Investing instead of buying a flat or house

2

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  • jimjames
    jimjames Posts: 17,580 Forumite
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    If the forecasts are to be believed you are better to keep the lump sum, wait for property prices to drop over the next year or two and then buy. But if those predictions are wrong you might end up paying more. I can certainly see the market slowing with mortgage rates at the current levels.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • As you have no apparent urgency in the need to buy, I would keep saving as you are now, doing very well and accruing more and more savings. As already said, all the forecasts are for cheaper housing till at least end of 2024----and I agree with those forecasts. My advice is to continue as you are for the next year ( or more) for the reason stated above and also in case your personal circumstances change; but don't let that stop you looking around for the type of house you may wish to live in at some stage and keeping a close eye on the way in which the housing market is falling and by what sort of extent. You are obviously in a very good position and that's great in these days of doom stories.
  • BooJewels
    BooJewels Posts: 2,838 Forumite
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    tiger135 said:
    [snip]
    The lump sum is close to 200 k currently so interest is growing nicely at over 500 per month.
    [snip]
    £500 interest on £200k is only 3% - so it sounds like you're not getting much more than that.  If you're contemplating buying a house, presumably your principle isn't locked away in fixes, so if that's in easy access accounts or ISAs, you can perhaps get better rates of interest to maximise your return on your lump sum. 

    If you're not minded to drop it into property just yet, maybe consider putting some of it into a 1 year fix whilst you think about it some more, with the balance in a better easy access account - that could increase your interest payments, even after paying tax on some of it, by around another £200 or so per month.  

  • Albermarle
    Albermarle Posts: 21,961 Forumite
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    BooJewels said:
    tiger135 said:
    [snip]
    The lump sum is close to 200 k currently so interest is growing nicely at over 500 per month.
    [snip]
    £500 interest on £200k is only 3% - so it sounds like you're not getting much more than that.  If you're contemplating buying a house, presumably your principle isn't locked away in fixes, so if that's in easy access accounts or ISAs, you can perhaps get better rates of interest to maximise your return on your lump sum. 

    If you're not minded to drop it into property just yet, maybe consider putting some of it into a 1 year fix whilst you think about it some more, with the balance in a better easy access account - that could increase your interest payments, even after paying tax on some of it, by around another £200 or so per month.  

    OP as above 3% interest is currently not very good

    You can get > 5% for easy access and nearly 6% for a one year fix.

    Also if you are working then you will be paying significant tax on interest, so you could look at some in Premium Bonds, which pay on average just under 4% tax free. Plus £20K in a cash ISA.
    Best savings accounts: 5.25% easy access or 5.97% fixed rates (moneysavingexpert.com)


  • El_Torro
    El_Torro Posts: 1,463 Forumite
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    Is there a location you want to live in, and can see yourself living in for years to come (at least 5 years, preferably longer)? If so then I'd focus my efforts on buying a place there. If you're happy with the flexibility that renting gives then keep doing that instead. As mentioned this isn't purely a financial decision.

    Also yes, interest rates are pretty good right now (if you ignore the money you're losing to inflation), renting continues to be expensive when compared to paying off a mortgage though. Renting also doesn't seem to be getting any cheaper for most people. 
  • I was in a similar situation when partner and i bought out house. The bit I didnt realise is that its expensive to run a house, the upkeep of it, there is always something that needs painting or fixing or replacing. When I was renting i would move to somewhere nice and new and didnt have to do the work or carry the cost. 
    I would say grow your lump sum until you can actually live off the interest.  that to me will be absolute financial freedom. 

  • Albermarle
    Albermarle Posts: 21,961 Forumite
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    I was in a similar situation when partner and i bought out house. The bit I didnt realise is that its expensive to run a house, the upkeep of it, there is always something that needs painting or fixing or replacing. When I was renting i would move to somewhere nice and new and didnt have to do the work or carry the cost. 
    I would say grow your lump sum until you can actually live off the interest.  that to me will be absolute financial freedom. 

    That's fine until you are older. Having your own home means you are not going to get turfed out at some point.
  • boingy
    boingy Posts: 1,316 Forumite
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    And house prices will soon be back on the rise - there is too much demand for prices to fall far, regardless of interest rates.
  • Nardy
    Nardy Posts: 78 Forumite
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    Kaizen917 said:
    You are probably in a strange spot where you are technically able to afford a very decent deposit but would still cost a fortune to pay a mortgage of the sizes we get to see today. This would literally put you in a situation from potentially getting quite decent compounding gains on your money to having a large debt doing the compounding against you.

    I would say there is some sense to wait a bit as I just cant imagine the current property market doesnt readjust (if current rates are here to stay, these prices will be pressured to go down a bit). But still, if I were in your place, I wouldnt put this off forever given that it would get you rent free as well.
    We don't know which bit of the UK he is living in, but there are some parts where he could buy a house cash and still have money in the bank.

  • tunde10
    tunde10 Posts: 214 Forumite
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    edited 2 November 2023 at 1:21PM
    The main problem is the renting element. Rents are high and there is no security of tenure. So you end up worse off long term.

    I'm in a similar position, single, mid 30s with over £175k in Investment & Savings.

    The difference is i grew up in care so got an housing association flat with permanent tenancy and rent of less than 40% market rate. I cant buy the flat as per current rules, but my situation, it is currently a no brainer to earn interest on huge savings and keep some investments.

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