Reply to: Interest Rates and House Prices in 2009

[gingerjedi]

And the equation is still positive if you rent, if houses fall more than the rent paid (which they are for me).

tim

Even with an interest only mortgage?

[MPwannadecentincome]

How does having kids stop the value of the house that you buy go down?

Having kids tends to force one out of the 2 bed flat into something a bit bigger. This of course does not stop the value of the house that you buy go down - all I am saying is that if you have to move because you need more space do not be so concerned if your house has lost some money as the bigger house might also have lost some more money and so the trade up may be easier particularly if you have been able to salt away some dosh in the meantime or have managed to repay a lot of the mortgage thus increasing equity in the property.

As I said its all down to personal circumstances - review your situation, the risks and take action accordingly. Some people will find it beneficial to buy and some won't.

[tim123]

depending on your personal circumstances maybe e.g. you don't have kids, or you don't have to be near a good school or you don't have to pay rent.....

How does having kids stop the value of the house that you buy go down?

And the equation is still positive if you rent, if houses fall more than the rent paid (which they are for me).

tim

[Stan.goodvibes]

Just giong by my experience of the last property crash in the late 80's - mid 90's....

I arrived in the UK June 1995, in putney and was intially renting for 900 quid/week. I remember walking through Putney looking at all the for sale signs, reading that the bank would give me a 95% mortgage with 2% off the market rate for 2 years and 1000 quid cashback, and wondering...

why isn't anyone buying?

Needless to say with a lot of blagging and some underhand mortgage broking I bought my first flat, and not long after that prices started rising and the market picked up considerably, but not in a bubble mode - just 'normal' inflationary pressure and the outward wave of value increase due to London expanding.

So far everything is looking VERY similar to the late 80's.

My pick: property will remain flat for the next 3-4 years, then inflation and and imminent end to the recession will cause the market to pick up.

The tricky bit is to notice the upswing before everyone else. I think because I missed the whole downturn in the early 90's and had a fresh persepctive from just arriving in the country, I noticed that the tide had turned before most of the general public, so got in early.

But you will know when that time comes, and it certainly aint here yet.

[Cyberman]

Check out Coca Cola, 1.69% rise today.

Try selling and taking a profit and you will find that most of it has been eaten up in charges of buying and then selling and the spread, and a profit is not a profit until you sell. Then if you make too much you have to pay capital gains. There are no capital gains on your main property, incidentally.

[Cyberman]

Your house. Your pension. Your savings. And any gold that they know about.

Here is how they happen:

1. Your house: well, possibly not yours, but repossessed houses might well become part of a nationalised housing stock.

2. Your pension: taken in to the state system in the interests of fairness etc. Currently under trial in Argentina.

3. Your savings: Wealth tax. Takeover of dormant accounts. Finally, a straight deduction (the Italian government did that just a few years back: overnight, all accounts had 10% deducted from them).

4. Gold: it's been made illegal to hold it before. Your Krugerrands under the floorboards might be invisible (or they might not), but your Bullionvault account will be down the Swannee.

Nothing is safe, and certainly not a Swiss bank account.

In four months I will not have much of a mortgage at all as I will be getting a lump sum from my pension. Thus repossession threat is nil. SMUG
Once a pension is being paid it is much safer than one that is not, plus mine is also index linked at a minimum 3%, and max 5%. Therefore, if deflation lasts a decade I will be well happy!! SMUG
All of my savings are in an offset mortgage, so no takeover to worry about, and I have no gold. SMUG

[MPwannadecentincome]

Buy you'd be even BETTER off if you kept the money in the bank and waited for the fall

tim

depending on your personal circumstances maybe e.g. you don't have kids, or you don't have to be near a good school or you don't have to pay rent.....

[BrilloPad]

CyberTory's house went up 3.56% in the same timeframe.

blood pressure

[DimPrawn]

Check out Coca Cola, 1.69% rise today.

CyberTory's house went up 3.56% in the same timeframe.

[BlasterBates]

Check out Coca Cola, 1.69% rise today.

[tim123]

Aah but my preconditions stated that you should have large deposit!

40K looks like a large deposit to me.

How many people (outside of this board) have that much cash stashed away?

tim

[tim123]

No - if the NEXT place you buy is also cheaper you are no worse off.

In fact, if you trade up, the next place you buy may be even more cheaper as 10% off £300K is less than 10% off £500K so you could be BETTER off!

Buy you'd be even BETTER off if you kept the money in the bank and waited for the fall

tim

[DimPrawn]

Aah but my preconditions stated that you should have large deposit!

What like 100%?

[MPwannadecentincome]

Just not so. Example:

You bought for 200k, put in 40k deposit (= 20%). You sell for 20% less, = 160k. Loan paid off, but all your deposit gone.

You try to buy the same house elsewhere: now it only costs 160k, but you have no deposit any more.

The first lender would lend you 160k if you put in 40k, but the second lender will not lend you 160k if you put in 0.

Aah but my preconditions stated that you should have large deposit!

[expat]

No - if the NEXT place you buy is also cheaper you are no worse off.

In fact, if you trade up, the next place you buy may be even more cheaper as 10% off £300K is less than 10% off £500K so you could be BETTER off!

Just not so. Example:

You bought for 200k, put in 40k deposit (= 20%). You sell for 20% less, = 160k. Loan paid off, but all your deposit gone.

You try to buy the same house elsewhere: now it only costs 160k, but you have no deposit any more.

The first lender would lend you 160k if you put in 40k, but the second lender will not lend you 160k if you put in 0.