Forthcoming increases in rents will ...

Generali

buglawton wrote: »

Quote:
Originally Posted by Generali
That's about 0.4% of income tax and NI receipts. You honestly believe Mr Osbourne is going to lose his job over that?
It sounds like wishful thinking.

To which my reply was: If it's 0.4% then that's an absolutely huge loss. Imagine the reaction if a 0.5% tax hike on incomes were proposed with our currently flat economic outlook!

Put it in the context of the reply I posted to your own figure.
Who has got a bee in their bonnet?

You can make this personal if you want, it makes no difference to me.

The 0.4% figure is comparing the change in SDLT payments to income tax and NI not all tax.

You seem to be remarkably scathing of Mr Osbourne about a very small change in the overall tax take, a tiny fraction of a percent. That makes me think that there is something else behind what you are saying.

Generali

Jon_B wrote: »

I see someone mentioned Bristol. Unfortunately now own a house, but to give you an idea - in North Bristol rents on 3 bed terraces have gone from around £650-700 in 2010 to around £950-1000 now.

That's about a 45% rise. The CPI has been about 11.5% over the same period.

Why do you think rents have risen so fast in Bristol? (Looking on Rightmove I'd say your figure for rents looks more likely for semis: terraces seem to be £875-900 although I confess that I do not know Bristol at all).

cells

padington wrote: »

So when a landlord sets a rent to advertise he or she didn't really do that, the renters did ?

... and when cigarette companies set the prices of cigarettes, they didn't really do that, the smokers did ?

... and when the petrol stations set the price of petrol, they didn't really do that, drivers did ?

... and when governments set the taxes they didn't really do this, tax payers did ?

... Or would it be truer to say the seller sets the price, which is tempered by the needs of the buyers, who in turn are tempered by the needs of other sellers ?

with a lot of goods and services, like cigarettes, the production is virtually infinite so the price is not set by the buyers but by sellers who will often try to set a price where they achieve maximum profit or in a competitive market max profit without enticing other competitors in.

for a limited good, like say art, the price is set by buyers.
a painting comes to auction with no reserve and whatever it sells for was set by buyers

When a landlord puts a property up for rent, they effectively auction it off. An estate agent might have an idea of what the buyers will bid so wont start bidding at £0 but might start it at £1,000

The principle is the same, landlords would be willing to accept close to zero (or just above the marginal cost of maybe £200/month). Anything higher is set by the buyers in a limited market. If somehow you could magic up a million homes tomorrow the rent price in London would crash towards £200 per month.

westernpromise

mwpt wrote: »

I would rather have bought at low multiples and high rates than the other way round. When you have high rates and low multiples, you can make massive dents into the mortgage and pay it off far more quickly than you can when the price is enormous but interest rates are low.

Not altogether surprisingly, all of this is of course exactly, 180 degrees dead wrong.

Let's take an example.

You have a flat you paid £80,000 for in late 1988 on a 25-year £72,000 mortgage. The mortgage rate over the next five years averages 13%. What are the monthly payments, and how much of that loan do you repay during those 5 years?

Answers: the monthly payments are £839 and you pay off £2,488 (3.5% of the principal).

Now let's say you buy the same flat today. We’ll quadruple all the numbers, so you pay £320,000 with a £288,000 mortgage, at a best-buy 5-year fix (Coventry at 3.15%). What are the monthly payments, and how much of that loan do you repay during those 5 years?

Answers: the monthly payments are £1,388 and you pay off £41,031 (14.2% of the principal).

In the latter case, the monthly payments are of course higher, by a total of just under £33,000 over the five years. But this additional outlay of £33,000 pays off over £38,000 of the mortgage. So more than all of the extra payment comes off the loan. This is extraordinarily good value.

You are also far more crash-resilient. By 1993 you would only have paid off £2,488 of the loan, so you still owed £69,512. If the value of the property has fallen by 13.1% by then, you are in negative equity. If you bought that property today for £320,000, then its value needs to crash by 23% to put you into negative equity.

Now let’s look at those mortgages a bit more closely. Are they affordable?

Well, according to the ONS, full time earnings grew 142% in real terms between 1975 and 2013. That’s a compound annual improvement of 2.35%. Taking that number and applying it from 1988 to the present, that means that the equivalent today in earnings terms of the 1988 monthly mortgage of £839 would be £1,608.

So the mortgage payment of £1,388 today is 14% *cheaper* relative to 1988 earnings - *and* it pays off the mortgage faster!

But could you get a mortgage of £288,000 today? Well, in 1988 you needed to be on about £25k a year to borrow the necessary. Today the equivalent salary, based on 2.35% earnings growth since then, would be £48k. So you’d need a mortgage of 6x 2016 salary rather than 3x 1988 salary. Such mortgages are available and, as the preceding numbers show, are actually more affordable than a 3x salary mortgage of 1988.

The claim that “I would rather have bought at low multiples and high rates than the other way round” is thus either innumerate or made from acute ignorance. If it’s neither, i.e. the OP knows it’s false but said it anyway, then presumably what he really wants is 1988 prices but at 2016 interest rates. If do then the greed, the sense of entitlement, and the berating of others for having unfairly had it good are, frankly, breathtaking in their hypocrisy.

Mortgage rate source: https://www.google.co.uk/compare/mortgage/qs?gclid=CJj1soKIysoCFYGDaQodScUMHw#!purpose=FIRST_TIME_BUYER&totalMortgage=288000&propertyValue=320000&propertyLocation=ENGLAND&missedRepayments=false&repaymentsType=CAPITAL_AND_INTEREST&term=25&applyRoute=false&jointApplication=false&annualIncome&employmentStatus&annualIncome2&employmentStatus2&rates%5B%5D=FIXED&initialPeriod%5B%5D=FIVE&initialPeriod%5B%5D=TEN&initialPeriod%5B%5D=NO_INITIAL_PERIOD&tab=search

Balance calculation source: http://www.calculator.net/mortgage-calculator-uk.html?chouseprice=288000&cdownpayment=0&cloanterm=25&cinterestrate=3.15&cpropertytaxes=1.2&chomeins=1200&cpmi=0&cothercost=3000&cstartmonth=1&cstartyear=2016&printit=0&x=63&y=13
ONS earnings stats: http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-365867

cells

westernpromise wrote: »

Not altogether surprisingly, all of this is of course exactly, 180 degrees dead wrong.

Let's take an example.

You have a flat you paid £80,000 for in late 1988 on a 25-year £72,000 mortgage. The mortgage rate over the next five years averages 13%. What are the monthly payments, and how much of that loan do you repay during those 5 years?

Answers: the monthly payments are £839 and you pay off £2,488 (3.5% of the principal).

Now let's say you buy the same flat today. We’ll quadruple all the numbers, so you pay £320,000 with a £288,000 mortgage, at a best-buy 5-year fix (Coventry at 3.15%). What are the monthly payments, and how much of that loan do you repay during those 5 years?

Answers: the monthly payments are £1,388 and you pay off £41,031 (14.2% of the principal).

In the latter case, the monthly payments are of course higher, by a total of just under £33,000 over the five years. But this additional outlay (just under £33,000 over the first five years) pays off over £38,000 of the mortgage. So more than all of the extra payment comes off the loan. This is extraordinarily good value.

You are also far more crash-resilient. By 1993 you would only have paid off £2,488 of the loan, so you still owed £69,512. If the value of the property has fallen by 13.1% by then, you are in negative equity. If you bought that property today for £320,000, then its value needs to crash by 23% to put you into negative equity.

Now let’s look at those mortgages a bit more closely. Are they affordable?

Well, according to the ONS, full time earnings grew 142% in real terms between 1975 and 2013. That’s a compound annual improvement of 2.35%. Taking that number and applying it from 1988 to the present, that means that the equivalent today in earnings terms of the 1988 monthly mortgage of £839 would be £1,608.

So the mortgage payment of £1,388 today is 14% *cheaper* relative to 1988 earnings - *and* it pays off the mortgage faster!

But could you get a mortgage of £288,000 today? Well, in 1988 you needed to be on about £25k a year to do so. Today the equivalent based on 2.35% earnings growth would be £48k. So you’d need a mortgage of 6x salary rather than 3x. Such mortgages are available and as the preceding numbers show are actually more affordable than a 3x salary mortgage of 1988.

The claim that “I would rather have bought at low multiples and high rates than the other way round” is thus either innumerate or made from ignorance. If it’s neither, i.e. the OP knows it’s false but said it anyway, then what he really wants is 1988 prices at 2016 interest rates. If do then the greed, the sense of entitlement, and the berating of others for having unfairly had it good are, frankly, breathtaking.

Mortgage rate source: https://www.google.co.uk/compare/mortgage/qs?gclid=CJj1soKIysoCFYGDaQodScUMHw#!purpose=FIRST_TIME_BUYER&totalMortgage=288000&propertyValue=320000&propertyLocation=ENGLAND&missedRepayments=false&repaymentsType=CAPITAL_AND_INTEREST&term=25&applyRoute=false&jointApplication=false&annualIncome&employmentStatus&annualIncome2&employmentStatus2&rates%5B%5D=FIXED&initialPeriod%5B%5D=FIVE&initialPeriod%5B%5D=TEN&initialPeriod%5B%5D=NO_INITIAL_PERIOD&tab=search

Balance calculation source: http://www.calculator.net/mortgage-calculator-uk.html?chouseprice=288000&cdownpayment=0&cloanterm=25&cinterestrate=3.15&cpropertytaxes=1.2&chomeins=1200&cpmi=0&cothercost=3000&cstartmonth=1&cstartyear=2016&printit=0&x=63&y=13
ONS earnings stats: http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-365867

good post but you need to factor in the likely hood that the person buying in 1988 probably had the good fortune of going onto a cheaper rate 5 years later, and then again 5 years later and then again 5 years later and then again 5 years later

The person buying today is not likely to see the same happen.

So although you would be correct if both parties had a 25 year fix its better for the 1988 buyer as his interest payments went down while the buyer today probably is not going to see their mortgage interest go from 3% to 1%.....but then again who knows maybe it will

westernpromise

cells wrote: »

good post but you need to factor in the likely hood that the person buying in 1988 probably had the good fortune of going onto a cheaper rate 5 years later

Very unlikely. In 1993 prices were still around 20 to 30% below their 1988 peak, so the 1988 buyer was in negative equity. He thus couldn't remortgage because the property was insufficient security for the loan needed. He had a £69.5k mortgage on a £60k property. He was stuck on his lender's SVR until he got out of negative equity.

The point is that at current interest rates you can do something that was impossible in the past, i.e. you can repay your way out of negative equity. Someone who borrows 90% today and maintains the payments can absorb a 23% correction. In 1988 this was simply impossible. In the example I gave, at 3.15% you can pay off 14% of the mortgage in 5 years. At 13.5% interest that takes twelve years. Even if you assume a decline i interest rates, you were still hopelessly stranded for a decade if you bought near the peak. No such fate awaits anyone who buys today yet still they want to have the 1980s market back again. Or so they say. Yeah, right.

I would also add that a £72,000 mortgage at 13.5% over 25 years would cost £180,000 in interest; a £288,000 mortgage at 3.15% would cost around £120,000 over the same period. Granted rates weren't at 13.5% forever but they weren't at 3.15% either, from which it is quite clear that the 1980s buyer has paid out far more of their earnings on mortgage interest than a buyer today even after taking into account the higher buying price.

"Intergenerational unfairness" my ǝsɹɐ.

mwpt

cells wrote: »

good post but you need to factor in the likely hood that the person buying in 1988 probably had the good fortune of going onto a cheaper rate 5 years later, and then again 5 years later and then again 5 years later and then again 5 years later

The person buying today is not likely to see the same happen.

So although you would be correct if both parties had a 25 year fix its better for the 1988 buyer as his interest payments went down while the buyer today probably is not going to see their mortgage interest go from 3% to 1%.....but then again who knows maybe it will

Oh, it's westernpromise again. Obviously you agree with him. Peas in a pod.

Ignore a whole bunch of points, frame certain things in just the right way, make some assumptions, and guess what, the outcome is :

"It's easier and better value to buy in London now than it was in the past."

Absurd people.

cells

mwpt wrote: »

Oh, it's westernpromise again. Obviously you agree with him. Peas in a pod.

Ignore a whole bunch of points, frame certain things in just the right way, make some assumptions, and guess what, the outcome is :

"It's easier and better value to buy in London now than it was in the past."

Absurd people.

I dont know about the 80s but clearly in the 1990s London was cheap.

Also back then just as now there must surely have been cash-purchases or high deposit purchases so not everyone was done in by v.high interest rates

It is however hard to disagree with the fact that if you can get a mortgage, with todays low rates, the monthly payment is v.affordable for a lot of people especially for the 85% of the country that is not London

The north and Midlands home to about half the population is definitely a lot cheaper to buy with a mortgage today than it was 10 years ago. Today you can buy at the same price (or a bit lower) than 10 years ago but can get a 2% interest rate mortgage rather than a 6% mortgage. So you pay a smaller monthly sum and your capital repayments are quicker.

In fact if you look at the north and midlands now vs 10 years ago and use 2% vs 6% interest rates you find that the same monthly payment allows you to clear your mortgage in 15 years rather than 25 years which is a huge difference. I make that about 40% cheaper in real terms for the north and midlands

westernpromise

cells wrote: »

I dont know about the 80s but clearly in the 1990s London was cheap.

Also back then just as now there must surely have been cash-purchases or high deposit purchases so not everyone was done in by v.high interest rates

It is however hard to disagree with the fact that if you can get a mortgage, with todays low rates, the monthly payment is v.affordable for a lot of people especially for the 85% of the country that is not London

The north and Midlands is definitely a lot cheaper to buy today than it was 10 years ago. Today you can buy at the same price (or a bit lower) than 10 years ago but can get a 3% 5 year fix rather than a 6% 5 year fix back then so significantly cheaper monthly and overall mortgage payments

Facts and logic are powerless in the face of the perpetual crash troll's massive sense of entitlement.

mwpt

cells wrote: »

good post but you need to factor in the likely hood that the person buying in 1988 probably had the good fortune of going onto a cheaper rate 5 years later, and then again 5 years later and then again 5 years later and then again 5 years later

The person buying today is not likely to see the same happen.

So although you would be correct if both parties had a 25 year fix its better for the 1988 buyer as his interest payments went down while the buyer today probably is not going to see their mortgage interest go from 3% to 1%.....but then again who knows maybe it will

Even despite that, if we just fix the interest rate for the full 25 year term, it's still better to buy on high rate low multiples because you can overpay and pay it off far faster.

Here is a spreadsheet showing it, from the example I used in my earlier post:

https://docs.google.com/spreadsheets/d/153OCXcQ2Upt4EeUoOI3SdnT88wS70js9sBB2dNxItXk/edit?usp=sharing

And of course we know that interest rates didn't remain high, they came right down over the course of the 25 years, assisting even further. It's unlikely we'll see anything like that to the current 2% rates and in fact over 25 years I expect them to go up, naturally.