Mortgage advice?

[yourdj]

But not in real terms i.e adjusted for inflation.

Thanks for the advice. The above advice was my point on not keeping cash as it will be worthless in 10-20 years. My dad bought a £300,000 house in 1987 its now worth 3-4 million! Unluckily he spent all his money and now has nothing

I think property is the best bet for now, unless there is a civil war or something

[Charlie Brown]

Couldn't agree more Toby.

If I ever fall into some money, the first thing I'll do is buy a apartment in town for next to nothing (well, in compassion to a house) and then rent it out to the students for £800/1k a month.

Once you get into the game, you're laughing.

I know one landlord, who started off at 17 with his own house. He applied the same tactic as above (buying/remortgaging)...he's now 60 and has 782 (or something silly like that) properties under his belt.

Probably why the banks went bust!

[Steve the DJ]

Be warned, here comes a little rant and no, I don't care if you agree with me or not...

Housing is the single most overvalued asset class in our economy.

No Government (nor the lenders) can afford for all the overpriced property out there to return to it's true value (or affordability in relation to actual earnings), because the repercussions in terms of losses to the banks and possessions (because there is no such thing as a re-possession as you don't own a property until you have paid for it in full), would be catastrophic.

This is the one of the main reasons interest rates are being kept so low but is never mentioned, it's to avoid "payment shock" for all those mortgage holders who are up to their noses with the monthly payment and any upward change in interest rates will push them over the edge.

Over 30% of the mortgages out there are on Interest Only were people are hoping asset appreciation will save the day in the long term, well, not until housing values are more in line with actual affordability will we see any real growth in house prices again.

The only way out of this is long term stagnation for house prices until everything realigns or we go down the Japan route where you buy a house with a 100 year mortgage making the monthly payments actually affordable and when you die it passes on to your kids.

Buy property by all means, history supports your theory that it always goes up, but for me, my experience of (and contacts in), the Financial Services industry confirm that events over the last few years are game changers and anyone expecting decent growth returns over the medium to long term are deluded.

[NKR]

I am in property and its overvalued against long term indicators. It does go down too. Housing is currently being proped up by the lack of planning permissions, which is keeping prices flat at best as supply is strangled. Mortgage changes are coming and the banks are starting to fire up the iron fist now that they have rebalanced their books on some of the major commercial property loses.

[Pe7e]

Buy property by all means, history supports your theory that it always goes up, but for me, my experience of (and contacts in), the Financial Services industry confirm that events over the last few years are game changers and anyone expecting decent growth returns over the medium to long term are deluded.

I totally agree, although if you have the cash to enable you to buy to rent, there are still reasonable returns to be made. IMO the most exciting opportunities are on the stock markets, but are more suited to the braver investor.

[wensleydale]

But not in real terms i.e adjusted for inflation.

Thanks for the advice. The above advice was my point on not keeping cash as it will be worthless in 10-20 years. My dad bought a £300,000 house in 1987 its now worth 3-4 million! Unluckily he spent all his money and now has nothing

I think property is the best bet for now, unless there is a civil war or something

I disagree.
If you can borrow at 1.5% but earn interest at 2.5% regardless of the level of inflation you will still make a profit as the money is not yours to start with.

It's not so much related to the inflation rate but the differential between the borrowing rate and savings rate.

[soundtracker]

Disagree all you like I'm still right.

[wensleydale]

Disagree all you like I'm still right.

I dont think you are.
I you are making a profit on the banks money, then however much inflation erodes it you are still making a profit.

[soundtracker]

Sorry but you are wrong, ask a professional mortgage advisor, or someone qualified to give investment advice - oh! You just did! I have CEMAP 1,2 & 3 which qualifies me as a Mortgage Broker and Financial Planning Certificates 1-4 which qualifies me as a I.F.A.

[wensleydale]

Sorry but you are wrong, ask a professional mortgage advisor, or someone qualified to give investment advice - oh! You just did! I have CEMAP 1,2 & 3 which qualifies me as a Mortgage Broker and Financial Planning Certificates 1-4 which qualifies me as a I.F.A.

I am happy to be proved wrong but you may need to revisit those certificates.

An example-

If Toby can borrow at 1.25% interest per year would be £62.50 on £5000.
He could put that £5000 (which technically belongs to the bank) in an ISA and earn 3.0% easily. This would generate £150 a year, meaning a profit of £87.50.
Whilst inflation may have an impact on the buying power of the cash its the banks cash anyway so that has no impact as the amount owed is not impacted by inflation.

Therefore in this situation why would you be worried about the impact of inflation or pay back the mortgage?