed GCSE Maths?!:D

TickersPlaysPop

MARTYM8` wrote: »

As has been pointed out - that only applies if they are financially illiterate

You currently own a flat which cost £150,000. Prices double - and its now worth £300,000. Wow - quids in.

But you have kids and now need a house. That house used to cost £300k - now its £600k.

So instead of needing to find another £150k to buy your family home you now need £300k. So in that sense they are £150k WORSE OFF.

Presumably who ever wrote this article failed GCSE Maths?!:D

This is why we need our government to step in and do something to prevent house price inflation above that of general inflation.

For a start restricting non UK residents from buying places to rent out as an investment. Our homes should not be on the global commodity market. Exposing our homes to global pressures when it is evidently an unarguably not matching demand is negligent by our government.

We need many things in place to promote and support house building, NOT more house inflation.

We need things in place to keep house price inflation inline with general inflation, ideally wage inflation only.

We need demand managed by controlling the level of investment from over seas.

TickersPlaysPop

Also,

Can somebody explain quickly and simply why repayment mortgages do not spread the interest evenly across the term?

It seems a bit unfair to me.

CLAPTON

TickersPlaysPop wrote: »

Also,

Can somebody explain quickly and simply why repayment mortgages do not spread the interest evenly across the term?

It seems a bit unfair to me.

because maths isn't fair : it's a matter of maths


interest per month = capital owed x annual interest rate /12


as the capital owing decreases over the term of the mortgage the interest paid each month decreases too.


bigger amounts attract more interest than smaller amounts
(just like saving accounts too)


It explains a lot about your posts.

stator

TickersPlaysPop wrote: »

Also,

Can somebody explain quickly and simply why repayment mortgages do not spread the interest evenly across the term?

It seems a bit unfair to me.

Because that would only work if you never switched mortgages. On mortgage you've lent someone say £100,000 you'd want say £5,000 interest in year 1 + £5,000 repayment per year, but as the loan is repayed the interest would decrease, in the second year they only owe you £95,000 so the interest would be £4,900 in the second year. The average interest would be £2,500 over the life of the mortgage.

If under your system you spread the interest evenly over a 30 year mortgage and the customer switched after 5 years, they've only paid £2,500 * 5 when they should have paid £5,000 in the first year and £4,900 in the second year, £4,800 in the third etc etc, quite a big difference.

Don't bother correcting my figures, they're made up illustrative numbers, you get the idea

purch

TickersPlaysPop wrote: »

Also,

Can somebody explain quickly and simply why repayment mortgages do not spread the interest evenly across the term?

It seems a bit unfair to me.

The clue is in the word REPAYMENT

As you repay the mortgage, the amount owed decreases and therefore the interest charged on the amount outstanding also decreases.

When the interest rate changes, the amount of interest charged also changes.

You cannot calculate the interest to be charged on a 25 or 30 year mortgage, as you do not know at the start what the interest rate will be throughout the term (unless fixed for the entire term)

It is not a particularly complicated concept.

wotsthat

TickersPlaysPop wrote: »

Can somebody explain quickly and simply why repayment mortgages do not spread the interest evenly across the term?

Those who understand compound interest are destined to collect it. Those who don't are doomed to pay it - apparently attributed to Albert Einstein.

CLAPTON

wotsthat wrote: »

Those who understand compound interest are destined to collect it. Those who don't are doomed to pay it - apparently attributed to Albert Einstein.

I like the sentiment but for mortgages there is no compound interest as all the interest accrued is paid in full each month, plus a bit of capital (for repayment mortgages).
Einstein was wrong about a lot of things.

LydiaJ

CLAPTON wrote: »

I like the sentiment but for mortgages there is no compound interest as all the interest accrued is paid in full each month, plus a bit of capital (for repayment mortgages).
Einstein was wrong about a lot of things.

Understanding why the monthly interest payable on your mortgage decreases over the term is pretty much the same piece of maths as understanding compound interest. I doubt there's anybody out there who understands compound interest and doesn't understand why a repayment mortgage doesn't spread the interest burden evenly over the term.

Oh, and some people have mortgages where the interest is added to the balance daily, and payments are only paid monthly, so there is a small element of compound interest as the month goes by before the next payment.

wotsthat

CLAPTON wrote: »

I like the sentiment but for mortgages there is no compound interest as all the interest accrued is paid in full each month, plus a bit of capital (for repayment mortgages).
Einstein was wrong about a lot of things.

I think Mr. Einstein might accuse you of being a bit of a nit picker and confusing Tickers even further for no good reason.

Paying off the accrued interest each month doesn't alter the fact that we're looking at an obvious effect of compounding. Try working out a monthly payment to clear a mortgage without exponentiating the interest rate in the calculation.

That's why, as Tickers asked, mortgage debt doesn't fall in a linear fashion - that bit of capital paid increases by just a little bit more each month - exponentially in fact.