The 'We're saving for a deposit' thread

countrygirl27

Hello Just a quick question, everyone is currently banging on about the housing market whether prices are going down etc. Now I dont want to appear thick but.......

If you can afford your mortgage and dont intend to move, why do house prices matter?

Because my little plan for which I am saving would involve me buying a house which I would be happy to live in indefinitely, and as I have a pension, I wouldn't use my house to fund my retirement, why should I worry about house prices?

(Obviously I am hoping for prices to come down so that a nicer house would be easier to buy, although there can be problems with borrowing for a mortgage then I think.)

Anyway, I dont really understand this obsession with values, negative equity etc, unless you're wanting to move.

lostinrates

countrygirl27 wrote: »

Hello Just a quick question, everyone is currently banging on about the housing market whether prices are going down etc. Now I dont want to appear thick but.......

If you can afford your mortgage and dont intend to move, why do house prices matter?

Because my little plan for which I am saving would involve me buying a house which I would be happy to live in indefinitely, and as I have a pension, I wouldn't use my house to fund my retirement, why should I worry about house prices?

(Obviously I am hoping for prices to come down so that a nicer house would be easier to buy, although there can be problems with borrowing for a mortgage then I think.)

Anyway, I dont really understand this obsession with values, negative equity etc, unless you're wanting to move.

For FTB like us the point is not just what prices are its how much we'll pay over the life of our mortgages. (this fuels the debate as mortgage rates go higher). But say for each £1 you borrow you pay £3 after the interest is added on by the end of the mortage term. Getting 30p of that pound suddenly means you are paying a lot less back....at the same interest rates £2.33 instead of £3. Sounds little in small change. Change the £3 quid to £300K and think what you could do over your lifetime with the change from that!

(caveat, it is highly likely my maths is wrong:o )

Plus deposit saving . Lots of ftbs are finding the mortgage deals they had hoped for are not available. If you can get a mortgage that would cover your forever house (sounds idyllic) IMO it doesn't hurt to be looking now and prepared to bargain hard for a good deal. Equestrian properties ARE dropping but slowly IME. The specialist agents..equestrian more than country agents, are still saying their market will hold, but I am imagining that a lot of nice small cottages with hobby riders have overstretched for an expensive horse or small lorry and increased mortgage payments will apply to them as much as the next person even if mewing doesn't.

Bf109

countrygirl27 wrote: »

If you can afford your mortgage and dont intend to move, why do house prices matter?

OK. First of all, lets assume, for the sake of the argument, that houses all cost £200,000. (Roughly the average price)

Now lets say they all drop in price by 20%. (A conservative estimate of house price falls)

Thats a saving of £40,000.

I dont know about you, but to me and to most people, £40,000 is a hell of a lot of money. How long would it take you to save this sum? 2 years? 5 years? 10 years? 100 years? Given that you end up paying back £2.50 for every £1 borrowed (typically) this sum now swells to £100,000. Now £100,000 really is a lot money! Hell! You could live like an absolute emperor in Thailand for ten years on that much money!

So thats the first thing. Its a massive money saving.

The next point is negative equity and the ability to move in itself.

Regardless of what plans you have in place, sharply rising prices and sudden rises in unemployment can strike at any time. Mortgages last for 25 years. How much can an economy change in that time? By a pretty damme big margin!

What if it happens to you? You suddenly find yourself unemployed and unable to meet your repayments. You have to sell. You have to downsize to cut costs. You have to rent.

But you cant! Because your house is worth less than you owe on it. The mortgage company wont allow you to sell and even if they do, you will end up owing money on a house you dont even own, never mind live in any more!

That isnt a small matter.

So you see, shrug your shoulders and laugh at those who worry about such things if you will, But now you should know why so many people are genuinely concerned about house prices. So should you be.

MrDT

countrygirl27 wrote: »

Hello Just a quick question, everyone is currently banging on about the housing market whether prices are going down etc. Now I dont want to appear thick but.......

If you can afford your mortgage and dont intend to move, why do house prices matter?

Because my little plan for which I am saving would involve me buying a house which I would be happy to live in indefinitely, and as I have a pension, I wouldn't use my house to fund my retirement, why should I worry about house prices?

(Obviously I am hoping for prices to come down so that a nicer house would be easier to buy, although there can be problems with borrowing for a mortgage then I think.)

Anyway, I dont really understand this obsession with values, negative equity etc, unless you're wanting to move.

Would you rather pay out half you monthly salary on a mortgage or a quarter? The cheaper you buy the better for you surely?

I can see where you're coming from, but purchase price does matter imo. Personally I wouldn't be heartbroken if I bought a place and it dropped in value, but if I were to lose my job and fall behind on payments it'd be a big deal. If I buy a cheaper place that is very affordable I'm lowering my risk I would most likely manage to cover my repayments by taking a 'needs must' lower paying job if the worst happens etc. If I stretch right now then that wouldn't be an option if things go chest upwards.

Just because something is affordable as things stand doesn't mean that'll always be the case. Sure, in the majority of cases things get easier as time goes by (down to the fixed purchase price and wage inflation), but this isn't always the case. Attitude to risk comes into play really

oldMcDonald

Brilliant replies MrDT, Bf109, and lostinrates:T

With regards the 'Saving for a deposit' bit of the thread - we are soooo close to 50% now. September is going to see us living out of the freezer and cupboards and walking everywhere rather than give our money to ASDA / Tesco / Shell / BP etc. I'm determined to post during Sept that we have reached 50%

Bf109

Every time we get close to 50% we raise our expectations!

vaksam

Can I join too?

I'm 28 and live with my OH. At the moment I'm the only one saving, as OH is paying off credit card debts accrued when he was younger. I've saved 1.5k so far, so not much compared with some of you, but that's been built up in just over a year, and I've had to dip into my savings fund when the company I worked for went under without paying me last year, and more recently when I needed work doing on my car. So I think I'm doing ok, especially as I've only just started to earn enough that I actually can stash some away (as well as finally starting a pension)!

The story could be quite different though. Back in the January of 2007 I had just moved into my boyfriends flat, and we were preparing to make our landlord an offer to buy it (we knew that this was a possibility as he had had conversations with my OH basically giving us first refusal when he wanted to sell). We didn't have a deposit at the time, so those 100% mortgages seemed like a fabulous idea, especially as you could fix the rates for 2 years, and we could have afforded it - just - as the flat we are in was worth at the time in the region of 3x our salaries, with the repayments being £50-£100 more per month than the cost of renting. And a lot of people we knew were mortgaging in this way, so where was the harm - after all, we kept being told - and believed that renting was 'dead money'.

Then the company we both worked for went bust (one of the earliest retail casualties of the credit crunch) and my OH, then I were made redundant. Company no 2 comes along, buys out the first from administration, hires the old staff back and promptly went bust 6 months down the line! Luckily my OH had started work with another company by this time, so we weren't too badly hit the second time around, but in my down time whilst I was job hunting I started to read up on the house buying, and mortgage process on this site and others which was something I'd singularly neglected to do the first time around.

This in itself just seems to me, frankly insane as I usually do a ridiculous amount of researching before buying anything, let alone the most expensive purchase I'm likely to make. But like a lot of people I think, we'd been swept along by herd mentality, and after all, we kept being told that nothing could go wrong - it's not like house prices are likely to go down or anything...:rolleyes:

By the time I'd finished reading last summer I was fairly determined that I didn't want to go down the 100% mortgage route, and had resolved to start building up a deposit of maybe 5%. I started working again in September, and it took a few months to pay off overdraft etc from not working, and we also started paying more for living expenses as we got rid of a horrible flatmate (that's another story), and so the rent/bills were now being split 2 ways rather then 3. So I started stashing little bits of money away when I could, and then began saving more seriously when I got a pay rise earlier this year.

Obviously now we are aiming for a lot more than 5%, and not looking to buy anytime soon. I'm not anticipating that we'll be in a position to buy until maybe another 3-4 years of saving, and that also depends on the state of the market at that time. But I can't believe how close we came to getting our fingers burned, similar flats where we live were selling almost as soon as they came to market at 95k plus at the beginning of last year, 3 that went on for this much in the summer of 07 haven't shifted at this price and one has just gone onto the market at 85k.

So it still bums me out that we don't have a place to call our own, and that we can't redecorate and put our own stamp on the place, but I'm glad I'm not being kept awake at night thinking about trying to re-mortgage in 09 and wondering will we be able to afford the SVR we'd no doubt end up being shifted onto. And I know I've not been able to save much, but I'm quidco-ing, ebaying, amazon marketplaceing and anything else I can think of to swell the balance by small amounts, and no doubt we'll get there eventually. OH has been able to get a new job outside of retail, which should hopefully mean that he can progress further and so earn a better wage in the future.

The one main change I've noticed though is that I'm not as stressed about getting on the ladder anymore. If I can buy a house someday, then great! If not, so be it. It'll be because I can't afford to be on the ladder, and I'd rather have no house at all than have one and have to worry all the time about paying the bills.

Anyway, sorry for the rambling introduction, but this seems to be a great thread to keep me motivated and :beer: to you all who are managing to save!

lostinrates

vaksam wrote: »

Can I join too?
!

Course you can.:cool:

Just want to say making comparisons to each other (you mentioned you felt your saving was low and others have said elsewhere they feel alienated by some of our amounts) is NOT the point. We have different aims and timescales, different start dates and different salaries and commitments different properties in mind.;) But our aim is the same and as valid for people saving a penny a day, a pound a day or 1k a month or more! Its to start our life as home owners in a financially responsible and safe way! :T

re feeling bummed about not having a place to decorate and the ups and downs of not owning when you want to.....it happens. I go through highs and lows almost daily (usually when I can't find something or need something thats in storage or I'm cleaning other people's choice of decor :rolleyes: ) but its life. I know when I get a house I'm going to love every inch of it and the decor etc will be ALL MINE (and Dh's a bit too I guess :rotfl: ) and if anyone doesn't like it they don't have to visit :rotfl:

countrygirl27

'So you see, shrug your shoulders and laugh at those who worry about such things if you will, But now you should know why so many people are genuinely concerned about house prices. So should you be.'

OK so thats me told!

I was not doing the above, I was saying I didn't understand this aspect of it.

Of course I want prices to fall, so that I can afford a nicer property/pay less for it/ have less rick/make my deposit into a bigger proportion of the price etc. So I can see why people like myself, who are hoping to be FTB over the next few years, are hoping to see property prices fall.

But here is a scenario - if you are in your early 60's, recently retired, mortgage payed off and a nice pension rolling in, why are you worrying about proerty prices? Because it seems to me that everything is relative - ie. yes the value of your house is falling, but so is the value of everyone elses. Lets say my imaginary person lives in a 3 bed family home that is currently worth £350K. They decide to move to a smaller 2 bed flat currently on the market for £200k. But property prices fall 10%. Yes they lose money on their house, but the flat is now £20k cheaper as well. In fact in this scenario you could say they effectively lose £15k = ( -35k+20K=-15K)

Supposing you were the person going the other way, from the flat to the house you could argue that the change in price is actually benefiting you because yes your flat has lost £20k in value but at least you are paying £35K less for your new house.


Now I do understand that obviously it is far more complicated than this, and other factors come into play. Buying a house and paying off the mortgage is expensive and stressful. But I just think that 'HOUSE PRICES' are something that we as a nation are fixated on.

obsessed_saver

Synonymous wrote: »

My ISA is only at 5% but I can't move this now until April can I? Just in process of moving current account from HSBC at 0.1% to A&L at 1% (plus £100 cashback, as recommended by MSE)

Yes, you are allowed to transfer your ISA to another provider.

You are not allowed to put in "new" money into two different ISA accounts in a tax year, but you are allowed to move your "old" money from as many accounts into as many accounts as you like.

Check out the Savings and Investments forum on here. There's a "Best cash ISA" thread in the ISA sub-forum maintained by Kazza. Really useful, but should be verified with the moneysupermarket links at the top of that post to make sure it's still valid. With a £10k amount, you might be able to qualify for higher rate accounts as well.

On the current account, you can find accounts that pay better rates than 1%. You can pay your £550 saving "through" the A&L account to qualify for the £100, and get a better paying current account to receive your monthly pay.