Cyclone Posted June 2, 2011 Share Posted June 2, 2011 Whilst wages were rising this wasn't a problem though, you could afford to meet the mortgage payments, you also got a better Mortgage deal with a bigger deposit. Now because the only equity you're getting in the house is what you pay off the mortgage, the size of the deposit needed to buy the house is often the limiting factor and not the mortgage repayments. I suppose that depends on what you define as a 'problem'. Personally I don't like paying interest, so taking out a bigger and bigger mortgage all based on the deposit you've generated through house price inflation sounds like a terrible idea to me. And pay was never increasing at the same rate as house prices (well, not for the boom period of 2000 - 2007). If the mortgage payments aren't the limiting factor and the deposit is, then that means the person has spare cash they can save to put towards that deposit. And when it's a deposit that's been saved, instead of one that appeared due to inflation, the bank can have more confidence that they can actually afford the mortgage they're asking for. Link to comment Share on other sites More sharing options...
JFKvsNixon Posted June 2, 2011 Share Posted June 2, 2011 I suppose that depends on what you define as a 'problem'. Personally I don't like paying interest, so taking out a bigger and bigger mortgage all based on the deposit you've generated through house price inflation sounds like a terrible idea to me. And pay was never increasing at the same rate as house prices (well, not for the boom period of 2000 - 2007). Paying less interest on your mortgage because you've got a large deposit then would surely appeal to you? If the mortgage payments aren't the limiting factor and the deposit is, then that means the person has spare cash they can save to put towards that deposit. And when it's a deposit that's been saved, instead of one that appeared due to inflation, the bank can have more confidence that they can actually afford the mortgage they're asking for. Of course then you can save, but it takes time to save tens of thousands, and as I was pointing out earlier the lack of this limiting factor was a benifit of the rising house prices that lots of people were happy about. Link to comment Share on other sites More sharing options...
Cyclone Posted June 2, 2011 Share Posted June 2, 2011 Moving house and taking out a new and larger mortgage will not result in you paying less will it. Particularly if the 'large deposit' has come from house price inflation, which means that the additional amount you have to borrow is now larger than it was previously. It will actually mean paying more on your mortgage. Yes it takes time, that's how the economy worked when it wasn't involved in a bubble that created a massive worldwide recession. Nobody should be pleased about rising house prices except those exiting the market or with more than one house. Simple example 0% inflation Mortgage of 50k (on a 55k house). Several years pass you've paid off 5k and the mortgage is now 45k (10k equity) Move house to a 100k house. Sell current house and pay off current mortgage, take out 90k mortgage. 20% inflation (over several years, so probably 9%/annum for sake of argument) Mortgage of 50k (on a 55k house). Several years pass you've paid off 5k and the mortgage is now 45k (10k equity) Inflation means your house is worth 66k. You sell it, you now have a 21k deposit. Move house to the same house as above, but it now costs 120k. You now have a new mortgage of 99k. So whilst the inflation resulted in a 100% larger deposit, it also resulted in a 10% larger mortgage! Clearly a bad thing. Link to comment Share on other sites More sharing options...
JFKvsNixon Posted June 2, 2011 Share Posted June 2, 2011 Moving house and taking out a new and larger mortgage will not result in you paying less will it. Particularly if the 'large deposit' has come from house price inflation, which means that the additional amount you have to borrow is now larger than it was previously. It will actually mean paying more on your mortgage. Yes it takes time, that's how the economy worked when it wasn't involved in a bubble that created a massive worldwide recession. Nobody should be pleased about rising house prices except those exiting the market or with more than one house. Sorry I meant to put less interest, I'll amend my post. Link to comment Share on other sites More sharing options...
Cyclone Posted June 2, 2011 Share Posted June 2, 2011 It won't result in less interest either. As demonstrated, the overall mortgage will be larger, hence the interest payments will also be larger. Link to comment Share on other sites More sharing options...
Celeb Posted June 2, 2011 Share Posted June 2, 2011 I have 26 houses so its great news for me. No intention of selling though...dont need too. Link to comment Share on other sites More sharing options...
JFKvsNixon Posted June 2, 2011 Share Posted June 2, 2011 It won't result in less interest either. As demonstrated, the overall mortgage will be larger, hence the interest payments will also be larger. Sorry again, I meant a lower interest rate, so you'll pay less interest on the loan. So with a 40% deposit with HSBC you'll be paying 2.99% interest, with a 20% deposit you'll be paying 5.39%. So as I said you'll get a better deal with a bigger deposit. Link to comment Share on other sites More sharing options...
Cyclone Posted June 2, 2011 Share Posted June 2, 2011 Well, yes, everyone (who has debt and not net assets) benefits from low interest rates. But that's only weakly linked to house price inflation. And the entire page has been about inflation, not interest rates... Ah, I see what you're getting at, having this deposit from inflation will allow you to secure a lower rate because you are putting down a larger deposit. I'd rather just have a smaller mortgage in the first place, I could run the numbers to check, but I suspect it works out better than having the higher mortgage and lower rate (although the exact numbers would be important). Link to comment Share on other sites More sharing options...
Peas Maker Posted June 7, 2011 Share Posted June 7, 2011 ???? I was underground The impression they were on thé way down ? Link to comment Share on other sites More sharing options...
muddywolf Posted June 8, 2011 Share Posted June 8, 2011 ???? I was underground The impression they were on thé way down ? They are, like a said before there is too many mixed signals. http://www.independent.co.uk/news/business/news/home-prices-post-worst-annual-slump-since-2009-2294320.html No one can predict if they are going up or down, never mind putting a percentage on it over 5 years. One expert says one thing and gets a article printed about it, the next one comes along and has a different view and that get printed etc. Link to comment Share on other sites More sharing options...
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