We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
MILLIONS of Young People WANT & NEED Higher House prices!!!
Comments
-
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.
no idea what you are talking about
the interest charged each month on a mortgage is simply the capital outstanding at the time x the monthly interest rate
(accepting that it could be considered that there is an element of compounding within the month if the loan company uses a daily interest rate and then adds the daily interest to the capital on a daily basis )
the reason that interest is variable (i.e. decreases) over the period of the loan is simply that the capital amount owing decreases (on a repayment mortgage) as a part of the monthly payment goes to reducing the debt.0 -
Sums up perfectly the position of a young house buyer, I think you have beaten Hamish to the best explanation as to why young homeowners should be demanding higher HPI.
That's the boat I'm in; I bought at 85% LTV (and a full 5x salary) right before the market tanked, and if I'm lucky now I'm back down to about 90% LTV, despite owing £10k less. I'm hoping the house price will have gone up further before the base rate climbs so I can get a reasonable remortgage rate. I've no intention of moving up but I'm aware that the LTV is very key these days and jumping down a band can save a fortune.0 -
the reason that interest is variable (i.e. decreases) over the period of the loan is simply that the capital amount owing decreases (on a repayment mortgage) as a part of the monthly payment goes to reducing the debt.
Yes but AIUI Tickers wanted to know why that decrease in monthly interest paid wasn't linear.
It's a compound interest calculation. It's the same calculation even if we're talking about a repayment mortgage - just with the interest subtracted each month.
You can calculate next months interest payment by simply multiplying the outstanding debt by the monthly interest rate. How would you calculate your interest payment for three months from now?0 -
Einstein was wrong about a lot of things.
But probably a lot fewer things than you and me!'I want to die peacefully in my sleep, like my father. Not screaming and terrified like his passengers.' (Bob Monkhouse).
Sky? Believe in better.
Note: win, draw or lose (not 'loose' - opposite of tight!)0 -
Yes but AIUI Tickers wanted to know why that decrease in monthly interest paid wasn't linear.
It's a compound interest calculation. It's the same calculation even if we're talking about a repayment mortgage - just with the interest subtracted each month.
You can calculate next months interest payment by simply multiplying the outstanding debt by the monthly interest rate. How would you calculate your interest payment for three months from now?
tickers is confused about most things in life but what tickers wrote was
the answer is that the interest charged per month is that accrued during that month based on the amount of loan outstanding during that month and that this decreases from month to month due to a little capital being paid off each month.
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 interest is not compounded from month to month or year to year, as you pay the interest off in full each month as you go.
Not only isn't the interest 'spread evenly throughout the term' but it isn't a linear function either: neither has anything to do with compound interest.
Obviously the formula for interest in the Nth month or the capital remaining after the Nth month will be the result of a recursive relationship that will lead to a equation with an expression raised to the Nth power.
There are many such equations in maths and they may or may not have anything to do with compound interest.0 -
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.
It's because there's an exponential rather than linear relationship between time and interest payment.
The payment can be calculated in by using a function which includes [1 + interest rate] to the power of the number of payments. i.e. interest rate compounded by the number of payments.
That might sound like compound interest at play but you don't pay any compounded interest - just the amount for that month.
Hope that helps.0 -
It's because there's an exponential rather than linear relationship between time and interest payment.
The payment can be calculated in by using a function which includes [1 + interest rate] to the power of the number of payments. i.e. interest rate compounded by the number of payments.
That might sound like compound interest at play but you don't pay any compounded interest - just the amount for that month.
Hope that helps.
in any event I don't blame Einstein0 -
I don't know what any of you are talking about, but to me it's pretty simple.
Young people cannot afford for house prices to increase because then they'll be waiting even longer before being able to afford to get their first property.
If you want to work your way up the property ladder, don't rely on price increases but rely on your work to get you up the employment ladder, or improve your house to increase the value.
There's a reason people say "I'm glad I have a house because I couldn't afford to buy one now". House prices are ridiculous without young people moaning that they're not being given an easy enough ride. You got a house, you're already on easy street.I can't add up.0 -
supermassive wrote: »I don't know what any of you are talking about, but to me it's pretty simple.
Young people cannot afford for house prices to increase because then they'll be waiting even longer before being able to afford to get their first property.
If you want to work your way up the property ladder, don't rely on price increases but rely on your work to get you up the employment ladder, or improve your house to increase the value.
There's a reason people say "I'm glad I have a house because I couldn't afford to buy one now". House prices are ridiculous without young people moaning that they're not being given an easy enough ride. You got a house, you're already on easy street.
House prices are achievable for young people, So long as you're not aspiring to live in London...... but that's the same with any capital.0 -
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.
To be fair Einstein I doubt he was referring to mortgages. Mathematical compounding is a far more important factor when reinvesting income due to the amplifying effect.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.2K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.3K Work, Benefits & Business
- 601K Mortgages, Homes & Bills
- 177.5K Life & Family
- 259.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards