Because his asset is leveraged with the banks money. Do you suggest that people who aren't experts (I presume his brother isn't) borrow money from the bank and then invest in shares?
How would he raise the money in the first place?

Btw I'm not saying that equities aren't a great way to invest money.They should be a part of any investors portfolio

You could take on leverage just as you take on leverage to buy any other asset (such as a house).

Is your friend an expert on property then?

Point is why take on massive leverage to chuck all your eggs in the basket of one particular asset in one asset class (which is what buying a house is)?

It is madness just we see it as normal.

Sorry did you not see my last post .Mervyn is in no rush to put interest rates up to 5% or any where near that for years to come .

In the Mean time he will be paying off his mortgage (presumably ) and when rates go up he will be paying interest on a lot less money owed !!

No, it's not quite the same, both have their advantages and disadvantages

1) A property in London will not suddenly half in value over night, and equity can. Though I accept one would have a portfolio of shares

2) Managing these 'plays' in shares would need a lot of attention. If you have a full time job this is difficult to do especially if you are leveraging and don't want to lose your shirt.

If you don't give it this attention you won't make any money

3) The property gives one extra dimension that equities can't ie it gives you a roof over your head

I have no idea what friend you are talking about??


Just to be clear I'm not saying equities aren't an essential part of any investors portfolio, but that's not the same as leveraging the money you have saved for a deposit for your first home and spunking it on shares. (assuming said property is in desirable part of London and not some rat hole in Liverpool and that one isn't especially talented in equity trading)

I did .... and I gave it the respect it deserved.

Mervyn can want what he wants - he is a single voice. Interest Rate increases need to be well before the curve to do any immediate good.

I said, "If Interest Rates go up" .... and my comments 'if' this happens stand.

You could buy into a passive funds which tracks the FTSE100, it's unlikely to half in value, but could of course....just as any asset could (including property).

Your complacency about property is evidence we are still in a bubble.

Then you have listened to yourself far more than you have actually listened to me. I have no complacency about property. My own portfolio is diversified between property ( which includes residential, commercial and foreign), equities, gold and cash (£ and other currencies)

Mervyn can want what he wants - he is a single voice. Interest Rate increases need to be well before the curve to do any immediate good.

He is a single voice, leading a group of rate setters ,but happens to be the one leading the way and having the final say .!!
Thats his job.

It's not down to him only at all. Only if the MPC vote comes out a tie does he get to decide himself.

Ultimately the markets decide. It's out of George's 'vigilant' hands.

quite tax efficient, i.e. no tax on capital gain if it is your home

and what I like too is that it is tangible-- and I have it and you don't and if you want it you have to pay me -- I like that

and what I find is really cool is that you really get to enjoy it, by living in it and owning it, unless you get your rocks off on looking at your portfolio every evening

I know what you're saying, but ultimately they could stubbornly keep base ratest 0.5% forever and trash everything.

For someone in my circumstances it's all pretty academic anyway, I can't get a fixed mortgage for less than 10 times the base rate anyway.

The only people who are helped by the 0.5% base rate are those on tracker mortgages that have had them since at least 2008. I don't know for sure, but I'd bet even most businesses (that we keep hearing is the reason rates have to be kept low) do not get anywhere near the base rate on their loans.

The base rate seems completely decoupled from "reality", as it were, apart from the few lucky tracker rate mortgagees who are living in houses for almost free, paid for by savers *and everyone else* in the form of rising inflation (and where's everyone's wage growth, please??)

The only people who are helped by the 0.5% base rate are those on tracker mortgages that have had them since at least 2008.



The base rate seems completely decoupled from "reality", as it were, apart from the few lucky tracker rate mortgagees who are living in houses for almost free, paid for by savers *and everyone else* in the form of rising inflation (and where's everyone's wage growth, please??) [/QUOTE]



I dont get the "paid for by savers" bit .Dont keep your money in the bank if rates of Interest dont meet your requirements ,shift it elsewhere and make it work .Nobody is tied to keeping it in the bank earning nothing ,but dont expect the rewards to be given without some form of work ,risk on the owners part .

Is there a particular reason you want a fixed rate mortgage yourself ?

Spot on Henrik. Those low rate mortgages only have 2 years left though. And then the fun starts.

And even now there are many people who see this as normal.

House = consumer good. Unless you let it out - I.e. for the income - you can hardly call it an investment. London may be different, assuming it stays the financial centre it currently is and to the same degree, but the same can't be said of elsewhere in the country. Why should a house continually rise in price?

spot on henrik

Well said,that is exactly the situation...

The 0.5% is helping a small amount of people within the populus...

The market is dead because in reality 5%-6%-7% is the mortgage lending rate for your normal man in the street.

We have a couple of years of correction yet,prices will fall and the base rate will rise...Its just not happened in any big way yet.

But it will...

Meanwhile us savers that have been frugal and sensible with our money are getting shafted by the banks to bail out ******** lenders...

Have we ever had such huge personal debt? Im sure that in our parents and grandparents time that people wasnt in massive debt just to say they have a "portfolio" and a Q7...

Many people have there priorities way out of whack!

Spot on fatscoobfella1. The solution? Keep you savings in something the government can't dilute at will to please these plebs.

Yep....

I dont have a lot of savings,but what i do have is not in the banking system anymore..Years of 3%-4% if locked up blah blah blah is a joke and an insult..

when my wife and i found out that our 4th child were twins, we decided to move to Cambridge (village just oustide)

but we both grew up in NHG/Ladbrook Grove and still have our house there, which we rent

I agree with the sentiments of Henrik,Fatscoobfella et al - but ultimatly you have to play the hand you are dealt in life, not the fantasy hand who would like to be dealt

and the very reason my brother can get a good deal quickly and get on the housing ladder is that he has no debts, been careful, and not spunked his hard on flash cars

I dont get that last statement at all Hodgy....

Money fantasy is not something that i indulge in at all.....My feet are well and truly planted...

I have no mortgage(we paid it off as soon as we could in our late 30's),no debts,no car loans,no credit cards...

We earn our money and save to buy the things we want when we can afford them.

Would i want another mortgage to buy another house,so someone could rent it,then i will use it as a retirement fund etc etc.....NO......
Thats a load of stress,debt an worry....

the last statement shows myself and my brother agree with you -- I get quite p1ssed off with people in there mid thirties complaining about not being able to get on the housing ladder yet have had a succession of expensive cars -- often it is a question of priorities.

should houses be a home not a financial vehicle, yes

should we all have world peace and love each other as brothers, yes

given the above two things do not exists, and property is a very easy way (if you take a risk) of making quite a bit of money, then I play the hand I am dealt

I do agree that in the past housing has been a way to make good money....Especially when the housing market were booming..Now,not a great thing to have money in,UNLESS you can afford to.
IMHO if you have to borrow the money,you cant afford to own it...

And lets not get into the debate about cash rich people snapping up all the FTB's so the young and less privelidged have no chance of owning a starter home.

I would be interested to hear how much money could be made long term,taking into account that over a period of a mortgage your roughly paying twice the amount that you borrowed..

BTW...i am not levelling any criticism or the question at yourself Hodgy,im genuinely interested in the answers...

Rightly or wrongly i was always taught to have as little debt as possible,never to borrow money etc etc..
The idea of having a lifetime of debt would be purgotory for myself..

What is the ultimate goal ?

no worries mate, we all have differing views over this stuff but Fatscoobfella -- you are working on the assumption the all debt is bad, it isn't, in fact you would get very little economic activity without it.


so in part, my answer references my point re debt above, I do not view it as an intrinsic problem if used properly (I did go into all this an a thread a few years ago)

It's not so much the money I have in the bank (although that is affected as well), but rather that keeping base rates low and running lose fiscal policies means that we get inflation. Ok, some of it is due to rising energy costs etc, but again if the base rate was higher then Sterling would be higher too, which would somewhat mitigate the effects.

Inflation is bad for me and people who work, because it means that our yet unearned income is being eroded. We may well have the same "number" on the pay cheques (or even more if we're lucky), but unless we get inflation busting pay increases then we're going backwards with regards to purchasing power. *This* is really my main gripe, because it affects everything we buy / use. It is also almost hidden, so most people don't realise they're being stolen from.


On the second point; I don't want a non fixed rate mortgage, because I think (might turn out to be wishful thinking...) that at some point the base rates will go up, and if I have a tracker, my costs will obviously go up as well. The best tracker I can get at the moment seems to be 3.99% (one that hasn't got a two year teaser rate). The best fixed rate with the same deposit would be 5.79% (5 year fix).

The cost for me to secure the payments for five years is thus 1.80%, which seems a fair cost, considering that interest rates can't go down much more, but they might conceivably go up a lot more than 1.80% over the next couple of years.

It's a gamble, of course, but for me personally, I think it would be worth it.

I havent said all debt it bad...I dont profess to understand world economy,but i do realise that debt and economic activity go hand in hand..

But i think PERSONAL debt is a bad thing..And everyone should try and have as little as possible.

I realise that buying a house without borrowing is near on impossible,but nothing else that you want to own need you go in debt for..

But on a personal level how can paying interest to a finance company/bank/ocean finance be a good thing ??

The only difference between renting, and buying with a mortgage, is that with former you pay rent to a landlord and with the latter you pay rent to the bank.

Of course with the latter you can profit (or lose) with changes in market price which effect your capital....buy then are we talking about a house as a place to live or a financial instrument!?

And in your case Tony,the rent goes to your mum...

When are you going to make the jump ?

No I rent my own flat thanks.

May buy later in the year. See what is around, maybe someone desperate to sell in the cold months.

Still looking in the posh suberbs of Manchester?