How to save for a house deposit 🏠


(Duncan) #44

I’m afraid that this view (although it’s the orthodox position) is vastly over simplistic. I suggest you read this article, and also this one for an introduction.


#45

Hey @duncang, so what’s the advantage to renting in the long term (assuming that’s your current thought process?)

I only assumed that based on your answers above :smiley:

Renting certainly has some perks to it, but those perks disappear very quickly once you have a stable income, family, future plans etc (IMO).

Keen to hear the other side of the argument!


(Matt) #46

Supply & demand is the ruling factor in the pricing of housing, even if there are other contributors. Look at the housing market in places like Vancouver, Seattle and San Francisco to name a few. Either way, one truth remains - it is financially far better to buy a property than to rent.


(Duncan) #47

Flexibility is high amongst them. Because the UK has some very regressive laws around property (namely: stamp duty), the labour market becomes somewhat constrained because once people buy a place they are disinclined to pay the thumping tax to change house. I do intend to buy, but I intend to do so at the right time. Why buy the top of the market and end up (a) paying off more debt, and (b) potentially ending up really stuck because you’re in negative equity? No thanks!

I have a stable income, and and both sufficient funds and salary to buy, and family. I explicitly choose not to. I disagree with the implication that anyone who doesn’t in some way would if they could. Perhaps if they’ve no understanding of the underlying factors driving the housing market…

One that people tend to forget when they quote their very low mortgage rate (besides the future instability in that rate) is the cost of house repairs. Sure, you pay not much for 10 years, and then the roof needs replaced. The low frequency fools people into not amortising these costs into their housing outgoings - they just consider the mortgage.

That’s not to say that there aren’t significant downsides to renting; short assured tenancies chief amongst them. You would rather want to be able to stay somewhere if you choose to (see Scotland’s new laws regarding this, which look a lot more like those on the continent) rather than being evicted on a whim. But I don’t fancy the top of the market, thanks :rofl:.


(Duncan) #48

What else do these places have in common (you missed: Sydney, Aukland, Toronto, and several others). Yup: low interest rates. That’s the governing factor here. While in the UK the supply-side argument is dominant, it’s really very wrong. The problem really is not as simple as “we didn’t build enough houses”. It’s an easy to digest narrative, but just totally over-simplistic.

This really is a pernicious fallacy. Perhaps you have yourself bought and want to believe it, though. You hear “renting is just throwing money away!” very often, but when you look at the underlying factors it’s really not the case.


#49

I am yet to see any underlying factors. The main takeaway from this for me, is the one reason many don’t want to buy is the flexibility in being able to move on to some place else, which is fine.

I would much rather be paying my own mortgage off, whilst keeping my own asset than paying someone elses mortgage off and adding to their savings pot to make the repairs should something need fixing in any of their property portfolio.

I dread to think of paying rent when I’m retired.

That’s as simple as it is.


(Duncan) #50

Again, I think that this is just the easy way to think, without appraising the whole of the costs involved. If instead of directing savings towards the mortgage you direct them towards, say, an index tracked fund, then the yield on your investment will cover your rent in retirement (and, potentially, then some). It’s just that you seem to have swallowed the (rather pervasive in the UK) “if I rent then life is terrible” story wholesale. Here’s a great article explaining with real statistics why this story is plainly false.


#51

I left the article pretty fast after I couldn’t see through my tears of laughter.


(Duncan) #52

:+1:


#53

I think there are definitely valid arguments on both sides - But there are also a lot of unknowns.

It would appear a large portion of your argument is based on this being the “top of the market”, and house prices can’t continue to grow.

It’s a question I’ve asked myself many times, but have yet to come to a satisfactory answer on it.

Unless there happens to be an overnight house price crash (which I just don’t see happening), you could opt for the “home owner” route now (which will save you money in the short term on mortgage costs, and allow your asset to grow in value).

If things change (your personal situation, or the market), you can opt to sell, and move to a rented house.

Perhaps it’s different in various parts of the country, but I’m literally saving almost £1,000 per month by owning the property, which gives me options if my situation changed.

If that £1,000 went into rent, despite being more flexible with the tenancy agreement etc, I’d actually have less options as I’d have less money (right now).

But if you’ve found a situation that works for you, that’s great - The reason I asked is because all of my friends who are renting, want to buy, and all of my friends who have bought, are extremely happy they have done so (for financial reasons amongst others), so it’s nice to see someone who is happy on the other side of the argument :smiley:


(Matt C) #54

Seems as though this topic has veered wildly off course given the original question is “how” to save for a deposit and not “why”?

Shall we bring it back around to that? :thinking:


#55

I’m not sure “wildly off course” is accurate :joy:

It’s providing information to people who are perhaps looking to save for their first time house - Some of the information might be valuable which is surely a good thing?


(Duncan) #56

Ask them again once interest rates hit 6% :wink:.


(Duncan) #57

I agree. I think that “why” precedes “how”. There’s a button to mute on the right if you’d rather be out @BristolMatt :slight_smile:.


(🤦‍♂️ abofm.club 🤦‍♂️) #58

I cheated. My Aunt died and left me a good house deposit. Added it to my existing ok one. Then I had an awesome deposit.

Miss her though. She never got to meet my 3 kids, despite providing a better house for them.


(Matt) #59

Your reluctance to do any research shows how wrong this idea is. In 1979 interest rates were 17%, and house prices increased by an average of 30% each quarter. In 1989 interest rates were 14% and on average house prices in the UK rose 20% per quarter. Basic market logic dictates that supply and demand will control housing prices more than any other factor. Believing otherwise is simply not rooted in reality. The figures are out there - if you own a house in the UK in an area that is not deprived, over 10 years you will make money. This has been true since 1952. Why would it now change? How can you claim those figures aren’t true?


(Matt C) #60

Well just off course then! :crazy_face: I thought that this thread was supposed to be about how to save for a house not why (presuming the people it applies to have decided to buy rather than rent).

I do know about the mute button, but thanks for pointing that out. I don’t want to mute the discussion as I am saving for a deposit. I am actually interested in how people are doing this. I am not interested in the renting vs buying argument however as I’ve already moved past that. It just seems to be dominating the thread of discussion now.


(Duncan) #61

Au contraire… You’ve conveniently picked the two greatest spikes in the pre-2007 era. And you’ve also conveniently omitted inflation, which was huge then, and in the years surrounding. You’re further conveniently omitting the crash from 1990 to 1992. But I suppose if it doesn’t fit your narrative then you probably don’t want to appraise it! House prices did go up (we covered this: I have claimed that it was a one-time deal), but not to the extent that you’re implying, and not consistently over that period. Lest we forget: “Past Performance Is Not Indicative Of Future Results”.


(Matt) #62
  1. You can’t move goal posts. Either low interest and an increase in housing prices are linked, or they are not. History PROVES that in the UK, interest rate has no bearing whatsoever on house prices.

  2. Find me any time in the last 70 years where owning a house in a non-deprived area for a decade would not prove profitable.

For reference as you claim cherry picking:
image


(Duncan) #63

I think that it’s quite trivial to see, no? If the cost of capital goes down then house prices will rise, because people will borrow more capital.

“Past Performance Is Not Indicative Of Future Results” - Here’s a report which backs this general investment maxim up in our specific context. The report can be summarised as “The housing ladder only worked because of the unique economic conditions of the late 20th century. It’s now broken and unlikely to recover.”.

I don’t disagree that they disproportionately rose, it’s completely obvious and well-known. I even said in my last message:

House prices did go up (we covered this: I have claimed that it was a one-time deal)

What I argue is that (a) it’s not to the extent you’re implying (we’ve debunked that through looking at inflation), and (b) the assumption that this will continue is flawed.