House buying risks

Crashy_Time

Getting_greyer said:

Crashy_Time said:

Getting_greyer said:

Crashy_Time said:

Getting_greyer said:

Crashy_Time said:

Salemicus said:

> The Black Swan that bursts the bubble will be a stock market/credit market event IMO

Yes, something sort of financial crisis would probably hurt house prices.

Of course, we already had one of those. Tell me, if you'd bought at the peak, just prior to the 2007-8 financial crisis, and held until now, would you have made money, or lost money?

Time in the market >> timing the market.

You shouldn`t try to "make money" from a highly illiquid asset IMO, especially one that is designed for living in and not as an investment vehicle because you would have to downsize AND time the market to actually make any money. Most recent buyers are hoping to UPSIZE not downsize. The 2007 bubble was pumped back up with zero interest rates and massive money printing, but they can`t drop interest rates again and the amount of money printing required now, after a never in living memory deflationary event, is actually threatening to RAISE mortgage rates. The mistake you are making is in thinking that the next "Black Swan" will be the same as the last one.

Are you mixing up deflation and decreasing inflation again?

Are you mixing up stimulus and actual demand again?

No I am not and never have....? 

You can consider the CB`s and their stimulus packages as "part of the economy" or even as "the economy" if you want, that is a sensible investing approach, but they don`t do the level of stimulus we have seen over the past few years in reaction to "inflation" or even "declining inflation", their main enemy is deflation and that is the enemy they are fighting.

OK, how does this equate to me mixing up fiscal or monetary stimulus packages with demand for goods at certain prices? The answer is it doesn't.  
Yes spiralling deflation is a danger to an economy, arguably much worse than spiralling inflation and as we have low positive inflation that is only a short stride to deflation. Again this suggests an economy is not operating at output equilibrium....unemployment etc. Clasical theory suggests the answer is monetary levers such as to drop interest rates to stimulate demand.  However we are at near enough zero bound.  The BoE is clearly sceptical of nominal negative rates, so the answer is to buy lots of gilts to bring the real interest rate down to increase output. But if we have full employment the theory suggest that inflation can occur......this is an incredibly simplified piece on the dilemma CB's face.  I'll not go on further.  But the fact remains you told people we have been in deflation for years which is simply not true. And the BoE operates to the mandate it is given by the Chancellor.  Eg target inflation at X, it's not a devious plan you seem to think it is, there are just effects that occur as byproducts.

So without the stimulus would it be "Inflation", "deflation" or "Dis-Inflation"?

Crashy_Time

getmore4less said:

Crashy_Time said:

Keswick1uk said:

Crashy_Time said:

How are things progressing OP, what has your son decided to do?

He's looking at the market and the villages close by to work out his next step. Deciding areas he'd like to live and those with kerb appeal for resale. Plus areas where you can navigate without it being like a dodgems at the weekends. And where the buses run close ish too.

Apparantly, many more instructions are appearing daily on his rightmove searches - were 2 or 3 a day and now up to 10, so he's watching what is happening generally too. He's started to look at sold prices as well, as they get released on net prices (something like that). 

He's secured another years rent with no increase, so that's a temporary win too. He's found out he's likely to be able to borrow circa 162k.

So not much further on but he's content doing his thing.

Is he using PropertyLog to keep an eye on seller psychology?

Propertylog is broken costs £1.99pm to fix it.

Seems to be working again.
https://www.propertylog.net/

Crashy_Time

Getting_greyer said:

I'm out anyway.  Every convo with Crashy seems to be me seeing something that's look like him saying "chalk is the same as cheese".  I'll then say "chalk and cheese are separate things"  he replies "so you don't think chalk is the same as milk, lol. Keep on believing that diary farms exist to make money from milk if it helps you sleep at night, sheeple." 

I`m simply saying that the monetary/stimulus response we have seen only happens in response to one of the options I posted in the previous post.

Crashy_Time

Mickey666 said:

annabanana82 said:

My Brother is a ham fisted baboon when it comes to anything financial or administrative. If he's managed to keep his mortgaged home for 17 years then I'm not sure repossession really needs to register as a risk for the vast majority of the population.

. . . a "ham fisted baboon" who is well on his way to having zero housing costs within sight and all the financial freedom and choices that brings - so let's hear it for all the "ham fisted baboons" out there! 

But he was described by his own relative as a "mortgage prisoner"??

strawb_shortcake

Crashy_Time said:

Mickey666 said:

annabanana82 said:

My Brother is a ham fisted baboon when it comes to anything financial or administrative. If he's managed to keep his mortgaged home for 17 years then I'm not sure repossession really needs to register as a risk for the vast majority of the population.

. . . a "ham fisted baboon" who is well on his way to having zero housing costs within sight and all the financial freedom and choices that brings - so let's hear it for all the "ham fisted baboons" out there! 

But he was described by his own relative as a "mortgage prisoner"??

He does have an end date to his mortgage, he's just stuck with his lender because he's a financially inept ham fisted baboon 

Crashy_Time

annabanana82 said:

Crashy_Time said:

Mickey666 said:

annabanana82 said:

My Brother is a ham fisted baboon when it comes to anything financial or administrative. If he's managed to keep his mortgaged home for 17 years then I'm not sure repossession really needs to register as a risk for the vast majority of the population.

. . . a "ham fisted baboon" who is well on his way to having zero housing costs within sight and all the financial freedom and choices that brings - so let's hear it for all the "ham fisted baboons" out there! 

But he was described by his own relative as a "mortgage prisoner"??

He does have an end date to his mortgage, he's just stuck with his lender because he's a financially inept ham fisted baboon 

Doesn`t matter according to some posters, he is really a financial wizard it seems?

Keswick1uk

To be fair, the ham fisted baboon, has had the comfort blanket of falling interest rates and a decade with the lowest rates ever.

Having been lucky enough to have used 5 years of those low rates to eradicate our mortgage debt super fast, apart from the credit crunch blip, this hasn't been the hardest 17 years in history to handle a home purchase.

getmore4less

Crashy_Time said:

getmore4less said:

Crashy_Time said:

Keswick1uk said:

Crashy_Time said:

How are things progressing OP, what has your son decided to do?

He's looking at the market and the villages close by to work out his next step. Deciding areas he'd like to live and those with kerb appeal for resale. Plus areas where you can navigate without it being like a dodgems at the weekends. And where the buses run close ish too.

Apparantly, many more instructions are appearing daily on his rightmove searches - were 2 or 3 a day and now up to 10, so he's watching what is happening generally too. He's started to look at sold prices as well, as they get released on net prices (something like that). 

He's secured another years rent with no increase, so that's a temporary win too. He's found out he's likely to be able to borrow circa 162k.

So not much further on but he's content doing his thing.

Is he using PropertyLog to keep an eye on seller psychology?

Propertylog is broken costs £1.99pm to fix it.

Seems to be working again.
https://www.propertylog.net/

Still broken.
https://www.propertylog.net/why-is-the-price-history-blurred

BikingBud

Mickey666 said:

BikingBud said:

Mickey666 said:

I'd far rather risk being a 'mortgage prisoner' for 25 years than being a 'rent prisoner' for my entire life and have nothing to show for it.

But it's not only 25 years now, it's 30/35 years and with massive deposits now required many can't meet these rates. 

What do you mean by "many"? 

from: https://www.theguardian.com/money/2021/mar/10/uk-40-year-fixed-rate-mortgage-habito-deposit-loan

• Typically, mortgages were arranged over 25 years, but high house prices and stringent affordability tests have led to borrowers extending their repayments over a longer period, even though over the course of the mortgage they will pay much more in interest.

Also from: https://www.unbiased.co.uk/life/homes-property/what-s-the-longest-mortgage-term-you-can-get-in-the-uk

• There are now many lenders who offer mortgages longer than 25 years, with the longest readily available being 40 years. As of March 2020, lenders of 40-year mortgages include Halifax, Nationwide, Leeds Building Society and Yorkshire Building Society.

And https://www.yourmoney.com/mortgages/first-time-buyers-pay-40-more-for-longer-mortgage-terms/

• More first-time buyers are taking out long-term mortgages to lower their monthly repayments, even though this increases the total amount repaid over the life of a mortgage, analysis has found.
• Low mortgage rates mean repayments as a share of take-home pay are close to a historic average, according to Nationwide. However, in 2020, around 70% of first-time buyers took out a mortgage with an initial term of over 25 years, up from 45% in 2010.
• At the end of 2020, the first-time buyer house price to earnings ratio stood at 5.2, close to 2007’s record high of 5.4, but well above the long run average of 3.7.

or: https://www.independent.co.uk/money/mortgage-debt-coronavirus-house-prices-costs-b689516.html

• Expect to still be paying off your mortgage in old age, homeowners warned.
• One in five borrowers won’t have cleared their mortgage debt before retirement, as rising house prices and later first-time purchases push back the age Britons free themselves from housing costs.
• Despite hopes to be clear of the monthly payments by the time we hit 60 – two years later than we anticipated this time last year – a growing number of homeowners don’t think they’ll be mortgage free until well into their 70s.  

Is that enough?

getmore4less

• Typically, mortgages were arranged over 25 years, but high house prices and stringent affordability tests have led to borrowers extending their repayments over a longer period, even though over the course of the mortgage they will pay much more in interest.

lets put some real word context around that.

Back in the day before the 90s) when 25 years was the norm the standard measure was your home would cost double the price over 25years with the interest

That's when rates were hovering above 6% the interest total would trend toward 100%+

amount	rate	payment	owing	interest
£100,000.00	6.00%	£644.30	£0.00	£93,290.42

now they are closer to 2.5% the interest on a 25y is <40%

amount	rate	payment	owing	interest
£100,000.00	2.50%	£448.62	-£0.00	£34,585.02

Even over 40years its only ~60%

amount	rate	payment	owing	interest
£100,000.00	2.50%	£329.78	-£0.00	£58,293.55

There are going to be some that have averaged there rate even lower and will see total interest over live of their loans under 50% of cost even if they go long.

the reality is going long you will still pay less interest than those that took out those typical 25y terms back in the day 

even when you factor in you have to pay more for the same you pay a lot less interest over 25y

amount	rate	payment	owing	interest
£100,000.00	6.00%	£644.30	-£0.00	£93,290.42
£143,619.57	2.50%	£644.30	-£0.00	£49,670.86

if you extend to 40 you still pay less interest than those old days when 25y was typical.

amount	rate	payment	owing	interest
£143,619.57	2.50%	£473.63	-£0.00	£83,720.94