House Price Crash Discussion Thread

hgllgh

I let the main administrator and Martin Lewis know about this request today. Got a reply from them both so hopefully it will happen. They are considering it.

OxfordMark_2

An example of the current economics of renting versus buying.

I rent a two bedroom semi in Oxford in a good central position, 1980's build. I deal directly with the landlord and it costs £750 per month (this is my third year at this price).

My neighbour put his identical house up for sale last year before changing his mind. He was offered £265k within days. So if I bought my house with a 10 year fixed mortgage at 6.2% (I've just used my banks rate to get an easy number, obviously there may be cheaper deals about), over 20 years, borrowing the maximum of £212k, I would pay £1,570 per month for a repayment mortgage (total paid £377k), or £1,150 per month for an interest only mortgage (total paid £488k). Obviously I also need to find the £53k difference between house price and mortgage, not a small amount.

While many people view renting as wasting money (my mother included!), I think people forget the money they're "giving" the bank to fund their house purchase. I'm trying to save some of the difference between my rent and what I would pay in mortgage, currently £500 a month. At the moment this is earning 6.3% AER, so over the same 20 year period I would be left with savings of £239k. Which means for me to be in the same position financially if I bought my house it would have to increase by this amount. Over the past 20 years, using Martin's calculators for reclaiming council tax, it has gone up by £199k.

So at the moment and in my location it is hard to see the financial sense in buying rather than renting.

tr3mor

OxfordMark wrote: »

So at the moment and in my location it is hard to see the financial sense in buying rather than renting.

Loads of people are in the same position, myself included. It just shows how overpriced houses have become now mortgage payments would be double rental payments.

merlinthehappypig

tr3mor wrote: »

Loads of people are in the same position, myself included. It just shows how overpriced houses have become now mortgage payments would be double rental payments.

Me too. £900 a month rent for my house that would be over £2000 a month on a 90% mortgage.

Jonbvn

OxfordMark wrote: »

Over the past 20 years, using Martin's calculators for reclaiming council tax, it has gone up by £199k.

In the short-term it is impossible predict house prices. However, over a 20-year term, it would surely not be unreasonable to expect house prices to at least keep pace with inflation. For the house to double in value of 20-years, inflation need only be 3.5%.

Current data shows CPI at 1.8% & RPI at 3.9%.

BTW, your rent seems very low.

Gorgeous_George

OxfordMark wrote: »

An example of the current economics of renting versus buying.

I rent a two bedroom semi in Oxford in a good central position, 1980's build. I deal directly with the landlord and it costs £750 per month (this is my third year at this price).

My neighbour put his identical house up for sale last year before changing his mind. He was offered £265k within days. So if I bought my house with a 10 year fixed mortgage at 6.2% (I've just used my banks rate to get an easy number, obviously there may be cheaper deals about), over 20 years, borrowing the maximum of £212k, I would pay £1,570 per month for a repayment mortgage (total paid £377k), or £1,150 per month for an interest only mortgage (total paid £488k). Obviously I also need to find the £53k difference between house price and mortgage, not a small amount.

While many people view renting as wasting money (my mother included!), I think people forget the money they're "giving" the bank to fund their house purchase. I'm trying to save some of the difference between my rent and what I would pay in mortgage, currently £500 a month. At the moment this is earning 6.3% AER, so over the same 20 year period I would be left with savings of £239k. Which means for me to be in the same position financially if I bought my house it would have to increase by this amount. Over the past 20 years, using Martin's calculators for reclaiming council tax, it has gone up by £199k.

So at the moment and in my location it is hard to see the financial sense in buying rather than renting.

Alternatively, rent for 40 years and, assuming 3% rent inflation, you will pay £678,611. Compare this to buying for £377K + deposit of £53K and the figures look less rosy. What if you live to be 100?

That said, renting saves much more than the mortgage.

Also, saving £500 per month this year and increasing this by 3% per annum while earning 5% interest will see you able to pay your rent from the interest earned after just 70 years.



GG

tr3mor

Gorgeous_George wrote: »

Alternatively, rent for 40 years and, assuming 3% rent inflation, you will pay £678,611. Compare this to buying for £377K + deposit of £53K and the figures look less rosy. What if you live to be 100?

I'm not planning on renting long term. I'd much rather buy when mortgage payments would be at a more sensible level comparitively.

OxfordMark_2

Alternatively, rent for 40 years and, assuming 3% rent inflation, you will pay £678,611. Compare this to buying for £377K + deposit of £53K and the figures look less rosy. What if you live to be 100?

It's a very fair point that after the 20 years you do own where you live and don't have to pay anything else, whereas renting you have to carry on paying for ever. Good job we're all going to have to work til we're 90.

SmarterProperty

I have to agree with one of the previous replies where even gloomy news should be shared - more so for the benefit of FTB's. I was quite shocked a few weeks ago when during a college lecture, a question was asked about the current economic climate and everyones views. One student, early 20's, said it was poor because interest rates were very high. An interesting perspective because of course, in her own life and experience, she has witnessed interest rates a few points lower than they are at the moment. But those older members of the class, as still feeling blessed due to remembering the days of rates shooting up to 17.5% back in the late 80's. So its as well to be able to point out the many many different scenarios that can, and may, happen.

www.mesmarterproperty.com

hgllgh

OxfordMark wrote: »

It's a very fair point that after the 20 years you do own where you live and don't have to pay anything else, whereas renting you have to carry on paying for ever. Good job we're all going to have to work til we're 90.

don't forget though, you pay back roughly twice what you borrow with a standard mortgage so if you are saving roughly half of your rent (as you are) then you are a more or less covering your rent (by way of reducing the initial starting point of your mortgage when you do buy) so you can rent and wait for things to pan out without thinking of it as "money down the drain"