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

Generali

wotsthat wrote: »

It's a simple interest calculation to calculate next months interest payment but you can't calculate the interest payment for 6 months hence without compounding the interest rate by the number of payments in some way.

The way most people would do this is, in excel, repeat your simple interest calculation on each row i.e. A series of simple interest calculations. However, that's simply a way of introducing compounding without having the inconvenience of having to find out how to work out where the x to the power of y button is on a calculator.

The reason a mortgage is paid off unevenly is as you say but if the debt remaining is plotted against it's clear that the relationship is exponential by virtue of the compounding effects of the principal paid.

Clapton is right in that no interest is compounded as it's paid off each month but the calculations are the same as any other compound interest calculation. The reason Tickers doesn't understand mortgages is because he/ she doesn't understand compound interest.

The interest doesn't compound because it's paid off in full each month. By definition, if!you pay off the previous month's interest then it can't compound.

wotsthat

Generali wrote: »

The interest doesn't compound because it's paid off in full each month. By definition, if!you pay off the previous month's interest then it can't compound.

Yes my use of the terminology has caused some upset. There's an exponential relationship involving the interest rate and number of payments.

The calculations, over a number of payments, use exactly the same formula as one would use for a compound interest calculation except the interest accrued each month is subtracted.

Maybe Einstein was worried about people rolling over Wonga loans.

Generali

wotsthat wrote: »

Yes my use of the terminology has caused some upset. There's an exponential relationship involving the interest rate and number of payments.

The calculations, over a number of payments, use exactly the same formula as one would use for a compound interest calculation except the interest accrued each month is subtracted.

Maybe Einstein was worried about people rolling over Wonga loans.

LOL. Probably. He would have been reassued that the problem is relative.

TickersPlaysPop

Thanks to all for clearly explaining HPI and the good /bad dynamics of it.

Also for pointing out why interest in repayment mortgages needs to be front loaded. I still have some ideas about that but won't divert the thread.

So HPI is good for the following people...

Buy to letters
Owner occupiers in their 'peak' property
Mortgage lenders
Housing associations
Estate agents
Chancellor due to more stamp duty
Over seas investors
Local councils that sell off land/ property

Unfortunately the poorest and less fortunate get a worse deal with an increase HPI. They get stuck in properties, and at worst see the bottom rung of the ladder disappear up into the sky.

Why does the government not debate this and have policies in place to keep it in line with wage inflation?

mystic_trev

TickersPlaysPop wrote: »

Why does the government not debate this and have policies in place to keep it in line with wage inflation?

Because we have a Free Market Economy.

Using your suggestion you may as well say why don't we have Policies in place to keep wage inflation in line with House prices!

the_flying_pig

mystic_trev wrote: »

Because we have a Free Market Economy.

Using your suggestion you may as well say why don't we have Policies in place to keep wage inflation in line with House prices!

In fairness there are 'government' policies to control the cost of energy, water, medicine, certain rental tenancies, dentistry, telecoms, rail travel, bus travel, payday lending, other healthcare, education, airport landing slots, postage stamps, and so on. I suppose that housing must be different.

jjlandlord

Perhaps it is a good time to repeat that price control never works to solve demand v. supply imbalances. It just makes the issue worse.

Property prices have boomed in some areas (not all) because demand outstrips supply.

Now, price control will not increase supply and, in fact, may reduce it (why build in an area where your profit will be limited?)
Equally, price control will not reduce demand but may increase it. For example people who know they are priced out of London don't bother, but they would if they knew they could bother.

What would be the result?

You would still have many, many 'applicants' for each property. However, the seller would not be able to decide based on the highest offer. Thus, logically they would pick cash buyers, buyers with no chains, etc. over the rest.

If you had to get a mortgage and had a small deposit, you would probably have no more chance than now to buy.


The same would go for rent controls as again proposed this week by Labour.
Properties would still go to those in the best position and with a long list of applicants landlords would be free to increase their demands re. income, guarantor, rent paid in advance, etc.

Bravo_Zulu

Negative equity is my problem and it means that I'll be stuck with the property until the mortgage has reduced enough for me to be actually be able to sell it. Devastated in all honesty, bought it in 2006, did all the wrong things and now it's worth £20K less than what was paid. It's lost about 20% of its value.

If I'm lucky I'll walk away with no debt from it. A far cry from my thoughts of buying a house, owning it for a few years then selling at a profit. Worse money making decision ever.

jjlandlord

the_flying_pig wrote: »

In fairness there are 'government' policies to control the cost of energy, water, medicine, certain rental tenancies, dentistry, telecoms, rail travel, bus travel, payday lending, other healthcare, education, airport landing slots, postage stamps, and so on. I suppose that housing must be different.

It is not unreasonable to control prices where there is no market.

If we follow your logic, everything should be price-controlled. Welcome to USSR. It worked great.

CLAPTON

the_flying_pig wrote: »

In fairness there are 'government' policies to control the cost of energy, water, medicine, certain rental tenancies, dentistry, telecoms, rail travel, bus travel, payday lending, other healthcare, education, airport landing slots, postage stamps, and so on. I suppose that housing must be different.

The government tends to have policies about monopolies or near monopolies (cartels): sometimes like energy they are designed to increase the price, sometimes not; sometimes they are effective and sometimes not, often it's simply crony capitalism.


Buying and selling houses tends to be largely a matter of one private individual selling and one private individual buying: clearly things like stamp duty, mortgage restrictions, planning controls etc. affect the price indirectly but the essentially transaction is between private individuals and so much more difficult to control.


So essentially, if one wants top control prices how does one do it and who are the winners and who are the losers.


More houses are needed.