Common Knowledge; Don't buy a house for crying out loud.

[Vague_Boy]

Anybody short of a complete dolt knows that owning property is one of the best bets in todays economy

 

If you've paid off your mortgage, you own the house. Otherwise, you're renting from the bank.

 

The eye-watering mortgage debts of homeowners in their 30s and 40s means that the Bank of England cannot raise interest rates without pushing millions of people into an 'unsustainable' position, Sir Mervyn King has warned.

 

The outgoing Governor of the central bank last night said that many homeowners faced a debt timebomb because they had failed to use the opportunity of record low interest rates - which have stayed at 0.5 per cent since March 2009 - to reduce their mortgage debt.

 

His warning was echoed in a Bank of England report this morning that predicted nearly one in ten mortgage borrowers would have to take significant action - such as working longer hours, cutting back on essentials and changing mortgage - if rates were to rise by just one percentage point.

 

LINK

 

The BoE is essentially paralyzed as far as economic policy goes. Not if it can't raise interest rates (now at multi-century lows) without putting "millions of people into an 'unsustainable' position".

 

Borrowing more than you can afford and not using the opportunity of low IRs to pay off your debt. Is that falling short of a "complete dolt" or reaching the full 100%?

[buck]

We bought a big house in Australia for our family.

They've grown and gone.

We sold the big house and bought a little one.

The difference funded our retirement.

Rents are rising rapidly, and our grandchildren are concerned about being able to afford them. Where would we be if we had rented?

I'm very much in the same boat as you. I bought a house in 1982 for $98,000, a garrison colonial with 5 bedrooms and two bathrooms, raised 3 boys in it, their kids, and an aunt in her nineties. Eventually they all disappeared into their own homes, except Aunt Peggy who went into a retirement home till she died. Eight years ago I sold it on the internet for $245,000, bought a small manufactured bungalow for $110,000, put down $60,000 on it, and we live in great comfort. The main point of all this the old house dropped in value during the great recession to about $200,000, but so did mortgage interest. At no time did my payments even remotely rise to what I would have paid to a renter, which would normally rise every year. Home ownership isn't for everyone. My Mom and Dad lived in rented property all their lives for around ten bob a week. But if young people can raise enough to make it then they should try. Economies move up and down all the time, so bearing that in mind, you have to consider what is important. Do you need a new car? Do you need one at all? How many nights a week do you want to go out? Eating at home is a lot cheaper.

[I1L2T3]

I'm very much in the same boat as you. I bought a house in 1982 for $98,000, a garrison colonial with 5 bedrooms and two bathrooms, raised 3 boys in it, their kids, and an aunt in her nineties. Eventually they all disappeared into their own homes, except Aunt Peggy who went into a retirement home till she died. Eight years ago I sold it on the internet for $245,000, bought a small manufactured bungalow for $110,000, put down $60,000 on it, and we live in great comfort. The main point of all this the old house dropped in value during the great recession to about $200,000, but so did mortgage interest. At no time did my payments even remotely rise to what I would have paid to a renter, which would normally rise every year. Home ownership isn't for everyone. My Mom and Dad lived in rented property all their lives for around ten bob a week. But if young people can raise enough to make it then they should try. Economies move up and down all the time, so bearing that in mind, you have to consider what is important. Do you need a new car? Do you need one at all? How many nights a week do you want to go out? Eating at home is a lot cheaper.

 

Nice post. But the issue remains that the UK still has a housing bubble that never really popped.

 

Would I want to buy into the UK housing market now by taking on massive debt or risking hard saved cash? Absolutely no way! The young are getting wise.

 

I would wait. If deflation happens mortgage debt is the last thing you need. Same with runaway interest rates and stagnating wages.

 

Be careful. I can't say it enough. Remember that rates are ultra low and can't go much lower from here. If you have to buy then consider a fixed rate to protect against the rises when they come.

[buck]

Nice post. But the issue remains that the UK still has a housing bubble that never really popped.

 

Would I want to buy into the UK housing market now by taking on massive debt or risking hard saved cash? Absolutely no way! The young are getting wise.

 

I would wait. If deflation happens mortgage debt is the last thing you need. Same with runaway interest rates and stagnating wages.

 

Be careful. I can't say it enough. Remember that rates are ultra low and can't go much lower from here. If you have to buy then consider a fixed rate to protect against the rises when they come.

We always bought at fixed rates. In 82 these were enormous, around 12% per annum. But after Mr. Carter left, things got a lot better. I had until I retired, a very good job, with excellent retirement benefits. All of which made it possible to develop a great credit rating, all important in the US. I was able to negotiate mortgages any time I wanted to. I know circumstances are much different back home. I'm not sure but I believe you are stuck with the debt if you get foreclosed in UK, or so I've heard. Over here people have been able to negotiate a loan with little down payment and walk away from it when foreclosed. This has led to a lot of banks with a lot of empty houses, and little money available to all but the best risks. The banks were to blame for so much easy credit and have no right to cry foul when they lose out.

[Allen]

We bought a big house in Australia for our family.

They've grown and gone.

We sold the big house and bought a little one.

The difference funded our retirement.

Rents are rising rapidly, and our grandchildren are concerned about being able to afford them. Where would we be if we had rented?

Same here.

Bought a modest 3 bedroom semi in Sheffield.

The mortgage repayments were about the same as renting.

As the years past the mortgage repayments were far less than renting.

Years later..and circumstances changed.

The children grew up and left home.

The wife died....

I sold the house and bought a small place that suits me just fine.

Now have no mortgage to pay...no rent....and a few grand in the bank.

Renting is dead money...don't do it!

[maxmaximus]

People will stop paying rent or mortgages. It's a rational choice - when it really comes to the crunch people will prioritise spend on things that keep them alive day to day. Sorry to state the blindingly obvious but it's why people remain alive to build up rental and mortgage arrears. They don't generally die of hunger or cold beforehand.

 

The choice they have is to spend the minimum on food and pay for the roof over their head, or pay more then they need to pay for food and other stuff and loose the roof over their head. Going without the food which one requires to service can at best save £10 per week, there's also the opportunity for those in desperate need to use food banks.

 

---------- Post added 01-07-2013 at 07:41 ----------

 

Nice post. But the issue remains that the UK still has a housing bubble that never really popped.

 

Would I want to buy into the UK housing market now by taking on massive debt or risking hard saved cash? Absolutely no way! The young are getting wise.

 

I would wait. If deflation happens mortgage debt is the last thing you need. Same with runaway interest rates and stagnating wages.

 

Be careful. I can't say it enough. Remember that rates are ultra low and can't go much lower from here. If you have to buy then consider a fixed rate to protect against the rises when they come.

 

The problem being that many have been waiting for ten year for the bubble to stop inflating and pop, during that time they could have spend around £50,000 on rent, how long should they keep paying this high rent whilst waiting for something that may never happen.

[F. Sidebottom]

http://blogs.spectator.co.uk/coffeehouse/2013/06/why-dont-young-people-buy-homes-perhaps-they-spy-a-bubble/

 

 

 

Most young people would not recommend that a young couple, newly married, both working in steady jobs buy a home.

 

Finally, a generation has woke up. They are full aware that there is no 'property ladder'. And although there might have been due to government subsidy, the ladder has led to a very high platform that is incapable of supporting it's own weight, let alone the over-inflated UK property market.

 

Rents are too high, property prices are too high.

 

And what goes up, must come down.

 

You wouldn't go down the pub at 'happy hour' if prices were doubled. You shouldn't pay well over the odds for a house. Especially if you need a mortgage. Mortgages are mental in today's society.

 

Why the hell would you want decades of debt, when unemployment is rising amongst the younger generations and very few new entrants to the labour market have any form of job/income security.

 

 

 

It's common knowledge among the young. "Don't buy a house". Thank God for that, the younger generations aren't mental, there is hope for the future. Maybe they can build a better society to replace the ****** up mess of one we have now.

 

If what you are saying is right, then the only thing that is going to make you happy is if you move to a country where property and land is much, much cheaper.

 

The sooner the better. Please.

[Rupert_Baehr]

Populations are increasing and they are not making any more land. The laws of supply and demand dictate that in the long term prices can only go up despite some attempting to talk them down. Grab yourself a piece of the action!!!

 

Perhaps stopping the population from increasing might be the first part of the answer?

 

If you've got more people entering the country than you need, you've got too many. You can't limit entrants from the EU (unless you do so under accession agreements) - but then again, there is nothing stopping Brits moving to the EU, either.

[llamatron]

http://blogs.spectator.co.uk/coffeehouse/2013/06/why-dont-young-people-buy-homes-perhaps-they-spy-a-bubble/

 

 

 

Most young people would not recommend that a young couple, newly married, both working in steady jobs buy a home.

 

Finally, a generation has woke up. They are full aware that there is no 'property ladder'. And although there might have been due to government subsidy, the ladder has led to a very high platform that is incapable of supporting it's own weight, let alone the over-inflated UK property market.

 

Rents are too high, property prices are too high.

 

And what goes up, must come down.

 

You wouldn't go down the pub at 'happy hour' if prices were doubled. You shouldn't pay well over the odds for a house. Especially if you need a mortgage. Mortgages are mental in today's society.

 

Why the hell would you want decades of debt, when unemployment is rising amongst the younger generations and very few new entrants to the labour market have any form of job/income security.

 

 

 

It's common knowledge among the young. "Don't buy a house". Thank God for that, the younger generations aren't mental, there is hope for the future. Maybe they can build a better society to replace the ****** up mess of one we have now.

 

so many threads + so few topics = far too much free time!!

[Rupert_Baehr]

Those interest repayment only motrgages were only for around five years and then the home buyer had to start making payments on the principal and the monthly payment about doubled. Hence the number of foreclosures which sprouted like mushrooms in a dark, damp cellar.

...

 

In the US, perhaps. In the UK, they were called 'Endowment Mortgages' and they worked very well until the Life Insurance policies which were typically used to back them started to fail.

 

I took out my first Endowment Mortgage for £7,500 in 1976. It was backed by a £7,500 (minimum predicted yield) insurance policy (which included £7,500 Whole Life cover.)

 

I sold the policy in 1991 for £21,500 (to enable me to pay off the mortgage I had at that time.)

 

Shortly after that, Insurance policies began to under-perform and Endowment Mortgages became extremely risky .