Tuesday, 1 February 2011

Throw your money down the drain

I think I might have to change my tune. Money Saving Madam is in a mood. Month one of saving has ended and I can report that there is nothing in the pot. Zara’s profits have dropped by 10% but we’re still in the red. Perhaps I don’t care for the property ladder after all.

If it isn’t enough that my own bank account is against me, so are the statistics.

It costs approximately one arm and one leg to buy a home. The average property is 5 times the average salary. The proportion of first-time buyers able to buy a home without financial assistance has hit an all time low. Just 17%.

With rising rents, the cap on university fees removed, and a desperate employment market, it is hard to see how the next generation are ever going to conjure up the savings.

Actually, sod the next generation. How am I ever going to conjure up the savings?

Perhaps home ownership is overrated anyway. How often I hear people talk of their ‘cursed mortgage’. The mortgage is the reason they stay in a job they hate, why they cannot holiday at will, and why they endlessly wait for the day it is paid off and they are free.

Common wisdom (which is far removed from common sense) is that you should take on the largest mortgage that you can afford. By doing this you are able to trick people into thinking you have enough money to live in the smart part of town. And because your mortgage is just more than you can really afford, you have effectively made yourself poor.

Renters amongst you will be familiar with the phrase ‘throwing money down the drain.’

Let us examine the moral high-ground of our homeowner friends.

Say they have a £200,000 mortgage. On a 25 year term they will pay well over £240,000 in interest. So the idea that they own their house is a myth. The bank owns it, and is selling it back to them at a ludicrous mark up.

£440,000 for a £200,000 flat? I think has better rates.

To me it seems that the mortgage system is just an organised method of throwing money down a different drain. I can’t deny that I’d still like my own front door, but for now, I’ll lease the one I’ve got and try and keep the usurers away from it for another month.


  1. I know the feeling and understand your pain! I get more than slightly irritated when people tell me that I am wasting my money. I do need a roof over my head, and cant afford my own one, because of the financial mess that the older (and now preaching) generation got us all into when they started borrowing more than they could afford for cheap-flight holidays... I would still like my own front door though (and my own walls, roof, windows and floors, if that's not too much to ask for!). On the upside, at least we don't have to worry about DIY, fixing burst pipes, or negative equity for a while....

    Keep going though - you will get there!

  2. Very nicely argued Rach! And a good outline of the home-ownership issue.

    It has seemed to me for a while that the obsession with home-ownership in this country is at least partly irrational, and just accepted as "what one does". While it is a logical step for many, I'm not convinced it is for all, and perhaps there are people who would do well to view it as a decision to be made, rather than a goal to be reached.

    I would also reiterate the view I shared with you the other week (which you hotly contested I might add - would be interested to know if you've changed views?) - that actually the main beneficiaries of someone owning their own home (other than the bank!) are the homeowner's inheritees, rather than the homeowner themselves. A house owned is to a large extent "sunk" wealth. An investment no doubt, but not necessarily the best one.

    In my view, the best reason for owning your own house is acutally one that no-one ever mentions - bluntly, it gives you more choice, simply because there are far more houses available to buy than to rent.