Housing market is realy bucking up!

[Andy Hall] :

Au contraire, mon ami. It's the huge level of gearing that makes housing so different. Put down 10%, house goes up by 10% and (ignoring expenses) you've doubled your money. Of course the same would be true if you borrowed money to buy shares and they went up but only a tiny minority of people ever do this (either directly or by futures trading)

Reply to
Tony Bryer
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Absolutely.

I think Investment Trusts are allowed to borrow... however, this sort of thing ought to be heading for uk.finance, or somewhere, so I'm not continuing here!

Reply to
Chris Bacon

Err, this level of gearing is absolutely standard in most vanilla derivatives.

So, what you're saying *isn't* that the level of gearing makes it different, but that it's popularity does.

Reply to
Huge

25 years ago I took out a private pension scheme. If I had had the bottle to plough all the money into property instead my pension fund would be 6x larger than it was.
Reply to
Tony Williams

Much depends on the start and end points.

Reply to
Huge

Yes - it's strange how short some memories are. Inflation with the previous Tory government was so severe that Heath introduced 'threshold' payments for employees - automatic pay increases each month.

Reply to
Dave Plowman (News)

Which direction and which "fat cats"?

This is more silly nonsense from the tabloid press....

Reply to
Andy Hall

There are quite a few financial vehicles with high gearing, not just the housing market.

Which is a choice.....

Reply to
Andy Hall

The message from John Cartmell contains these words:

You don't say how much it cost so we have no way of knowing what your idea of the salary of a fairly averagely paid 21 year old.

I was looking in Stafford and prepared to pay a premium for the rural location. You don't say where you found your stone built terrace but I doubt if it was in the West Midlands. Almost everything I looked at was built of brick.

What a difference a few years heavy inflation makes. IIRC I sold up in

1978 for £15,600. Inflation 10 years earlier wasn't so steep. Taking the mid year RPI the difference between 1968 and 1971 was 23% and between 1969 and 1971 17%.

I can remember Healey promising to squeeze the rich, his 98% marginal income tax rate and basic rate at 35% but the inflation record is by no means as clear cut as you make out. The Tories were only in power from

1970 to 1974 and they, like the labour administration that followed first had to cope with inflation caused by the previous administrations electioneering. And if I have my dates right 1974 was the first oil crisis since the Suez crisis of 1956 which couldn't have helped. Inflation peaked in 1975 (28%) which could perhaps be blamed on the Tories but it is hardly fair to blame the Tories for the 17+% inflation for 1977 and the 15+% for 1979. For all their other faults Thatchers Government did at least get inflation down to a manageable figure within a few years of taking office.
Reply to
Roger

Whilst both shares and housing go up on average over the long term. There are two differences.

1) Houses go up quickly and down rather slowly. 2) Share increases are subject to CGT whereas you own home isn't.
Reply to
Ed Sirett

Generally true, I agree, which in the context is quite helpful.

I wasn't necessarily thinking of shares or necessarily of own home.

Reply to
Andy Hall

However, gains on a second property are taxed - and how do you *really* make money on your house? Die, and leave the loot to someone? "Downsize", and spend the money? Move abroad?

uk.d-i-y - rename it uk.wibble.

Reply to
Chris Bacon

I have gone some way towards that with

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It lists the figures for repayments etc. on £100,000 as a repayment mortgage.

This assumes a 3% wage inflation versus 5% and 7% Mortgage Interest Rates. (An arguably realistic set of figures?)

The results are that the repayment part of the mortgage starts out at about 28% and rises year on year. That's a fairly sizable chunk.

The affordability column shows how the mortgage gets easier to pay each year.

Assuming that someone takes out the mortgage and can afford to pay it with

5% interest then the problem of an extra 2% interest rate only exists for the first 7 years! After that inflation cancels the effect.

The moral of the tale or table is that if you really wish to be protected against the soothsayers of doom: Get a low start/ initial fixed rate mortgage.

The other aspect is that 'repayment holidays' are really big money spinners for the bank, avoid at all costs short of the house itself.

Reply to
Ed Sirett

That and keep a lookout for better financing products, switching to them at appropriate times.

Another scenario often missed is that it is not necessary to have a repayment vehicle capable of repaying the entire sum borrowed if the eventual aim is to trade down in some way. Clearly the risks of this strategy have to be considered, but it can be a very effective way of achieving what is effectively a tax free investment in certain circumstances.

Reply to
Andy Hall

Money lenders. Do I really have to bring the explanations down to primary school level?

I think most of the tabloids are promoting the fat cat agenda.

Reply to
John Cartmell

About 2,000. Pay about 600-700pa.

Pretty much where the M65 now does a dog leg turn at the junction with the A678.

72-75 were horrible years.

The inflation was going down steadily from a terribly high point. Despite what Healey promised the brunt of the pressure in lowering infaltion was on the poorer paid and the rich got off very easilt in comparison - hence the problems in 78-79. Thatcher did not 'get inflation down'. She did what other governments wouldn't do and destroyed British industry, massaged (word too weak) statistics, and substituted mass unemployment in place of economic restrictions. No sane leader could have taken such steps.

And inflation returned in spades as soon as unemployment returned to as low as two-three times the rate when she took over power.

Reply to
John Cartmell

In article , John Cartmell writes

Are you sure about the pay? I started in 1971 as a £12pw 16yr old junior (and I mean junior) lab assistant, the lads a couple of years older than me were getting about £20pw, they paid better money on the track at Vauxhall which is what the careers advisor thought we should all do as we lived in Luton.

Reply to
David

Not really. I just wanted to confirm that this was the basis of your thinking.

Money in its various forms is a commodity just like many other things.

It is bought and sold. Providers of it offer all kinds of product and all kinds of services to make their offering attractive to their potential customers.

The customers now have a vast range of products and suppliers to choose from and it is highly competitive, as it should be.

So...... the suppliers supply, the customers choose what they want (if anything) and buy it (or not). The suppliers make a margin on the product.

This is exactly the same as any other commercial transaction.

The notion of "fat cat" in all of this is a nonsense.

If you took the view of allying money lenders with sinners and expecting them to be cast from the temple, I can respect it; simply because the temple is not an appropriate place to be doing this kind of business, but not because it isn't appropriate at all.

I think that they are just providing the nonsense propaganda that their jealous readership would like to read.

Sorry, but in the real world, some animals are more equal than others.

Reply to
Andy Hall

The message from John Cartmell contains these words:

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I still don't think the average 21 year old would have a cat-in-hells chance of making such a purchase though, even with an income of £700pa. You had the advantage of a working wife and both of you in secure employment. How many of the rest of us would have had either at 21?

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The motorway to nowhere. :-) Probably still gets less traffic than the single carriageway A65 even though it is now linked to the M6. Must have been some important MPs in the area.

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In terms of inflation, yes, although 72 and 73 (8,11) weren't particularly bad compared to 74, 75, 76 and 77 (19, 25, 15, 12) or 79,

80 and 81(17,15,12). Inflation figures quoted are the %age increase for the December RPI figures.

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The figures I have looked up don't match your resume. The December to December RPI increases (the ones immediately above were July to July) for the years 74 to 79 were 19, 25, 15, 12, 8 and 17. Inflation wasn't under control during that Labour administration.

During the Thatcher years inflation came down rapidly (15, 12, 5) and although there was a glitch at the end of the 80s inflation didn't make double figures again.

On the face of it the rich didn't get off easily under Healey who upped the highest rate of Income Tax from 75% to 83%, didn't increase the start of that over £20,000 tax band at all till 1977/78 and imposed the Investment Income Surcharge at 15% on investment income of over £2000pa.

The poorer got squeezed as well. Squeezed harder every year until at least 1976/77 but the rich had to take that punishment as well. Only those with creative accountants would have done well in that period.

Reply to
Roger

But they shouldn't be encouraged

Reply to
Stuart Noble

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