Where Does It Go? - UK Money Blog £

I live in a pretty seaside town in Cornwall which has a lot of Londoners coming down buying up holiday homes; great for them but the locals are now priced right out of the market.  Buying a house in my parents day was a natural step to adulthood; these days the prices are so inflated its not even considered, especially on Cornwall wages which average the lowest of the country.

Buying your own home is a UK obsession - Margret Thatcher’s move to let all council house be bought by their renters in the 80-90s via S125 has meant a lot more people of that generation now own former council property.  This I think has helped fuel the consumer splurge, with former tenants finding themselves jumping upwards from working class (The Brits are still obsessed with class; sorry) and taking out secured loans to cover in many cases frivolous spending - who needs a kitchen refurb every two years?

An interesting post by the New York Times property expert David Leonhardt offers a buy or rent calculator - it basically shows that sometimes its best to rent rather than tie up your money in a speculative bubble.  (Graph in $’s but same principle for £’s)

A basic rule of thumb touted in the article by David is to divide the price of your house on the market with your annual rental.  If the ratio is above 20 the monthly cost of ownership exceeds the cost of renting.

My figures…

Pay £700 a month rent on a £300,000 valued house; £8400 a year rental outgoings - I get a ratio of 35.71% (!)

This is typical for the county.  This is obviously way over what I want to tie up my money in - I’m thinking I’ll only now ever get a mortgage if I can get an LTV (Loan to Value) under 50%. 

Those sitting in their over priced houses smugly are in no real better position - if they sell their house they have to buy another over priced house

EDIT - 17 July

Found a good site explaining the tradeoffs in more details here - What Should you Pay for Your House?

Tags: mortgages, housing bubble, cornwall, uk

After consulting the snowball calculator, the figures indicated it’ll take me around 2 years to pay off the debt s I have on my credit card at the moment.  After digging around a little in www.MoneySavingExpert.com, I gave Martin a bit of cash by clicking his affiliate link to the HSBC CreditCard

My reasons where:

• I could pay off the debt in under two years.
• I didn’t want to have to switch too soon in 12 months say
• Give myself a little discipline by not having 0 interest, so encouraging me to pay it off and not spend more on the card
• My current 0% plan is ending in 2 months
• No annual fee
  

I’ll follow the Golden Rule - no purchases on this card until the balance transfer is paid off - it’ll go in the drawer and a direct debit set up to pay it off, to avoid interest being paid on that before my balance.

I think this keeps up with my philosophy of money saving without working too much - I don’t want to count the pennies but will count the 20p’s?

The stats of the card according to the website are:

• 0% on purchases for 12 months from account opening
• 2.9% for two years on balances transferred within 30 days of you opening your account. 2.5% balance transfer fee applies (minimum £5)
• Typical 15.9% APR variable after introductory period
• No annual fee to pay

A good overview on how to deal with credit cards is found here at No Credit Needed - Credit Companies Want Your Money

Last month I spoke of going onto pay-as-you-go on my mobile to try and cut expenses, they offered me an £18 a month contract which despite hard work from the TSR at the call centre I said no to. Pleads included “This offer is only going until next week!”

Well today I was phoned up by another salesman from 3 (My mobile phone provider) asking for me - nowadays I always answer “Is this Robert Brown?” with “Who’s speaking?”, and I was about to launch into a murder scene interrogation…..

…but as I was lining it up with grunts and obscure mutterings (I doubt I could of pulled it off with the Tom Mabe style) the guy at 3 offered me £10 a month for life for 500 minutes anytime/any network. 

This works out over £300 a year less than what I was paying for up till this month, with 100 minutes more text/calls.

Just goes to show how desperate companies are to fix you into a contract - no doubt the iPhone is taking away a lot of business so they get me locked in for another 18 months, hell they even threw in a new phone (Nokia 6500 Slide), which I read a few reviews of and it breaks a lot, but I could always sell it on ebay.  I’m pretty happy today since I would have probably used about £10 a month in top-ups.

Anyway, a good lesson for me: never accept the first thing they offer you.  Just by saying “no” I’ve saved probably £100 a year.

And so it if that I start to see the credit crunch squeeze on my nearest and dearest.

My girlfriends sister has two kids and a now estranged husband, a divorce pending if they can bear to stay in the same room as each other to sign the papers. 

An emotional time for everyone involved exasperated by the fact their shared house in a pleasant up and coming seaside town is now rolling towards negative equity.  The mother and two children are left in the house whilst the husband who was the main breadwinner has moved into another house with his new girlfriend. 

Only a few months have past, but due to the many memories leading up to the breakup, and sheer un-affordability, mother and children aged 2 & 4 are wanting to move out.  Already a few months behind on mortgage payments, with a secured loan on the house to fix up the house a few years ago, house prices have gone down 10% leaving zero or less equity in the house.  Even moving costs, but faced with the prospect of moving and still owing money to the bank puts pressure on a situation that is grim in the first place.

Bankruptcy is being discussed, and there seems little way out aside from that.  Problem being there, if a voluntary repossession takes place, the council class it as voluntary homelessness and no help will be coming to help rehouse.  Hopefully a visit to the CAB will help find some other options.

A lot of critics in the paper at the moment are saying the credit crunch is welcomed, payback for all those people who over extended themselves looking for easy money.  But that ignores so many real life situations where all that was wanted was a stable and safe home to bring up children. 

The criminals in this venture to my mind are the banks, greedy in their profit margins, gambling even with more information than the average citizen that house prices will carry on upwards forever.

Lets not forget that if all their mortgagee’s can’t pay, the banks don’t lose their money - they get the property. Thats why its called a secured loan.

All the belly aching in by the banks are about their immediate profits - eventually they will make their money back by selling on all their repossessions, ready to capitalise (literally) on the next boom when confidence is high.

Food, fuel and energy prices are spiraling in contrast, decreasing disposable income.  Getting nagged by the girlfriend we haven’t gone out to dinner recently is the consequence for me so far, pitiful little compared to her sister and many others in the real economy.

And so people turn for the scapegoats - the current one in the UK seems to be Gordon Brown and his 10p tax bracket.  Its a little misguided - I’d say its the bubble bursting over house prices which no government could sustain.  Running the country is simple - just keep everyone’s standards of living rising and you’ll coast along.  With all the rhetoric soring about spin, sleaze and making an impact on the world stage, just the money in people’s back pockets being full or empty is what it all comes down to in the end in this country. 

Will this time be the last?  Will a recession turn into a depression turn into revolution?  Maybe not this time, but until then mothers face the threat of repossession whilst banks get guaranteed loans. 

Tags: creditcrunch, mortgage, citizens advice, politics, economy

Carrying on with budgeting help, I came across this method named “Snowballing” which offers psychological methods to pay off debts.  If you have several debts, such as loans, credit cards and overdrafts you can use this method by paying the minimum fees on each, then using any remaining cash to tackle them one debt at a time.  You can choose to tackle the debt with the lowest balance (psychologically nice) or highest interest (mathematically best)

There is a Snowball Calculator around that can help you work out how much to save I think I’ll check it out.

Tags: budgeting, calculator, tools