Next Stop Recession?

[GeoffCapes]

That’s a game of chance - when he has an opportunity to clear a mortgage. It could be a liability if rates continue to rise and house prices fall.
Renters might not be able to afford rent that matched mortgage rates.

The semi greed game.

I imagine these a decent amount of equity in the houses by now to not have to worry about negative equity.
It's Sam's decision at the end of the day.

We'd probably all make different ones.

 

[rockits]

I have no idea like most of us of course but I am trying to get in a position of no mortgage, very low monthly bills/outgoings, a rainy day fund to weather a heavy storm and some assets that could be sold to liquidise funds if it really bites hard. I don't think I would want to be risk on and heavily leveraged gambling on stability or growth/increases in anything.....aside of inflation of course! Time to be a little defensive it feels.

Will also also allow me to be a little different with business/work if time is less of a required paid for entity. I'm experienced in a good sector that will always have work so it could be a lot worse. All of this hinges so much on planning consent from planning to build the house. Without it I'm in a far far less rosy position.

 

[Scaf]

I guess to get a better comparison from 2022 to 1988 we would need to work out say the average UK house price, average UK mortgage rate and average UK salary for both years to get a decent idea of how 2022 compares to 1988 in real terms. I expect it is more expensive now but I wouldn't be surprised to find it is closer than most people think or guess when adjusted. Maybe a percentage of salary spent on mortgage for an average UK house would be a fairly decent comparison. Maybe even might need to work on gross figures to get an easy comparison.

However, you could even introduce tax rates as not sure if nett pay will be less or more in real terms in 2022 compared to 1988. You can't really make a decent comparison really between 1988 and 2022 unless you make a decent real world comparison.

I would say it’s massively different.

I bought a house in 1990 for 96k it’s now worth 600k so up by a multiple of 6.25.
I was on a salary of 28k and that very same job still exists and pays 46k up by a multiple of 1.65.

So in 1990 I could borrow 3.5x salary and buy the property with money deposit

In 2022 I wouldn’t stand a hope in **** of buying a 600k house with a 46k salary

No other factors will make a material difference to that calculation.

Property in my area has doubled in the past 13 years and continues to do so.

The answer to Sam’s predicament may well lie in the location of the houses and the capital gain he can expect for the future. No way would I cash in mine, if anything I am advised to take equity out and buy more !

 

[Wattie]

I would say it’s massively different.

I bought a house in 1990 for 96k it’s now worth 600k so up by a multiple of 6.25.
I was on a salary of 28k and that very same job still exists and pays 46k up by a multiple of 1.65.

So in 1990 I could borrow 3.5x salary and buy the property with money deposit

In 2022 I wouldn’t stand a hope in **** of buying a 600k house with a 46k salary

No other factors will make a material difference to that calculation.

Property in my area has doubled in the past 13 years and continues to do so.

The answer to Sam’s predicament may well lie in the location of the houses and the capital gain he can expect for the future. No way would I cash in mine, if anything I am advised to take equity out and buy more !

Poor financial advice from whoever.imo.

 

[Scaf]

Poor financial advice from whoever.imo.

To be fair the advice was from a buy to let landlord “king” and I didn’t follow it, I bought gold

 

[Wattie]

To be fair the advice was from a buy to let landlord “king” and I didn’t follow it, I bought gold

“King”
You said “
I am advised to take equity out and buy more!”
When, now?
Or 10 years ago?

 

[Wattie]

To be fair the advice was from a buy to let landlord “king” and I didn’t follow it, I bought gold

What’s funny?

 

[rockits]

I would say it’s massively different.

I bought a house in 1990 for 96k it’s now worth 600k so up by a multiple of 6.25.
I was on a salary of 28k and that very same job still exists and pays 46k up by a multiple of 1.65.

So in 1990 I could borrow 3.5x salary and buy the property with money deposit

In 2022 I wouldn’t stand a hope in **** of buying a 600k house with a 46k salary

No other factors will make a material difference to that calculation.

Property in my area has doubled in the past 13 years and continues to do so.

The answer to Sam’s predicament may well lie in the location of the houses and the capital gain he can expect for the future. No way would I cash in mine, if anything I am advised to take equity out and buy more !

I wonder if property in your area will double again in the next 13 years. If only we knew the answer to that one!

The one thing that is a little more difficult to quantify is that a £1 in 1988 was worth a heck of a lot more than it is in 2022. So your buying power has reduced substantially in real real terms as that £1 just doesn't go as far. All the numbers are bigger so are people better off in 2022 over 1988? It is a really difficult and complex thing to work out really. The raw numbers don't always tell the whole story. I should imagine there are a zillion stealth taxes over the last 34 years that barely existed in 1988.

 

[daverichardson]

Hello
My direct experience of similar circs
I sold up and paid mortgage off
I wanted to live where I was and liked the area
Banks could not take away my newly owned property
But the biggest thing was my circs unexpectedly changed when my wife took ill and sadly left the parish
You do not know what awaits tomorrow
If you can afford it retire as soon as you can
If you can pay off mortgage do it and live your life
best wishes

 

[Felonious Crud]

Maybe some Americans could do with losing a few pounds... Just saying.

...present company excepted, thank you very much!

The UK is in hot pursuit. One in three children is obese and the UK is now the fattest country in Europe.

 

[CatmanV2]

The UK is in hot pursuit. One in three children is obese and the UK is now the fattest country in Europe.

You can't say that! You'll upset someone!

C

 

[MaserMike]

My thoughts for possibly changing my mind -
-All 3 mortgages come out of their fixed deals at various points over the next 2 years, so obviously they won't be anywhere near as cheap on renewal.
-House prices are very likely to fall fairly hard in the near future.

• If I wanted to get back into property again, wait till they are cheap. (Sell now high, buy again low

Thoughts for remaining on plan -

• property has served me very well over the last 22 years and without it wouldn't be anywhere near where I am now. It 'should' continue to do well in the long term.
• We rode out the downturn in 2008 without any real problems despite going into negative equity on our previous residential home .....will this one be worse ?
• Plan to semi-retire around 55 (11 years from now) so if I ride it out, its quite likely it'll have fully recovered to at least what it is now by then.
• No hassle with having to sell two houses, sitting tenants, asking them to leave etc...

So who would like to share their opinions?
What would you do?

The best thing I ever did was to go mortgage free Sam last year, just takes the pressure off modern life and brings a lot of flexibility especially with jobs, also unstable outlook for the UK economy/government. Sold both my Maseratis earlier this year to further load up savings and pensions…still got 2x classic cars. I also own a house in the Cotswolds outright, to eventually pass on to the kids and is a long term investment.

I’m a year younger than you, hopefully retire **** early if I play my cards the right way before 55.

Really depends what you want, but I’m all for having a easier life now with a safety cushion behind and planning ahead for the kids. One life and all that, enjoy it!

 

[GTVGEOFF]

Hi Sam, hope you are well.
To retire early is great providing you have good plans for that extra time.
But be warned you have more time to spend! Also if you are just reply on pension pot, we'll they are just stocks and shares, bonds , etc.
I prefer tangible assets as well that you are in control of. Property will have it's blips but long term I believe it is the best place to have your money. Believe me if you're think you have enough to retire on now, in ten years time you won't have. Happy to chat more if you wish but would never advise a specific. Chat the scenarios over with an accountant. Avoid financial planners. Best of luck.

 

[Sam McGoo]

Seems like a reasonable plan to me Sam as long as you factor in all taxes etc.
Paying off the mortgage is a huge financial “Freedom“ move and in my experience there's a lot to be said for that.
Don't get greedy……a bird in hand etc.

If you were selling to put the proceeds in the bank or some other sort of investment, my answer would be different and I’d tell you to keep the houses…..better the devil you know…..

We’ll done (nice decision to be able to make) and good luck, whatever you decide.

I'll have to make sure about the taxes etc but obviously the big one being CG tax. I'll have to have a play with ownership amounts between my wife and I, as I had to transfer some to to her to be more Tax efficient on the income, but would need it back to utilise both CG allowances and private residence relief for the years we lived in them.

Good point about not being greedy...

The only way you lose money on property is if you sell (when prices have fallen).

Personally, I'd keep the houses.

House prices will undoubtedly fall, but that just means more people will want/need to rent. If you wanted a bit more financial freedom, sell one and halve your mortgage.
You still have the income/nest egg of the other.

That's always been my reasoning for keeping them, as long term, you just can't go wrong.

Although, surely if prices fall, LESS people will need to rent, as more can afford to buy?

I imagine these a decent amount of equity in the houses by now to not have to worry about negative equity.
It's Sam's decision at the end of the day.

We'd probably all make different ones.

Regarding the equity in each, its amazing how the different areas vary so much. The one I bought in 2001, two bed bungalow on Canvey Island in Essex has gone up 263% since purchase. The one purchased in 2004, again 2 bed, but an end terraced cottage in Downham Market, Norfolk has only increased 48% in pretty much the same time period. The residential house in a Cambridgeshire village, 88% in just 10 years.

 

[Sam McGoo]

Property in my area has doubled in the past 13 years and continues to do so.

The answer to Sam’s predicament may well lie in the location of the houses and the capital gain he can expect for the future. No way would I cash in mine, if anything I am advised to take equity out and buy more !

See above, they are in different areas, and vary greatly. And before this last month or so, I was also considering releasing equity for another rental, but am spending on our house instead.

Hello
My direct experience of similar circs
I sold up and paid mortgage off
I wanted to live where I was and liked the area
Banks could not take away my newly owned property
But the biggest thing was my circs unexpectedly changed when my wife took ill and sadly left the parish
You do not know what awaits tomorrow
If you can afford it retire as soon as you can
If you can pay off mortgage do it and live your life
best wishes

Thanks for your reply, selling obviously worked for you.
Really sorry to hear about your wife, that's awful.
I'm not in a rush to retire, just want to strike that balance.
This is purely a financial decision on whether I'd likely be better off in 10-15 years than if I kept them due to potential price crashes and interest rate hikes for a longer period than we're used to.

 

[daverichardson]

That's the point
We do not know what will happen tomorrow let alone 10 years time
My view still stands but appreciate its your decision
I would repeat my actions again
Good luck

 

[Sam McGoo]

The best thing I ever did was to go mortgage free Sam last year, just takes the pressure off modern life and brings a lot of flexibility especially with jobs, also unstable outlook for the UK economy/government. Sold both my Maseratis earlier this year to further load up savings and pensions…still got 2x classic cars. I also own a house in the Cotswolds outright, to eventually pass on to the kids and is a long term investment.

I’m a year younger than you, hopefully retire **** early if I play my cards the right way before 55.

Really depends what you want, but I’m all for having a easier life now with a safety cushion behind and planning ahead for the kids. One life and all that, enjoy it!

Hi Mike, Thanks. I get the pressure relief thing for sure, and that's what's always been told to me growing up...pay your mortgage off as soon as you can etc, but the pressure to is not something I feel, especially as mortgages have been so cheap for a decade. It would be purely a financial decision.

Its the economy/ global uncertainty that's got me thinking about the timing of it.
Your in a much clearer position, as you have another property paid off, so have that asset. That would be the dream if I had a one of the rentals paid off too! Do you rent that one out or just a holiday home for yourselves?

 

[rockits]

There is also a lot to be said about the health benefits of less stress, angst and worry. It is not to be underestimated IMHO.

I'm far from where I'd like to be but do have a vision and path of how to get there. Just need a bit of decent fortune rather than the reverse and it is kind of touching distance.

As many have said we can plan for pensions and the future which is great and something I've done to a point based on convention and what I was advised/educated to do. However, if tomorrow never comes or is very different to envisaged then not sure it helps so much.

Simple, sustainable and stress free living seems the way forward.

 

[rockits]

Having some kind of ongojng passive income is a great thing too.

 

[Wattie]

The UK is in hot pursuit. One in three children is obese and the UK is now the fattest country in Europe.

Think it’s 2/3 in Oz.