Hi Lads. Great discussion again. All very subjective these topics. Here’s my tuppence worth as somebody still in their 30’s (just about).
You’re all very doom and gloom about younger generations. My perspective is housing is far more challenging for my generation and even worse for the next. But I wouldn’t want to be back in the 1980’s or 90’s either where the place was such a kip there was a continual brain drain. I’m old enough to remember not having a washer growing up.
I know you disagree but I think it’s right to not expect a sudden return to enormous variable rates on one’s mortgage. The effect of interest rate rises on inflation is a function of the rate of interest and the size of debts and savings. If debt is through the roof, because government, corporate and house mortgage debts are so high, then interest rates don’t need to go up to 17% to have the desired effect of cooling economic growth.
It’s very hard for a first time buyer to lock into a 10 year fixed rate in ireland at decent value. You need lots of equity to make that work. As a recent remortgager with a decent bit of equity built up, I was comparing fixed rates recently. You’re paying in excess of 1% higher to move from a 5 year fixed rate to anything longer, despite the inverted swap rates implying lower forward interest rates in the future.
The other consideration is the competitive trends in ireland and beyond. The mark up. The traditional price gouging lenders are exiting the market and being replaced with fintech and efficient providers. We’re already experiencing that trend.
Given all that, I chose the 5 year point to fix the rate for, and my punt is interest rates will actually be lower again even this matures.
The only reason why interest rates would remain high at this stage is because wage inflation is high. And unless you’re a job for lifer, you should keep in mind that you’re likely to benefit from that wage inflation too. So stress test by all means but I wouldn’t read too into it.
Whether to buy or not? Panic is never good. But what seldom features in advice is the lifestyle non-financial impact. If you delay buying for a few years on a punt that prices might come down, it’s a few years of your life not in your new home and continuing to rent. That comes at a non-financial cost.
We’re all scarred from the crash in Ireland. But what would somebody’s life have been like if they followed advice back in 2000 not to buy because there’s a bubble on the way? They would have waited 12 years to see the bottom of the market which wasn’t that low compared to when they could have bought in 2000.
We have already seen the central bank loosen mortgage rules just as property markets have a wobble in other jurisdictions. And they have more headroom to loosen further if they feel the need to stabilise the market.
Jobs for life are not good. It leaves people complacent and sees their skill sets decay, leaving them at the mercy of their employers viability. In the long run, productivity of an economy is pretty much everything, and having job for lifers with no dynamism isn’t great for that. And for personal finances, you tend to get better paying jobs by moving company than you do by trying to climb within in my view. I think younger generations should embrace the insecurity as a good thing in a thriving economy - but that’s admittedly easier for me to say being of higher skill than most.
Thanks Sean. As always, very good points. In part things come to housing as an investment or lifestyle choice and how to blend all the financial and non financial aspects. My own advice to my younger self, but to nobody else, would be never to saddle yourself with a long term mortgage when you are young. Ties you down to a particular place at a time when I would have preferred, looking back, to have moved around and tried different places and jobs. The lack of ’security’ wouldn’t have bothered me. As I say, it’s always very personal.
Maybe the younger generation isn’t as badly off as we think. After all, many of the pre-90s generations had to emigrate. We have high property prices, less generous pensions and no jobs for life - but plenty of other things on the other side of the balance sheet.
You mention skills - that’s very important. In most economies one pressing problem is the disappearance of reasonably well remunerated unskilled work. That badly affects one particular cohort, for whom something must be done.
If I had an opportunity to, I think I would have got the mortgage young like you did. But for most young people nowadays, like it was for me, this isn’t a choice that’s available without financial backing from parents. The 10 to 20 percent deposit - takes a long time to build on lower earnings.
A mortgage is seen as probably the only opportunity one has to borrow an amount of that size to invest in a relatively tax efficient way - because the family home is not taxed. That works very well as an investment if you’re exchanging rent for your mortgage interest. The downside is the concentration of risk.
For me, other than the pension, it’s the best way of accumulating wealth from an investment that’s on offer.
Hi Lads. Great discussion again. All very subjective these topics. Here’s my tuppence worth as somebody still in their 30’s (just about).
You’re all very doom and gloom about younger generations. My perspective is housing is far more challenging for my generation and even worse for the next. But I wouldn’t want to be back in the 1980’s or 90’s either where the place was such a kip there was a continual brain drain. I’m old enough to remember not having a washer growing up.
I know you disagree but I think it’s right to not expect a sudden return to enormous variable rates on one’s mortgage. The effect of interest rate rises on inflation is a function of the rate of interest and the size of debts and savings. If debt is through the roof, because government, corporate and house mortgage debts are so high, then interest rates don’t need to go up to 17% to have the desired effect of cooling economic growth.
It’s very hard for a first time buyer to lock into a 10 year fixed rate in ireland at decent value. You need lots of equity to make that work. As a recent remortgager with a decent bit of equity built up, I was comparing fixed rates recently. You’re paying in excess of 1% higher to move from a 5 year fixed rate to anything longer, despite the inverted swap rates implying lower forward interest rates in the future.
The other consideration is the competitive trends in ireland and beyond. The mark up. The traditional price gouging lenders are exiting the market and being replaced with fintech and efficient providers. We’re already experiencing that trend.
Given all that, I chose the 5 year point to fix the rate for, and my punt is interest rates will actually be lower again even this matures.
The only reason why interest rates would remain high at this stage is because wage inflation is high. And unless you’re a job for lifer, you should keep in mind that you’re likely to benefit from that wage inflation too. So stress test by all means but I wouldn’t read too into it.
Whether to buy or not? Panic is never good. But what seldom features in advice is the lifestyle non-financial impact. If you delay buying for a few years on a punt that prices might come down, it’s a few years of your life not in your new home and continuing to rent. That comes at a non-financial cost.
We’re all scarred from the crash in Ireland. But what would somebody’s life have been like if they followed advice back in 2000 not to buy because there’s a bubble on the way? They would have waited 12 years to see the bottom of the market which wasn’t that low compared to when they could have bought in 2000.
We have already seen the central bank loosen mortgage rules just as property markets have a wobble in other jurisdictions. And they have more headroom to loosen further if they feel the need to stabilise the market.
Jobs for life are not good. It leaves people complacent and sees their skill sets decay, leaving them at the mercy of their employers viability. In the long run, productivity of an economy is pretty much everything, and having job for lifers with no dynamism isn’t great for that. And for personal finances, you tend to get better paying jobs by moving company than you do by trying to climb within in my view. I think younger generations should embrace the insecurity as a good thing in a thriving economy - but that’s admittedly easier for me to say being of higher skill than most.
Thanks Sean. As always, very good points. In part things come to housing as an investment or lifestyle choice and how to blend all the financial and non financial aspects. My own advice to my younger self, but to nobody else, would be never to saddle yourself with a long term mortgage when you are young. Ties you down to a particular place at a time when I would have preferred, looking back, to have moved around and tried different places and jobs. The lack of ’security’ wouldn’t have bothered me. As I say, it’s always very personal.
Maybe the younger generation isn’t as badly off as we think. After all, many of the pre-90s generations had to emigrate. We have high property prices, less generous pensions and no jobs for life - but plenty of other things on the other side of the balance sheet.
You mention skills - that’s very important. In most economies one pressing problem is the disappearance of reasonably well remunerated unskilled work. That badly affects one particular cohort, for whom something must be done.
Thanks. Interesting points.
If I had an opportunity to, I think I would have got the mortgage young like you did. But for most young people nowadays, like it was for me, this isn’t a choice that’s available without financial backing from parents. The 10 to 20 percent deposit - takes a long time to build on lower earnings.
A mortgage is seen as probably the only opportunity one has to borrow an amount of that size to invest in a relatively tax efficient way - because the family home is not taxed. That works very well as an investment if you’re exchanging rent for your mortgage interest. The downside is the concentration of risk.
For me, other than the pension, it’s the best way of accumulating wealth from an investment that’s on offer.
Enjoyed the half I’ve listened to so far
Saving the rest for a car journey ... may restart as I was distracted earlier🤣
You could think about having a selection of music to get your subscribers to vote on the next time you consider a revamp!
Good idea but as Jim reminded me, we can only use non-copyright music which is quite restrictive..thanks for the suggestion!