The problem with the UK economy...too many people own a house

By Mohammed M-Hasan on Apr 16, 08 01:16 PM in Economics

I have rarely understood why , in today's day and age, so many people want to buy a house, when it clearly makes no sense for them to do so.

The actual fact is most people have no idea what it means to own a house, they are in my view blatantly negligent.

The baby boomers had this sorted. They bought houses, they built the equity, they managed their debt. and lived and worked in relatively compact geographies.

Today, or atleast from 1997 onwards and from 2002 onwards in particular, people buy a house, go on an extension 'binge' spend all the equity on holidays and by the time the 2 years of their fixed term are up, they are ready to remortgage.

Of course, this does not work anymore. But even before the current problems arose, can we actually say that presumably well educated people with comfortable incomes actually had the capability and sense to understand what they were doing.

I find it incredulous that the millions of people who bought houses actually understood the workings of the financial system well enough to understand with any comfort that 2 years was a reasonable timeframe. They just wanted it cheap. Many people I know spend more time working out the service charge in a restaurant than they would actually thinking about their mortgage rates.

This is no way to make the biggest purchase of your life!

Of course, creating equity in the long term is a notable reason. This is however the crux of my point, how many people in the last 5 years have actually got real equity in their houses?

I am not talking about the value of the house, which itself is depressed at this point, but about the net. gain after extensions and new bathrooms and power showers and widescreen TVs and tasteless cream leather sofas.

Not many hands up I guess...

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4 Comments

Sid Langley said:

Hey revolutionary stuff ... no, not the mortgagte stuff, but the line from someone without grey hair praising the baby boom generation.
Sid 'Grey Fox' Langley

April 16, 2008 2:50 PM

Muhammad M-Hasan said:

Thanks Sid

We do try and please with the unorthodox in good 'ol Brum.

Thx for taking the time to respond and the BB generation has a lot to teach us.

April 17, 2008 9:37 AM

richard hackney said:

Muhammad

where would you live when you retire assuming in the majority of cases an average pension would not pay your bills everyweek ! how would you afford your 700 pounds a month rent? where would you live if you didnt have propety which you owned?... asssuming you are used to a particular standard of living of course
my advise would be quite the opposite buy a house as soon as possible pay it off as soon as possible or rent it back to someone who would listen to advice like this, and would not mind paying off some one elses fture investment

The question is .. do you own a house ?

regards
rich

April 17, 2008 6:41 PM

Simon said:

What a bunch of ejits. We are in turbulent times. 1 in 10 facing negative equity. This is not our fault but the fault of the goverment financing our economy on debt.

Now they decide to re1fuse people mortgages. Ridiculous. 3 years ago a mortgage lender was prepared to lend me £250k in total on 2 houses, on an income of £26k. I didn't oblige but you can see what lending conditions were like.

April 18, 2008 10:54 AM