Isn't anybody tired of hearing the same old

teabelly

What also needs to be remembered too is monetary inflation will eat at the value of the outstanding loan so the 200k you borrow now is worth more than the 200k would be in 15 years time. Whether that is less than the money used to over pay in the beginning is something for someone that is better at maths and net present values than me to work out

RHemmings

teabelly wrote: »

What also needs to be remembered too is monetary inflation will eat at the value of the outstanding loan so the 200k you borrow now is worth more than the 200k would be in 15 years time. Whether that is less than the money used to over pay in the beginning is something for someone that is better at maths and net present values than me to work out

But surely the same applies to the value of the house. People keep telling us that it doesn't matter if house prices go down as the house will be worth more in 10 or 25 years time. But if the value of the loan goes down as the value of money goes down, the same should also apply to how much the house is worth. No?

WTF?_2

teabelly wrote: »

What also needs to be remembered too is monetary inflation will eat at the value of the outstanding loan so the 200k you borrow now is worth more than the 200k would be in 15 years time. Whether that is less than the money used to over pay in the beginning is something for someone that is better at maths and net present values than me to work out

Wage inflation eats away at loan values

General price inflation just eats away at your ability to service your debts.

ie. It makes things worse.


What with competition from cheap immigrant labour at home, outsourcing of anything that can be sent abroad and more competitive foreign manufacturers I doubt that there's much hope of most people seeing any sort of regular pay rise to compensate for inflation.

And I'd guess we're experiencing actual inflation of something close to 10% p.a. as opposed to the pathetic ~2% CPI that the government wants us all to believe.

Conrad

EdInvestor wrote: »

And their joint salaries 15 years ago were....?

You need to tell us what percentage of the joint salary they were paying on the mortgage to see who was better off.

But affordability is more stretched now than then and people have a higher proportion of debt of all kinds.

Rates only went to 15% for a few days then rapidly dropped.

ITS WORSE THIS TIME;
House prices are 27% above trend and that trend was based on decades where lending was sensible.

The recent boom came about due to cheap money (remember rates of 4% in 2001 - 2004), and lax lending.
Its a bit like throwing bucket fulls of bait in a pond. The fish get really fat. Remove 1/2 the food and what happens - fish get thinner.

N ROCK;
They were merely one of dozens of irresponsible lenders lending 5.9X joint income (thats over 10 x a sole income equivolent) and this on 125% lending:eek:
1 in 5 mortgages in the last decade were N Rocks and I can assure you thier market leading product was the 125% deal.

Again this is BUT ONE LENDER. Dozens of others were doing 90% self cert, 6 x income, bad debts - you name it. Several others did the 125% thing.

Can you not understand that a mass contraction of money supply will have a direct effect on prices that of course rely on money?


QUESTION TO YOU;
Where is the 40% + (and rising_ cash shortfall going to come from to support prices that were hitherto supported by the that 40% of cashflow?

PLEASE ANSWER:o

carolt

Conrad wrote: »

Can you not understand that a mass contraction of money supply will have a direct effect on prices that of course rely on money?


QUESTION TO YOU;
Where is the 40% + (and rising_ cash shortfall going to come from to support prices that were hitherto supported by the that 40% of cashflow?

PLEASE ANSWER:o

The reason they can't answer that is because they know there is no answer.

Hammersfan, EdInvestor, I've seen the Light, teabelly etc - we await your answers with baited breath......

setmefree2

The front end (the cost) of a mortgage is only part of the picture, celebrating the fall in market values whilst interest rates are rising makes no sense?

For every 1% interest rise on a mortgage of just £100k over 25 years you will pay £25k extra on interest only mortgage and approx £18k on a repayment.

At the following rates of interest this is what just £100k costs over 25 years (repayment):-
7%, £212,034(£18,744 more than at 6%)
6%, £193,290 (£17,913 more than at 5%)
5%, £175,377

So if you have a £200k mortgage an increase of 1% costs £38k/£36.

carolt

Really valid point, setmefree2.

I'd absolutely agree that rising mortgage rates are currently making it harder for FTB's who want to buy now, despite the fact that actual prices are starting to fall.

Until the credit crunch is resolved, and beyond, if inflation takes off, that will continue to be an issue.

Certainly, from a personal point of view, but I'm sure a point of view that many if not most potential buyers share, I judge whether or not to buy not on nominal house price, but on what the purchase will cost me monthly for the foreseeable future (and being pretty risk-adverse, with a young family to provide for, that means a long term fixed rate).

If it is far more expensive to buy than it is it to rent, as it is at present, then it's hard to justify buying. Not particularly in investment terms - though that would obviously make for a lousy yield - but in 'a house is a home not an investment terms' ie my family will be much happier living in somewhere bigger and in a nicer area, than somewhere cramped and nasty and possibly dangerous, just so I can 'own' it.

So, unfortunately for those who've bought recently, they're going to be squeezed by a combination of falling equity and rising interest rates.

Whilst those waiting to buy will be put off until falling house prices have fallen sufficiently to make it still viable to buy despite raised interest rates, ie until the monthly cost of buying is cheaper than that of renting.

So, yes, the credit crunch will mean prices fall further and faster than they would have done.

mr.broderick

carolt wrote: »

Really valid point, setmefree2.

I'd absolutely agree that rising mortgage rates are currently making it harder for FTB's who want to buy now, despite the fact that actual prices are starting to fall.

Until the credit crunch is resolved, and beyond, if inflation takes off, that will continue to be an issue.

Certainly, from a personal point of view, but I'm sure a point of view that many if not most potential buyers share, I judge whether or not to buy not on nominal house price, but on what the purchase will cost me monthly for the foreseeable future (and being pretty risk-adverse, with a young family to provide for, that means a long term fixed rate).

If it is far more expensive to buy than it is it to rent, as it is at present, then it's hard to justify buying. Not particularly in investment terms - though that would obviously make for a lousy yield - but in 'a house is a home not an investment terms' ie my family will be much happier living in somewhere bigger and in a nicer area, than somewhere cramped and nasty and possibly dangerous, just so I can 'own' it.

So, unfortunately for those who've bought recently, they're going to be squeezed by a combination of falling equity and rising interest rates.

Whilst those waiting to buy will be put off until falling house prices have fallen sufficiently to make it still viable to buy despite raised interest rates, ie until the monthly cost of buying is cheaper than that of renting.

So, yes, the credit crunch will mean prices fall further and faster than they would have done.

Just stay in rented forever, problem solved..i mean lots of members on here keep harping on about how great it is...

JonnyBravo

carolt wrote: »

Really valid point, setmefree2.

I'd absolutely agree that rising mortgage rates are currently making it harder for FTB's who want to buy now, despite the fact that actual prices are starting to fall.

Until the credit crunch is resolved, and beyond, if inflation takes off, that will continue to be an issue.

Certainly, from a personal point of view, but I'm sure a point of view that many if not most potential buyers share, I judge whether or not to buy not on nominal house price, but on what the purchase will cost me monthly for the foreseeable future (and being pretty risk-adverse, with a young family to provide for, that means a long term fixed rate).

If it is far more expensive to buy than it is it to rent, as it is at present, then it's hard to justify buying. Not particularly in investment terms - though that would obviously make for a lousy yield - but in 'a house is a home not an investment terms' ie my family will be much happier living in somewhere bigger and in a nicer area, than somewhere cramped and nasty and possibly dangerous, just so I can 'own' it.

So, unfortunately for those who've bought recently, they're going to be squeezed by a combination of falling equity and rising interest rates.

Whilst those waiting to buy will be put off until falling house prices have fallen sufficiently to make it still viable to buy despite raised interest rates, ie until the monthly cost of buying is cheaper than that of renting.

So, yes, the credit crunch will mean prices fall further and faster than they would have done.

Flippin eck I agree with everything carolt says in this post :eek:

setmefree2

izzybusy23 wrote: »

You say you bought your house as a 'home' .. good for you. BUT how are you going to feel when in the coming years you watch your house price slide down to half of what you paid and see other people buying houses similar to yours for a lot lot lot less than you paid??

Christ, you waited this long for a house price crash and then dived in at the peak. What possessed you?

And by you saying you are 'sick' of hearing people telling FTB's not to buy only leads me to believe to one thing... you are now totally bricking yourself that you have made the biggest financial mistake of your life.

The op may have got a really good interest rate and that may have made this one of the best decisions of his life. There is more to the cost of a house than what you pay for it. There is how much interest you pay on your loan to consider too. If I borrow £250k and pay it back in 10 years instead of 25 I save (roughly) £140k. Go over to the MFWers board and see the evidence.

The op may have a really good rate of interest, so your pity may well be misplaced. They may have in fact made a real good financial decision.;)