BEVS

As suggested I moved the posts about the map out of here and into a thread of their own HERE . I couldn't merge the posts with the actual map thread as it made the posts all wonky and out of alignment .

Sally Redux

Thanks for tidying up, BEVS.

spouse of scouse

Scouse's cousin lived in Canada for 40 years, and when the time came when he wanted to move home he couldn't afford to buy a house. He and his partner bought a static caravan at a site just out of Southport and they both love it. They just pay a monthly site fee, which includes almost all their bills. He did tell me how much it was, but I can't remember What I do remember is that it was a very economical way of living.

We visited them last time we were over there, they have a decent sized living area, compact but workable kitchen, a big double bedroom, a single bedroom and their own shower and loo. There's a big deck which overlooks woodland, and a smaller separate building next to the caravan which came with their site, that houses their laundry.

The site is only open for 11 months of the year, so in January they have a holiday in Spain. Static caravans are probably not everyone's cup of tea, but these two love theirs and are really happy.

not2old

I know someone that lives in one in the same area who also say its the best thing they ever did. Suggested this one to the missus - she won't have any part of it, yet will live in a bought 'sheltered housing' in Southport. Prices for a one bedroom with on site warden, can be found for less than £50k. Monthly fees + council tax approx £180-£200/mth

Of course we'd probably call the folks living in a static caravan 'gypsies' some even 'trailer park low life' - yet, the upscale name in the UK is 'holiday Park' homes. Can't change the image its still a 'caravan site'.

I think for retired folks its a way to go low cost living. Get one by the sea or a few minutes away

unique_boy

You are assuming that a) cost to service your mortgage remains the same over 25 years and b) the house will be worth the same or more than what was paid for. c) the renter doesn't save any money.

These are big assumptions. In the UK I think you can only lock in your mortgage rate for 5 years max.

Right now mortgage rates are historically low and house prices are near pre crash highs. I rented a flat in London that when I left was put on the market at 350k GBP for me to purchase with a 5% equity deposit would costs a mortgage of roughly 2k a month. This was more than 20% the market monthly rental rate. Factor in imminent IR rises (2017 most likely) your mortgage is going to become more expensive. In my time renting my rent has never increased year on year more than inflation.

Low interest rates and high house prices is not a good market to be in and this is why banks are enforcing stricter lending rules (they are now stress testing your income for rate rises).

Right now for me to buy it is riskier, more expensive and the return on investment is not guaranteed. Whereas I would advise people to rent and use the excess income to build a cash nest.

The spread between rental cost vs ownership cost is at it's highest in London and might not be evident in all areas of the country but you have to remember that Houses are not liquid assets.

That is looking at it from a purely objective monetary manner.

bigglesworth

Nobody ever factors in the cost of maintenance. The Chartered Institute of Housing did a study of ALL the costs of homeownership (although they did not factor in the loss of opportunity involved in tying capital up) and found it was pretty even stevens.

Also renting is usually more flexible. When young we tend to change jobs more frequently, so the inflexibility of ownership is a limiting factor.

Rents also tend to be cheaper, (plus no maintenance costs). If you place the savings in an investment fund, over time the growth in the fund will esily match or in many cases exceed the returns of homeownership. The killer part is taxation. Otherwise the sums come out very much in favour of renting. But as it seems increasingly likely that the capital appreciation in home ownership is likely to be taxed too, the financial argument is in my view tilting decisively against ownership. Much of the capital appreciation (until the latest surge) has been to some extent illusory, as a significant proportion has been due to the chronic inflation in the UK.

However, rent versus ownership is a much wider argument than a simple financial one.

What the CIH did NOT take into account was the "tyranny of the weekly wage". If you rent you HAVE to pay the rent, and as most of us are poor at saving, that means going to work every week. Whether you want to or not. (This was one of Sir Keith Joseph's main arguments for Right to Buy). Ownership (even when the bank are actually the owners) gives greater freedom.

When older, ownership also gives greater peace of mind and security.

I don't believe myself that there is one answer. It very much depends on ones circumstances. But I am quite clear that, were I at the beginning of my career rather than the end, I would be renting.

christmasoompa

Nope, 10 years. Current rates for a 10 year fixed are around 3.49%.

You're forgetting though, that anybody that's made a decent amount on the value of their property, then has a better LTV ratio and can get a much better rate. Our house has increased in value by a large amount in the past 3.5 years, which means that our LTV rate has massively decreased and we've been able to get the best rate possible - just fixed it at 2.39% for 5 years.

If we were renting, we'd have a fairly small 2 or 3 bed place for the same price as we're currently paying for a very large 5 bed with a couple of acres. So you do need to factor in price rises and how that affects the mortgage, any increase will mean a better rate, so even when they rise it may work out as fairly similar.

HTH.

Sally Redux

Why does ownership with a mortgage give you greater freedom?

Interesting points though. We sunk a fortune into our US house and definitely didn't recover that.

christmasoompa

Presumably because some mortgage lenders will allow you to take a payment holiday, or to underpay, if you have a good history with them? We've never needed to, but I have to say it's good to know we could take a year off paying the mortgage if we really needed to (yes, I know we'd pay for it in the long run and end up paying more, but if we were in trouble it would be good to know we wouldn't lose our home).

Sally Redux

I think the one we are looking at said you could do that if you had already built up enough overpayment to cover it. Generous eh? But yes there may be others along those lines.

not2old

forgetting the down payment, over 25 years the mortgagor will pay approx (depending on the interest rate) including all of the legal, set up fees & switching fees + whatever else, will, I suspect pay ~2x - 2.5x the original mortgage amount. On top is the upkeep, maintenance, roof repairs, added cost to keep the grounds like Buckingham Palace.

The renter paying the same rent as the initial mortgage from day one, then over the course, add to it rent inflation increases - would, I expect over 25 years have paid out the same amount (or more) in total of money as if they'd had the mortgage?

If someone has access to middle UK prices & rents of the past 25 years, be interesting to see the comparison.

At the end of the day, even if the house price never moved up one penny from its initial purchase price - the home owner has a nest egg for retirement

christmasoompa

They probably do say that now, given the tightening of the rules regarding mortgages. When we first got a mortgage 15 or so years ago, all you had to do was have paid the mortgage for the same length of time as you wanted a payment holiday for i.e. paid for six months, then you could have six month payment holiday!

Whether there are still some lenders that do that I have no idea though.

unique_boy

I was talking from the perspective of somebody buying the house the first time. You are one of the lucky ones who has gained the equity in their house from doing nothing.

It is an even bigger assumption that house prices only go up.

If you wanted to buy the house you currently live in today at the current market price for the first time, could you afford it?

UK wage inflation is waayyy behing house price increases. The current house price boom has benefitted those who already owned.

It is a precarious situation we are in, it looks like the bubble has peaked based on the numbers coming out for September HPI.

So I would be wary of buying right now.

p.s that rate you quoted is the 5 year rate not the overall rate for comparison? Have you thought what you would expect to pay in 5 years time? (you aren't going to get a rate that low)

dunroving

London is a foreign country as far as housing costs are concerned so introducing it is a distraction.

I don't think they are big assumptions at all over a lifetime.

a) Why wouldn't cost to service a mortgage (on average) remain the same? If I take out a £200,000 mortgage, the value of the loan won't change at all - except of course that the capital debt will decrease over time.

b) Show me a single house that went down in value over a 35-year period ...

c) Whether someone saves or not is a separate issue applying to renters and homeowners - or are you saying only renters save money?

I currently live in a 3-BR house that I am buying (I'd say I own it, but until I pay off the mortgage that isn't entirely true). The interest on the mortgage is less than £100 per month. You can't rent a shed for that much. The other £500 pcm is paying off capital, i.e., "saving money"

I'm not saying buying is better, just that over a lifetime it's hard to see how it is cheaper to rent.

Editha

As for buying now, I think it is a question of where.

I'd be wary of buying in London at the moment, not just because prices are high, but because of the market being so distorted by foreign buyers. I think it is very difficult to tell whether that is going to be a long term phenomenon or not.

But outside London, house price inflation is not that great. In many places prices are still well below 2008 values.

Outside London, I still think the best advice is to buy if you can.