spouse of scouse

I know it's a bit off-topic, but it might be an interesting comparison. Older people on an age pension in Australia who don't own their own house are under huge financial stress.

An aged pension couple who receive the maximum payments get $1,288 per fortnight. The median rent in Perth is $900 per fortnight.

This couple are eligible to claim $120 per fortnight in Commonwealth rent assistance. If they're paying the median of $450 a week in rent, they're left with just over $250 a week for food, utility bills, health care, clothing, transport - everything. Scouse and I spend about $250 a week just on food and household stuff, for the two of us, and we're not extravagant.

There is some public (social) housing, but the wait lists are huge. People who put their name on the list in 2003 are only now being housed, 11 years later.

Maybe that's why home ownership in Australia is still known as 'the great Australian dream'. If you don't own your own home when you retire, and you don't have a substantial amount of savings/private income, then you're going to be living well below the poverty line. So many people here are doing just that

christmasoompa

Yes, but hopefully we'll be in this house until we either die or get kicked out and put in a home by our kids, so in 40/50 years time there's no way it'll be worth less than it is now!

Yes, but it's only been a couple of years since we bought it, so not a long time.

I know we won't, but my point was that by then we should have more equity, so although rates will have increased, our LTV will also have decreased. We could of course, have fixed the rate for 10 years if we'd wished.

And my other point was that we could be paying more for a much smaller house if we were renting, just out of interest I've just looked and renting a similar house to the one we own would cost us another £1500 a month!

So multiple that by 15 years or so (when we're aiming to have paid the mortgage off by) and that would be £270,000 extra - even with interest rate rises, that's still going to be more. Plus of course, when we've paid the mortgage off that's it, unlike renting when potentially we'd have to keep paying the rent for another 30 or so years (assuming we live that long :fingers crossed.

Not everybody's situation will be the same, but there's no way that renting would be cheaper for us personally.

unique_boy

a) Interest Rates....Look at the numbers below (BoE rates), if your mortgage went back to 2006 levels are you saying it would not cost you more per month? Renters do not see that same increase.

Thu, 05 Mar 2009 0.5000 %
Thu, 09 Nov 2006 5.0000 %



b) Ehhh where have you been for the last 8 years. The whole financial crash spiralled from subprime mortgages and a house price collapse. I bought a house 2 months ago for 20% less than what it was sold for 5 years ago. Please explain why house prices only go up (excluding adjustments for inflation).

c) No I am not but you stated that renters would have no equity. They can have equity in other investments.

d) Your 500 pcm is not saving. Savings refer to cash (if you misunderstood) paying 500pcm into a house is not the same as saving cash. Your 500pcm is a function of the house price, if it goes up you make more money, if it goes down you lose money. It is also not a liquid asset.

Now it can be cheaper to rent or cheaper to buy but I would never say buying a house is a safe bet. House ownership is unfortuneately seen as a status symbol in the UK. I don't believe enough people are educated well enough in the financial ins and outs of it before buying.

spouse of scouse

Yep, it suits this couple down to the ground - they live in a lovely environment and have enough dosh left over to be comfortable (and take that month holiday in Spain every year!)

I think terms like 'gypsies' and 'trailer low life' say nothing about the people they purport to refer to, and everything about the people using them.

Hey, your friend who lives near Southport might be in the same park as Scouse's cousin!

dunroving

That's why I said "on average" - what was the average interest rate over the past 25 years? The cost of paying a mortgage will not continue to steadily increase over 25 years (it will go up and down). The cost of rent undoubtedly will go inexorably up, and stay up until the day you die.

The rest of your points are purely pedantic semantics. "Savings", "capital growth", "stock price increases", all essentially mean the same thing, just different vehicles. It means you own more capital. Of course if it is "cash savings", it is gradually eroded by inflation over time.

Of course when I said a renter won't have anything, I didn't mean they literally won't have anything, I was referring to the fact they will have nothing (that's nada, zilch, rien, if we are going to get nit-picky on word choice) from years of paying rent. Sure they can save, but so can a person paying a mortgage, so that is irrelevant.

I said house prices will go up over a 35-year period. At least read what I said before you fire off a half-cocked response. In 7 years, the value of my house has dropped by about 5%. I have owned houses in the past that have dropped in value or stayed the same over the short term. But every single house I have owned is worth more now that it was 35 (or even 25) years ago. Yes, 25 years ago, before the last-but-one huge house market crash!

All I know is that in 7 years I have paid off £50,000 from my mortgage and maybe spent £5,000 on maintenance. It would have cost me more to rent my house than it is costing to buy it (similar houses are renting for about £150 pcm more than I am paying in mortgage), and I'd have nothing material o show for it.

Absolutely agree with your last point, but that's a whole separate issue. All I know is I'll be smiling when I pay off my mortgage in about 4 years and won't have to pay anything other than maintenance from then on until I die. And of course, no landlord can tell me to move out, I can rent out a room or two for an income of maybe £10,000 a year, and I can choose what colour my walls are painted. That's all the proof I need that buying is a better financial move than renting in the long term.

not2old

related even

From the tone of this thread & others moving or moved back home, on the surface it would appear some (not all) returning have money, some even buying with little to no mortgage.

Whether a local 'in the UK' person or couple' compare to what BE ex-pat members of the same age have in terms of wealth - who knows?

As for seniors (the ones in difficulty in OZ or SA) I suspect seniors in the UK are better taken care of by the UK government, than are their commonwealth aged cousins.

On economical living, more moderate climate UK, it would seem living in a 'trailer home', oops 'a static caravan' is not too shabby

unique_boy

I think the fact that you have owned houses makes it easier for you (evidenced you maying off a mortgage in 11 years).

My points were aimed at for people moving back to the UK it is not a good time to purchase a house.

unique_boy

I really don't believe house prices can keep going up more than inflation. I think it is an incredibly silly assumption to say "house prices will go up over 35 years". One of the main reasons for the current increase is the UK govt propping up the market with helpt to buy and lowering rates. It has benefitted existing house owners but they are pretty much out of options for what else they can do and all indications is the bubble is getting ready to pop.

I just hope people on here haven't stretched themselves to far.

christmasoompa

OK, so just out of interest (yes, I'm a saddo) I've just done some calculations to see how renting v mortgage would compare for us.

Total cost for us with a mortgage over the next 20 years (we're hoping to pay it off sooner, but worst case scenario) would be approx £484,000. That's using our current rate for the next 4 years, then your 5% rate for another 5 years, and then finally I've used a 15% rate for the final 10 years (which should be a MASSIVE overestimation, but again worst case scenario etc).

Even using the 15% figure, that would mean our mortgage payment is £2904, but that's in a decade's time when hopefully our salaries have increased etc.

Renting a house similar to ours would be £3000 per month NOW (so more already than the highest rate of 15% for our mortgage). Even if you said the price would remain the same over the next 20 years (obviously it won't, it will increase with inflation), that's £720,000. A fairer figure might be £900,000 given rent increases.

So even with repairs and maintenance on our house, that's still a huge difference and far more expensive if we rented (in fact pretty much double). Plus of course, in 20 years time we'll have paid our mortgage off, whereas if we were renting we'd potentially have another 20/30/40 years of rental payments (so up to another £1.6M, again basing it on the £3000 of today's rent, when actually it would be an awful lot more).

So for us, there's absolutely no comparison and we couldn't have the retirement we're planning if we rented. I couldn't give two hoots about the value of the house, as we're not planning on going anywhere for decades, so that's just not relevant, but it should add to our retirement fund at least.

All of that aside, it's obviously far better for us financially to have a mortgage, but there's also a price that I don't think I personally could put on having a family home that my children will grow up in, where my daughter can get married one day if she wants, and where we have the security of knowing that we can stay as long as we want and grow old here.

So for that reason alone (regardless of financial considerations), a mortgage makes far more sense for me personally.

As I said above, everybody's situation is different, but for us personally, buying a house is very much a 'safe bet'.

dunroving

Easy? LMFAO.

You are making a very incorrect assumption there. In the short term, I have lost on house buying (hence my comments being very carefully worded about the long term).

I am not one of these property lords who you seem to think bought a cheap house 30 years ago, sat on their arses and are "lucky" to now be quids-in.

My current house was purchased only in 2007, with not much equity, at a very risky time. It went down in value by about 20% within a year or two (2007-2009). It's now closer to its 2007 value. I'll be able to pay it off in 4 years because I have worked my arse off, learned about tax-efficient investing, don't go on expensive holidays, and don't own a flash car (unless you count a 10-year-old Skoda Fabia as flash).

It's worrying about the immediate short-term risks of house-buying that will mean some young people will still be renting in 25 years. Ask those "lucky" people who bought houses back in the 1980s whether it was "easy" to buy back then. It's never a "good time" to purchase a house, it's just that right now it is more difficult than I the recent past.

Out of interest, I just checked Rightmove for the value of my first house.

Purchased in 1988 with hard-earned money while working overseas. Following £/$ exchange rate fluctuations and the ridiculous interest rate rises in the late 1980's (you see, I am aware of hideous interest rate fluctuations, in a way you probably aren't old enough to remember), my mortgage payments went up to about 120% of my monthly salary. So, I got myself two other jobs. Sold in 1990 for something like £35,000 (i.e., about as much as it cost, including the major renovations). That was just before the he house price crash that took maybe 8-10 years to come back to pre-crash prices.

It sold in April of this year for about eight times that much. And it is nowhere near London or any other posh area.

FYI, I owned a US house for 2 years in the late 90's, and owned another US house for 5 years in the early 2000's. The former made me a bit of money due to a wise purchase, and the latter also made me a bit of money because although it didn't sell for much more than I bought it for, I'd paid off a fair chunk of the capital.

Buying a house in the short term, or buying when you know you will keep moving, is probably not a good idea in general (though it would have been from about 1985-1990 and 1998-2007). But all other things being equal (and of course they aren't), I still believe that over a lifetime, buying is financially better.

unique_boy

***Mixed up the two users here but the below is still largely correct***

If I could just focus in on this, you said your rent was 600pcm and to rent a similar house it is 1500 on the market. I am going to estimate that a house renting at 1500pcm is worth around 300k.

The reason your mortgage is because you brought house equity to the table when you bought it I assume this from your statement on owning previous houses.

Look at it from the perspective of a first time buyer. They need to put down 5% minimum. 15k + stampduty + fees they are looking around 25k to buy that house.

An example repayment rate is 1,698pcm + maintenance, rates etc. This is were the rent vs purchasing affordability comes into it.

Preferntial rates don't really come into effect until you have a 75% LTV. This is one of the reasons of Help to buy came along.

You could say first time buyers won't be buying a 300k house but still to get preferential rates they are looking around 25k all in.

Now without a shadow of a doubt in your situation it makes much more sense but you are one of the lucky people who have benefitted from the housing boom.

With wage inflation lagging, we are getting to a place where first time buyets can't afford to enter the market....no new entrants...prices come down....people can't sell. etc

dunroving

If it is so "incredibly silly" , how come you haven't been able to pull up any evidence to the contrary?

Show me any 35-year period since the 1950s during which house prices went down. I mean from start to end, not some drop over a short time period during the 35 years.

unique_boy

Why was 2007 risky? Could you see into the future? Fair play to you that you seem to know about money.

but it is ok I'll guess I'll just stick to "posh London" good going on stereotyping the most densely populated area in the UK.

P.S over the lifetime it is better but right now in most areas as a first time buyer it is more expensive to buy than rent and riskier.

fulwood

Idea of static caravan is one not thought of.. Anyway have long time to ponder all this before I can leave US.. Have 2 dogs though so will look up some holiday parks and see what rules are for dogs.. I lived in 55+ community for 18 months in a mobile home - loved the community but place I rented ie mobile home was old, walls as thin as paper but would do it again. Now rent friend's house which is fine..

not2old

On the basis someone moving back who was able to buy with the minimal down payment - as of today, right now the monthly mortgage payment is exactly the same as the monthly rent.

Over the next 20+ years the rent as well as the mortgage payments remain approx equal, even lets suppose the mortgage payment at some point during the period is 20% more per month than the rent.

Without targeting social tenants on assured leases as well as not taking into account the nuisance factor of moving house, the landlord kicking you out or selling the property - Is it better to rent or buy?

On the basis you had the 5% down payment, would you rent or buy?

added below

http://www.thisismoney.co.uk/money/m...age-rates.html

HSBC has a two-year fixed rate at 4.79 per cent or a five-year fixed rate for 5.29 per cent from HSBC. Both come with a £99 fee and require a minimum deposit of £10,000.