£200k inheritance, property ladder or not?

Herzlos

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

confusedfreelancer said:

SadieO said:

This is ridiculously simplistic but if I put all my money into buying a house and its value tanks to zero, I've still got a house to live in. If all my money is in stocks and shares and they tank to zero then I've got nothing. Right?? 

Bingo. I reckon that even if my house value drops to zero, it's still going to be cheaper than renting once you factor in the decades of living rent free. It's such a stupid thing to be arguing against.

This is how I feel too. I feel a bit sick when I think of everything I've spent on rent.

Imagine how people coming off fixes just now feel when they realise how much they will be paying the bank for the use of their house loan?

"Wow this is expensive, but still less than rent! At least I can stop paying in a few years! Thank God I bought when I did".

Not that I need to imagine because I'm in exactly that category. My rate is about to go from 2% to 5%, meaning my mortgage will go from about £800 to £1000. Bad, eh? Well the only rental I can see in my town with the same number of bedrooms is £1400/month, but is a smaller house. So I think I'll be fine.  I'm not happy about paying more for mortgage, but I'm still so glad I've got a mortgage and not rent.

I'm sure you'll try and say that the only reason it's the only one for rent is because it's overpriced, any maybe it is, but if I needed to rent and had a choice of 1, what else do I do?

You can`t generalise the whole UK market from one town with a lack of rentals, if you expand your search area you will find more/cheaper rentals for sure, landlords can`t just bail out of the market the same way someone with stocks or a money market fund can, they have to wait for a buyer and in the meantime need to try to keep the property occupied to avoid double council tax etc. there are good deals out there if you look for them.

I'm comparing like for like, based on the actual house I'm sitting in right now, to provide my perspective as to why I, the sort of person you were targeting in your claim, don't agree with your claim.

Pick any other city and property type you wish and I can hash out numbers but the results will be the same.

The point your trying to dodge is that an equivalent rental is still 50% more than my mortgage *after* the rate hike.

I can`t see that being something that is sustainable going forward to be honest.

Absolutely. I've no idea how anyone can afford to rent long term. At least my Mortgage will go down.

The sad reality is that outside of social rents, which we need much more of, private rental rates are going to be based on the landlords mortgage, allowing for profit after tax. So the 2 are intrinsically linked but there's no way market rate will be less than an equivalent mortgage or the landlord will lose money.

The reality is that rents are based on wages and your mortgage debt is based on bond/credit markets (specifically the "10 Year Yield") no amount of a landlord needing, wishing, demanding that their debt costs be met by a tenant changes the fact that they are liable for the debt, and an empty property is going to cost them double council tax AND their debt tax to the bank, many landlords are VERY financially exposed now, and how many would dream of having 200k in a safe liquid place to cover their costs!

Aer you trying to imply that a BTL landlord isn't setting the rent rate based on their mortgage? That they'll take a loss on it for some reason? Sure there are some landlords who own outright (like yours, after 21 years) who aren't tied to mortgage rates, but as an investment and not altruism will be seeking the maximum value the market can bear.

I don't think I've ever seen a like for like mortgage/rental where the rental is cheaper than the mortgage, before considering equity/future - can you find an example?


I'm not saying renting doesn't suit some people, but it's just nonsense to claim it's somehow a better investment mechanism in the longer term.

kempiejon

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

strawb_shortcake

kempiejon said:

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

It can only ever be answered as "it depends" not one size fits all.

Some people (not all) have given some good examples of why they rent. 

For myself, I like the security, stability and knowing that one day I will have no mortgage (or rent).

To rent similar to my home, I'd be looking at £1500 pm, if the interest on my mortgage increased to 30% it would still be cheaper than renting. 

I'd have thought the vast majority of people buy a home primarily for a roof above their heads, the value of my home in 15 years is irrelevant as I'll have no mortgage and it's extremely unlikely that it's only my house to have crashed in value. 

Some people may find themselves in negative equity, some people will find themselves facing repossession, but equally you'll find yourself subject to market fluctuations in renting, or facing homelessness.

You find far more people on here seeking advice on being evicted from their rental than having their home repossessed. 

ReadySteadyPop

strawb_shortcake said:

kempiejon said:

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

It can only ever be answered as "it depends" not one size fits all.

Some people (not all) have given some good examples of why they rent. 

For myself, I like the security, stability and knowing that one day I will have no mortgage (or rent).

To rent similar to my home, I'd be looking at £1500 pm, if the interest on my mortgage increased to 30% it would still be cheaper than renting. 

I'd have thought the vast majority of people buy a home primarily for a roof above their heads, the value of my home in 15 years is irrelevant as I'll have no mortgage and it's extremely unlikely that it's only my house to have crashed in value. 

Some people may find themselves in negative equity, some people will find themselves facing repossession, but equally you'll find yourself subject to market fluctuations in renting, or facing homelessness.

You find far more people on here seeking advice on being evicted from their rental than having their home repossessed. 

That is because mortgage rates have only just started to rise, loads of people are still on fixed rates.

Herzlos

kempiejon said:

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

That's interesting, because it seems to be talking about a particular spike in June 2024 where mortgages became more expensive than renting, because first time buyer costs on houses are up 114% in the last decade whilst rents are only up 84%, and is talking about mortgage rates of 6% which we've come back down from.

It still seems to indicate that it's not a bad time to buy, because higher rates are suppressing demand a bit.

It's also not addressing that if you have £200k in cash sitting about, that it's going to be cheaper to use that towards a house deposit than stick it in an investment account and rent.

It also isn't factoring in the long term, like the OP was concerned about.


Can you find me an actual example, of 2 similar properties on rightmove where the rental is cheaper than the mortgage estimate?

ReadySteadyPop

Herzlos said:

kempiejon said:

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

That's interesting, because it seems to be talking about a particular spike in June 2024 where mortgages became more expensive than renting, because first time buyer costs on houses are up 114% in the last decade whilst rents are only up 84%, and is talking about mortgage rates of 6% which we've come back down from.

It still seems to indicate that it's not a bad time to buy, because higher rates are suppressing demand a bit.

It's also not addressing that if you have £200k in cash sitting about, that it's going to be cheaper to use that towards a house deposit than stick it in an investment account and rent.

It also isn't factoring in the long term, like the OP was concerned about.


Can you find me an actual example, of 2 similar properties on rightmove where the rental is cheaper than the mortgage estimate?

We can`t really factor in the future because we don`t know what will happen, I would guess that mortgage rates will be higher though judging by what is going on just now in the global economy. What happens if you take on a mortgage, put the 200k in as well then lose your job down the line if there is a recession?

ReadySteadyPop

Herzlos said:

kempiejon said:

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

That's interesting, because it seems to be talking about a particular spike in June 2024 where mortgages became more expensive than renting, because first time buyer costs on houses are up 114% in the last decade whilst rents are only up 84%, and is talking about mortgage rates of 6% which we've come back down from.

It still seems to indicate that it's not a bad time to buy, because higher rates are suppressing demand a bit.

It's also not addressing that if you have £200k in cash sitting about, that it's going to be cheaper to use that towards a house deposit than stick it in an investment account and rent.

It also isn't factoring in the long term, like the OP was concerned about.


Can you find me an actual example, of 2 similar properties on rightmove where the rental is cheaper than the mortgage estimate?

I don`t think this is the case, we are back at 2008 levels now for borrowing costs, that increases the chances of a recession and puts downward pressure on rents while increasing the earning power of the 200k.

https://www.msn.com/en-gb/money/other/ftse-falls-as-gilt-yields-keep-rising-and-dashed-us-rate-cut-hopes-hit-stocks/ar-BB1rnDXw

Herzlos

ReadySteadyPop said:

Herzlos said:

kempiejon said:

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

That's interesting, because it seems to be talking about a particular spike in June 2024 where mortgages became more expensive than renting, because first time buyer costs on houses are up 114% in the last decade whilst rents are only up 84%, and is talking about mortgage rates of 6% which we've come back down from.

It still seems to indicate that it's not a bad time to buy, because higher rates are suppressing demand a bit.

It's also not addressing that if you have £200k in cash sitting about, that it's going to be cheaper to use that towards a house deposit than stick it in an investment account and rent.

It also isn't factoring in the long term, like the OP was concerned about.


Can you find me an actual example, of 2 similar properties on rightmove where the rental is cheaper than the mortgage estimate?

We can`t really factor in the future because we don`t know what will happen, I would guess that mortgage rates will be higher though judging by what is going on just now in the global economy. What happens if you take on a mortgage, put the 200k in as well then lose your job down the line if there is a recession?

We can make some educated guesses on the 20-year-ish scale:

If we had a 20 year mortgage, it'd be paid off
House prices will have doubled.

Rents will have doubled.

In terms of losing jobs, you'd be unwise to put all of it in the mortgage unless you already have a savings buffer. However, it's a lot harder to get evicted from a house you own than one you rent, and worst case you'd still be able to pull out some or all of the equity.

It's not cost effective to buy often, because there are overheads, and the longer you've owned and the more equity you have, the less risk there is. But I'm talking about longer term here, because the OP is talking about getting a house to raise their kids in. 

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Herzlos said:

kempiejon said:

As we're a long way from the original Q.

Lets us posit "Is buying cheaper these days?"

https://www.cityam.com/renting-remains-cheaper-than-buying-in-uk-as-mortgage-rates-soar/

https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2024-press-releases/halifax/2024.03.27-renting-now-cheaper-than-owning-a-first-home-in-nearly-all-uk-regions.pdf

https://www.property118.com/londons-rents-are-cheaper-than-mortgages/

Or not?

https://moneyweek.com/investments/property/buying-cheaper-than-renting-again-how-much-could-you-save

That's interesting, because it seems to be talking about a particular spike in June 2024 where mortgages became more expensive than renting, because first time buyer costs on houses are up 114% in the last decade whilst rents are only up 84%, and is talking about mortgage rates of 6% which we've come back down from.

It still seems to indicate that it's not a bad time to buy, because higher rates are suppressing demand a bit.

It's also not addressing that if you have £200k in cash sitting about, that it's going to be cheaper to use that towards a house deposit than stick it in an investment account and rent.

It also isn't factoring in the long term, like the OP was concerned about.


Can you find me an actual example, of 2 similar properties on rightmove where the rental is cheaper than the mortgage estimate?

We can`t really factor in the future because we don`t know what will happen, I would guess that mortgage rates will be higher though judging by what is going on just now in the global economy. What happens if you take on a mortgage, put the 200k in as well then lose your job down the line if there is a recession?

We can make some educated guesses on the 20-year-ish scale:

If we had a 20 year mortgage, it'd be paid off
House prices will have doubled.

Rents will have doubled.

In terms of losing jobs, you'd be unwise to put all of it in the mortgage unless you already have a savings buffer. However, it's a lot harder to get evicted from a house you own than one you rent, and worst case you'd still be able to pull out some or all of the equity.

It's not cost effective to buy often, because there are overheads, and the longer you've owned and the more equity you have, the less risk there is. But I'm talking about longer term here, because the OP is talking about getting a house to raise their kids in. 

The problem is that your mortgage debt payments can also double at short notice as many people are finding out at the moment, unlikely this will happen with rent, and you can leave for another rental if it does, you can`t leave a mortgage until it is paid off, and I don`t think many people are looking at 20 years debt payments for a family house at today`s asking prices, more like 30 years, meaning much more bond market risk.

Herzlos

You can only leave a rental if you can find another rental, and if the price of all of them go up you're paying more.

Housing costing more over time is inevitable, but with a mortgage you are in more control of it via fixed rates, adjusting terms, shopping around etc, and are actively building equity so are more insulated from changes as time goes on. Your outstanding balance will never go up unless you borrow more for some reason.

The term is irrelevant to this argument. Assuming a 30 year mortgage then in 20 years with no overpayments, it's going to be about 50% paid off due to the way interests and balances work. That sounds bad but it's still 20 years ahead of rent which is 100% sunk cost.

The reality is that you need to live somewhere, and if you don't need to move regularly, it's much cheaper long term to buy than rent.