Do we have 10 years of BAU?

[adam2]

I would buy the property.
I doubt that BAU will last as long as the mortgage, but if it does last that long, then you should be able to make the payments OK.
When the 10 year fixed rate deal expires there is the risk of much higher interest rates, but remember that 10 years of modest inflation will make the payments much more affordable.
After 10 years of modest inflation, the £1,100 monthly payments should halve in real terms, and therefore still be affordable even if increased interest rates push the monthly payments up to say £2,000.

In the event of a really sudden crash into anarchy, then mortages will be of no consequence and physical possesion/occupation will be what counts.

In the event of a slow crash, then high inflation is probable, and that will effectively repay most of the mortgage for you.

The only risk is then deflation, when wages and prices fall roughly in unision, perhaps making fixed mortgage payments unaffordable.
That would be most unfortunate, but is very unlikely in my view.
I expect the rising price of oil and articles made from oil to lead to higher inflation and not to deflation.

[snow hope]

Houston, I think we have a GO.

[2 As and a B]

The only risk is then deflation, when wages and prices fall roughly in unision, perhaps making fixed mortgage payments unaffordable.
That would be most unfortunate, but is very unlikely in my view.
I expect the rising price of oil and articles made from oil to lead to higher inflation and not to deflation.

I disagree. Possibly. IMO, the relative price of oil (and other physical assets such as land) will periodically ratchet up but within a debt deflation spiral. Our economic system is based on growth fuelled by cheap inputs, amongst them energy, which is currently cheap oil but will be cheap labour (again) sometime in the future. Successive debt defaults and lack of investment will mean a steady deterioration in the economic climate, with less being produced, less manufacturing employment and less money around to buy whatever there is to buy. And that is without considering the social effects on the speed of the economic collapse.

[Catweazle]

If, in 5 years time, the economy totally collapses what are the banks and government going to do ? There will be millions of people defaulting on mortgages, the banks will not be able to evict people as there will be nowhere for them to go, amongst civil unrest the government will be forced to pass legislation either freezing debts or writing them off.

Buy the house, it's close to your fuel supply and potential food supply too. And buy a shotgun for them pesky squirrels.

[emordnilap]

There will be millions of people defaulting on mortgages, the banks will not be able to evict people as there will be nowhere for them to go, amongst civil unrest the government will be forced to pass legislation either freezing debts or writing them off.

Just like what's happening in America, eh?

I vote for mikepeplar going for it! Reading the posts, it seems like the right place at the right time.

Well, maybe not the right time...but better now than later, with that interest rate.

[OrraLoon]

I really should be in the woods felling trees, but it's raining today and I've not been on the forums here for a long while and thought I should check in. I do have a question for discussion as well...

Can we count on another 10 years of business as usual, albeit with recession/depression?

The reason I'm interested is that we're pondering if we should stay renting our house (which has solar thermal, communal GSHP, good insulation and plenty of space), or look into buying somewhere. The things that make the choice difficult are:
- prices around Rye, and particularly near our wood, are not cheap.
- we could borrow enough money to get a small place, but it would be nowhere near as nice as the place we rent and would cost more per month.
- We'd need at least 10 years to pay back this amount of money, hence my questions above...

So what do you think? Keep renting and see where prices go? Buy anyway and assume that if things go really bad the govt will have to do something so millions don't lose their homes if they can't pay the mortgage? Wait for local govt to fall apart (planning officers in particular...) and then build a house in the wood? Something completely different?

I guess other people are facing the same choice.

A few years ago I thought things would be clearer by now, but everything seems to be muddling along while the problems in the background are growing. Maybe I need to spend more time on the forums here to keep my doom level up!

Good luck, Mike. If it's any indication as to what you should do then I fully hope to be joining you within the next 12 months. And, of course, when I have I will make the appropriate long-term bearish 'deposit'.

P.S. Have you had permission to put up something like a metal shed in the woods? I've read that something like this only needs to be notified to the local cooncil.

[mikepepler]

Thanks for all the comments and advice everyone.

We've decided to go for it, though of course the offer needs to be accepted and the bank needs to lend us the money...

We had another look at it yesterday, with the agent rather than the vendor, and had a good poke around. Had a look down the well, and it's in good shape with water a few metres down. Have to get it test obviously before deciding what it could be used for, but it could at least water the garden. We also saw a wild boar outside the gate into the woods! 3 years we've had the wood, and this is the first boar we've seen! (not counting videos from a trail camera)

I'll tell you how it goes...

[stumuzz]

Huh, I see you're getting rid of the Defender. Shame on you. How can you look at it in the headlights!

[Adam1]

I agree that it's unlikely you'll find something as good again soon. I would test the waters with the vendors to see if they are interested in selling it direct, if you feel you are happy to deal with them direct.

As well as the saving for them in agent's fees, you may find that they will stick to the deal rather than gazump you for a better offer. (Assuming gazumping is still an issue in your area.)

We bought our place direct and it was much less stressful without the intervention of the slimy estate agents.

[mikepepler]

Huh, I see you're getting rid of the Defender. Shame on you. How can you look at it in the headlights!

I know, it would be a great shame, but we would not be hasty in this decision! It would only go if we really weren't using it.

[mikepepler]

Sadly our offer of £250k was not accepted, and going over that means £7,500 stamp duty instead of zero. And we can't afford any more than that anyway....

But the selling agent thinks the vendor is being unrealistic, so maybe in a few weeks or months he'll come back to us, by which time we'll be better off financially anyway. Of course, there could be all kinds of changes post-election, so maybe being forced to wait a while isn't so bad...

[snow hope]

Bad Luck Mike. I agree with your decision to wait. I think there is a high chance that house prices will drop further. Never mind the owners coming to their senses!

If they come back to you, my next offer would be lower!

[emordnilap]

If they come back to you, my next offer would be lower!

+1, definitely.

What's more, we're talking big money here. £250,000? What did they want, £251,000? A thousand is a lot of money for most people to find.

These telephone numbers, sheesh. Some people (notably sellers and estate agents) don't seem to see much difference between half a mill and 550 thou. I overheard it in an estate agent's once, some noodle on the phone, "She says three-eighty thousand, I don't think it worth more than three-twenty." Sixty thousand, for goodness sake! You could build a fabulous house for that.

[jcw]

Somebody has set up a Home Buyers' Strike group on facebook.

http://www.facebook.com/group.php?gid=104936389547036

[mikepepler]

The vendor wanted £275k minimum apparently. The asking price is several thousand higher, but has already been redcued 10% since it went on the market late last year.

The prices are silly really, but the village next to our wood is an expensive place. It's the only thing we didn't really consider when we bought the wood, as we thought we'd stay renting unless the economy fell apart, and then we'd live in the woods... There wasn't any other wood we'd have bought though, we'd been looking 6 months and this was the best one by far, so we're still happy with that decision.

I like the facebook group, and have joined!