Chip

iTrader: (3)

Thats the same with ANY asset, INCLUDING money in the bank, which is only actually worth anything if you spend it, its got no real value while its just sat there in the bank, and could EASILY drop in value by more than a house does but people rarely see that one as they think money actually means anything in its own right, it doesnt, ask anyone german who was alive during the war, lol

Ex-Finesse

Money can only be made on the housing market if..

a) It was bought as an investment (and is not your normal residence) or
b) you downgrade your house at the top of the cycle.

With a), you obviously see the increase in capital, and with b), you have moved to a house which will fall less in value than your previous, more expensive house.

Increasing house prices are actually bad for people who want to upgrade because it moves the "rungs on the ladder" further apart.

Chip - hyperinflation isn't too comparable with houses and mortgages, but I see your point, if extreme!
The UK actually risks deflation in the next few years, as energy and food prices start to decrease and UK industry suffers from the US and EU slowdown.

foreigneRS

or any zimbabwean now

i don't get that if they're getting extra rent on a mortgage that they took out a while ago, surely they are winning and it doesn't matter in the long term if the value is going down in the short term?

and if rental charges can be increased but property values are going down, surely that would be a good time to think about buy to let as the lower the value, the lower the repayments needed on a new mortgage?

Daviet

phil by the sounds of it you would be better looking at the mortages with the oneaccount there realy only good if you can put away a bit extra every month or so.everybit you pay on top of your monthly payment comes of interest free.or sumthing like that lol.worth looking at tho im sure.

Chip

iTrader: (3)

Id not bother getting a new buy to let property at the moment personally, the sums just dont really work very well at the moment (im sure comedy dan will try and disagree though, as im sure there are exceptions, lol) id say that its a "hold" market essentially.

Chip

iTrader: (3)

Oneaccount rates are typically higher than other mortgages, I would say that on the whole they represent a VERY bad investment.

Ex-Finesse

They are winning for the extra rent (say average Ł100 p/m) but they are equally loosing Ł1,000 p/m on the value of the property.

The property market is the slowest moving market I can think of. Downturns occur for years, not months.

I estimate it will be 4 to 5 years before a property is up back to it's value at end of 2007 (the peak). Look below, if one bought in 1980, it takes until 1986 until it's the same price. Look at 1990, it takes until 2002 to become the same price!

That ignores the inflation that reduces the value of that money over the 4 to 5 years.

I estimate it will be 6 to 8 years before properties return to their current value, this time allowing for inflation.



That's the most recent Nationwide data. Look how long the downturns last. It takes even longer for the prices to recover... in which time the money could have been earning interest in a bank account, at worst!

foreigneRS

interesting information

Chip

iTrader: (3)

You seem to have totally ignored all the small blips on the way up, where its gone down and then rapidly recovered and then exceeded the price before the downward blip, and TBH there just isnt the evidence yet that what we are experiencing now isnt just another of those in an otherwise steady rising market.
I suspect it may be significant and not just a blip, but its really too early to draw conclusions like the ones you are trying to draw.

foreigneRS

if the media have anything to do with it, it will not just be a blip. the fuckers keep talking a self fulfilling prophecy

Ex-Finesse

Chip, all those blips really are just that.... blips! They all last for a year at the most before growth takes off again.

Look at the very recent downturn the graph shows. Nowhere else on the graph does that happen and prices jump back up. When that kind of drop occurs, it continues to drop for many years!!

No evidence to suggest we're not in a blip?

How about the data a few days ago of fewest mortgages ever approved for house sales in May? From memory, this was circa 54,000, and is about half the number at this point last year.

So imagine your market place, half the buyers, but no less sellers. If anything, number of sellers has increased. Prices will only go down if there's a shortage of buyers.

Abbey, Nationwide and HBOS have all increased their mortgage rates in the past few weeks. The credit crunch is far from over and mortgages will be harder to get over the next few months. We can expect to see new mortgages become less than half what it was last year.

Finally, yes the media do stoke fears of a slump. However the media were also responsible for driving the market up in the first place, with the endless programs and articles re. B-T-L and developing.

Chip

iTrader: (3)

As I said mate, I suspect it may be significant, but it really is too early to call it yet.

Turbosystems

iTrader: (5)

part A us subject to capitol gains tax at 40% of the proffit not so good an investment when you factor that in

Chip

iTrader: (3)

Can typically be avoided by moving back in for a while before you sell etc.

Turbosystems

iTrader: (5)

they are very strict on this it has to be your primary principal residence remember you are being watched by the inland revenue, you pop up on the land registry.minimum fine for non disclosure is 100% fine on the tax you owe max 400%
chip you have no chance as you have it on a buy to let explain your way out of that to the irs lol

325Pete

Interesting thread this, as I am currntly looking to buy my first place! Couldn't have come at a worst time lol.

I really am in two minds as to what to do. I'm a FTB with a decent sized deposit, and have a property in mind. The mortage would be just over a weeks wage for me, so I wouldn't be making the mistake of mortgaging myself up to the hilt. Its up for Ł135k but I'd be pushing to get it at Ł125k.

On the other hand, I could get the property, the market could bottom out, and I could be in negative equity in a matter of months....

Chip

iTrader: (3)

Rubbish, its easily avoided providing you move in and make it your main residence for a year first (during which time you can let rooms to lodgers still, and just not be around, so you can effectively still rent it anyway so all that actually happens is a slight drop in rental income and on paper you live there) and that property isnt on a specific buy to let mortgage as such anyway as I moved in initially and got a normal mortgage.

Chip

iTrader: (3)

If you can comfortably afford the mortgage, and plan to be there a good number of years, then I dont see what difference it really makes if it goes neg-eq for a while TBH so its hardly a big risk.

foreigneRS

exactly. as long as you have a good proportion of the value of the property as a deposit, you should have no problem getting a mortgage, and the rates are still relatively low. not the worst time to buy in history by any stretch of the imagination

325Pete

Deposit would be 10-15%.

The other thing that I get hung up on is, why do we in the UK feel the need to own our homes? I see it two ways at the moment....

1) I buy somewhere with a 30-35 year mortgage. Pay it off in time for retirement and I then own my home. Whats the next move? Sell it, downsize and enjoy the money at the ripe old age of 65 or...

2) Rent somewhere for the same price per month a mortgage would be, getting a much nicer place. Buy a nice motor with some of my deposit and live for the now.

Chip

iTrader: (3)

The fatal flaw in 2) is that if you get a 800 quid a month mortgage now, then give or take a bit with interest fluctuations, it will be 800 quid a month in 5 years and in 10 years and still in 25 years

If you rent though, you will rent the same place for 600 now, 800 in 5 years, 1200 in 10 years etc
So it doesnt take long before you start feeling poorer.

foreigneRS

i think you will need more than 10 - 15% to get a good deal these days

Ex-Finesse

Recently changed, purely to remove the 10% rate wealth-creating individuals were using....

All capital gains are now subject to 18%, so actually beneficial for the BTL crowd.

(*I can't remember if indexation allowance for individuals is still in force)

Also, was never really 40% after 2 years due to taper relief.

Very strict restrictions on Principal Private Residence exemption, as Mitsy said.

Lots of 90% mortgages still available, albeit higher rates than 75%.

I would hold fire on buying at the moment, unless one was particularly in love with a house, and couldn't care about the financial implications.

325Pete

Good point, but whats to say when I re-mortgage at the end of any deal it wont now be a Ł900 a month mortgage and so on?

True, but its not going to happen. Then you have to take into the account that I'm self-employed and it gets even more complicated.

Hi Ralph - Its Pete from Evo.

Chip

iTrader: (3)

My deal is for 25 years, cost me a whacking 0.1% extra on the interest rate versus the 3 year equivalent product, so was a no brainer as far as I was concerned.

Going for a short term deal never works out, they HAVE to make the cost up in other details, like higher arrangement fees or charging you to close the account etc, the reality is that they never save you much money if you do the maths.

some of the comparison sites do a whole life cost, and you will be amazed how little it varies on the different deals from the same lender even though it looks so different at first glance.

325Pete

Hmm, I may have to look out for that! High Street deals have been around abouts 5.4% for 3/5 years then shoot up to app.7.2% for the remainder. Haven't really looked into the cost over the life of the mortgage.

Chip

iTrader: (3)

Im on a base rate tracker, so mine varies with the bank of england rate, but other than that, there is no increase or decrease during the lifetime of the loan.

Benni

How so? Phil has asked geniune questions and Chip and others have geniunely helped him out.

Benni.

Crowder

brought mine jan last year if i sold last summer id have made 30k after id done it up (everything bar the front door) now its more like 20-25k and dropping... concerning but in the long run i cant see neg eq staying? well im hoping not!!

Chip

iTrader: (3)

In the long run, prices will go up, they always have and they always will as long as we live in a country with positive inflation, which I cant see ever changing, but I dont think they will continue to march ahead at the way they have done in the last few decades.

The problem that I see, is in the town that I live in, in the 1960s a 2 bed end of terrace was worth 5-6K and average wages were around 2K
Now, the same house is worth 200K, and average wages are around 15K

So it used to be 3 years wages to buy a house, its now more like 13!


There are of course many other factors than just that, but that is a frigthening statistic by any standards IMHO!

andyt

iTrader: (1)

2nd that and the answer`s from everyone makes it a good read

Graham S1

Negative equity only matter if he looses his job. If he's in a safe job, no worries. Thats what fucked everything in the early nineties, massive job losses coupled with negative equity. And given we are a more service based economy than manufacturing........ could be worse this time round, then again, it might all be fine.

Oh for a crystal ball.

Chip

iTrader: (3)

Yep in the 80s mortgages hit those sort of figures, but house prices were roughly half what they are now.
So a 7% mortgage now actually costs you MORE per month than it did in the 80s at 12%, and earnings havent actually gone up by a massive amount since the late 80s either, so in real terms, its actually about the same I should think!

Chip

iTrader: (3)

My parents fixed their's in the 70s, at 6% for the full term of the loan, their friends nearly all took the cheaper option and had 5% or so on variable and thought they were mad.
By the late 80s my parents friend's all changed their minds, lol