House Price Crash Discussion Thread

boinging_2

pickledpink wrote: »

The problem with investing equity from a house sale into a savings account is that the interest doesn't always cover the monthly cost of a rental. On top of that, you are not adding to your capital by compounding the interest and could find that with inflation your savings eventually become less and less in terms of value.

It's also very tempting when you have easy access to money to dip into it! Debt and hard times can be very depressing, and some people find it very tempting to treat themselves to the odd holiday; new car; gadgets etc..........when they're feeling down.

I know of a woman who after her divorce (in the early 90's) put her share of the matrimonial home (£100,000) into a savings account. She then rented a flat whilst deciding what to do....took a cheap package holiday..then another...then needed a car........eventually lost her job...........and within 3 years all her equity from the house had gone! She's now renting a dingy one-bed council flat and kicks herself every day for being such a fool.

I know not everyone is as silly as that - but when debt is looming, and you have easy access to money - it is very, very tempting to treat yourself - again and again and again!

There was actually a report about that sort of scenario in one of the
broadsheets over the weekend. It advised people to stay put if they could.

Are you for real? Currently by STR I'm saving:

1) Interest on my equity
2) Monthly difference between what I was paying in mortgage and what I pay in rent
3) Plus house prices are dropping

If I buy a house tomorrow, compared with buying in Aug 07 (the house I was about to buy is still on the market at £10K less), I would save around 20K. This amount saved is currently rising every month.

Rover

pickledpink wrote: »

I'm interested to know how all you renters insist that the interest on your savings pays your rent?!

What sort of interest rates are you getting on your savings? And what sort of amounts are we talking about?:rolleyes: Round my way the average rent on an ordinary 2-bed flat is about £1000 pm = so you'd need some hefty savings to earn that sort of money each month. Not forgetting, with inflation your savings are worth less, and as you aren't earning compound interest (all that dead rent your paying) how long would it be until you'd be out of the rental market as you wouldn't be able to afford the ever increasing rents?

I live in Yorkshire, my rent for a 3 bed semi is <£650 pcm. My capital is currently in a 3 month bond with HBOS (maturing early April) - it pays 6.78% gross. The capital sum is well in excess of 6 figures and growing monthly as, as I've stated, it generates more in interest than I pay rent. Also I don't pay a mortgage or have any debts.
My purchasing power is increasing, the purchase price is decreasing. QED.

mystic_trev

Yep - Paying a mortgage is dead money!

the_mighty_spurs

To cut a long story short -

House on market for 158500

Mortgage 101000 with GE:eek:

Loan 10500 with Kensington:eek:

Bad credit, struggling with repayments. Had an offer of 151000 today.

Would be left with 35000 approx equity. We would like to sell and rent for approx 2 years. Is it wise or are we just being stupid

m00m00

if you are struggling with your repayments, then selling is the right thing to do. Clear your debts and be sensible with your equity, and you'll be in a much better position in a couple of years time, and it is likely any house price inflation within 2 years will be minimal at worst, and the probabilities of declines in prices are greater.

I'm guessing the APRs with GE and Kensington are on the high side also

the_mighty_spurs

should have added also that we would be renting for £200 less a month than we are paying now for a larger house in a nicer area with a bigger bedroom for our son. Want to put about £30,000 in a savings account or perhaps invest it? Not sure whether selling is the right thing to do or to continue as we are, struggling for a while longer. Our curent mortgage has 27 years left to go. So technically if we rent for two years then get a 25 year mortgage we shouldn't have lost anything?

ramtec

the_mighty_spurs wrote: »

To cut a long story short -

House on market for 158500

Mortgage 101000 with GE:eek:

Loan 10500 with Kensington:eek:

Bad credit, struggling with repayments. Had an offer of 151000 today.

Would be left with 35000 approx equity. We would like to sell and rent for approx 2 years. Is it wise or are we just being stupid

You'd be silly not to bite their arm off let alone their hand

m00m00

and you'll have 200 a month more to spend, and a better quality of life in general.

seems like a no brainer to me, especially if you have a 151k offer on the table.

the_mighty_spurs

what worries us is that we could keep on struggling and eventually our payments will go down. If we buy in two years our mortgage will no doubt be higher and then we'll be back in the same boat.

m00m00

how will your mortgage be higher ?

prices could very possibly be lower so you will need to borrow less
you will have a decent deposit
your credit rating will improve greatly over time

etc

it's almost certain that prices will decline over the next 12 months, so getting out now in your situation seems to be absolutely the right thing to do.