If you've borrowed against this increase in equity, then well tough... that's a risk YOU took.You say that, but in the UK if you decide, "I don't want to make a massively geared investment of several times my net worth in the housing market thank you very much. I'll rent for my whole life, maybe buy something small when I retire", then people look at you like you have three heads and tell you you're wasting money on rent that you should be spending on a mortgage
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If you just moved, negative equity (if small) isn't a real problem. If your content with where you are, you pay off the mortgage over time, and either house prices go back to a more sensible growth, or you get out of it by paying of a chunk of the mortgage.
I've done the mathematics, and I can either spend $850 a month on a two bed basement suite in a nice suburb of Victoria, (long) walking distance to downtown and the sea, or fork out a minimum of $1200 a month in mortgage (if I could get one at all) for a small studio 20 minutes drive out of town.
I'm not willing to spend THAT much on housing, and save part of the difference anyways.
The economics become very different if when your in a couple, I will grant you. $750 a month gets you a nice one bed apartment or chunk of duplex to share with your loved one somewhere reasonable.
If you just moved, negative equity (if small) isn't a real problem. If your content with where you are, you pay off the mortgage over time, and either house prices go back to a more sensible growth, or you get out of it by paying of a chunk of the mortgage.
That only works if the people who have just taken out their mortgage can afford to pay it off. If they can't negative equity is a big problem and with the pressure to buy a house in the UK and dodgy brokers in the US there are probably quite a few people who'll end up stuffed.
If you've taken out or worst been sold a mortgage you cannot pay of over it's term, then either you've made a huge mistake or been mis-sold the mortgage. In the former I see no reason why the government should bail you out. The latter seems to have occurred across and caused the recent 'credit crunch', and I see no reason why the government should bail the banks out. In fact there should be some way for the banks to be punished and lose the right to the lien over the house they've got a mortgage on.
I've no doubt some people will be stuffed by a fall in house prices. There's also people who are stuffed by the continual above inflation increases in the price of houses.
or been mis-sold the mortgageIf you say so. One effect of the "credit crunch" is that banks have raised interest rates to reflect the increased cost to them of credit, and decreased value of mortgage-based securities. The Bank of England has just recently cut the base rate, but it's not clear whether the banks will cut mortgage rates in response. They aren't obliged to. Banks are also offering lower percentages of security, and might get shy about high multiples of earnings
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I'm not willing to spend THAT much on housing, and save part of the difference anyways.
Yep, I've done similar calculations in the past. A small place (or half a medium-sized place) has remained mathematically within my reach for the last 5 years or so, but at all times I'd have been paying as much just in interest and insurance as I do in rent, never mind actually paying off the capital. You can share rent without utterly tangling your finances, which you can't do with a mortgage. So I've rented and bought shares. I haven't had the benefit of gearing, so I'm sure I have less net worth than if I'd bought 5 years ago, but shares haven't exactly been a dead loss over 5 years.
If I had bought alone then, I'd have made about 100 grand on the house by now. This is why people have felt pressured to buy - they feel that if they don't they're passing up that money, and that if they ever want to buy they'll somehow need to find that extra 100 grand when they do.
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I've done the mathematics, and I can either spend $850 a month on a two bed basement suite in a nice suburb of Victoria, (long) walking distance to downtown and the sea, or fork out a minimum of $1200 a month in mortgage (if I could get one at all) for a small studio 20 minutes drive out of town.
I'm not willing to spend THAT much on housing, and save part of the difference anyways.
The economics become very different if when your in a couple, I will grant you. $750 a month gets you a nice one bed apartment or chunk of duplex to share with your loved one somewhere reasonable.
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That only works if the people who have just taken out their mortgage can afford to pay it off. If they can't negative equity is a big problem and with the pressure to buy a house in the UK and dodgy brokers in the US there are probably quite a few people who'll end up stuffed.
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I've no doubt some people will be stuffed by a fall in house prices. There's also people who are stuffed by the continual above inflation increases in the price of houses.
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Yep, I've done similar calculations in the past. A small place (or half a medium-sized place) has remained mathematically within my reach for the last 5 years or so, but at all times I'd have been paying as much just in interest and insurance as I do in rent, never mind actually paying off the capital. You can share rent without utterly tangling your finances, which you can't do with a mortgage. So I've rented and bought shares. I haven't had the benefit of gearing, so I'm sure I have less net worth than if I'd bought 5 years ago, but shares haven't exactly been a dead loss over 5 years.
If I had bought alone then, I'd have made about 100 grand on the house by now. This is why people have felt pressured to buy - they feel that if they don't they're passing up that money, and that if they ever want to buy they'll somehow need to find that extra 100 grand when they do.
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