This Week in Property: The Latest News (24th March 2022)
Take a look at what our CEO Gill Fielding has to say about this week’s property news…
It’s official! Buying beats renting
I’m often asked by people if they should rent or buy a home and my answer is always to buy – for a variety of reasons, but mainly financial and now Halifax has done a detailed analysis of the different costs and buying a property beats rental by £115 per month. The Halifax included in that all the costs of buying and maintaining the property and they have even included the costs of borrowing the deposit – and still buying beats renting. And that gap will widen as rents are rising by approximately 6% while buying costs rose by only 2%. AND that’s without the capital growth in the home purchased which tends to be a significant asset for the owner. I can now rest easy and am grateful to the Halifax for calculating something we all intuitively know!
As the Bank of England raised our interest base rate last week. I’m now expecting a plethora of letters from my mortgage providers all telling me the monthly mortgages are rising on all my properties. And that’s because I am now on flexible rates as the fixed periods expired long ago. I’m happy with that because although flexible rates create a bit of uncertainty, overall the rates tend to be a little lower and the tenants are paying the mortgages anyway so it doesn’t really affect me. However, if you’re not an investor and that bothers you there is now a 40 year fixed mortgage available for residential mortgages! These mortgages are from Molo Finance and they provide fixed rate mortgages from 15 to 40 years. There is a small degree of flexibility as you can overpay and also take the mortgage with you to another property but of course you are tied to them for that period so you need to be absolutely certain that’s what you want – but many people do want absolute certainty so if that’s you give them a look. Can you imagine fixing your mortgage for your entire working life? Some people would hate that possibility but some would love it and choice is key and it’s great to have another product in the market that gives people choice to get a product that fits their needs and personalities.
I’ve just read that there are 2,000 ISA millionaires and the top 60 have ISAs averaging £6.2 million. Now overall I’m not an ISA fan but I was amazed by these figures because they just prove that consistently putting money aside for investment each year will compound and grow into something magnificent over time. In all these cases mentioned the people used their full ISA allowance per year over a long time (between 20 – 30 years) and had that invested in the stock market. There are many different ways to becomes a millionaire and today’s society tends to look for the quick – and flashy – methods like bitcoin but frankly nothing beats the good old steady tortoise methods where you invest regularly and constantly over the long term which when added to compounding will get you a million with absolute certainty – eventually!
I’ve been asked a lot recently about whether leasehold properties are as good an investment as freehold and I’m amazed by the amount of lies people are fed about leaseholds and some think they’re the best thing since sliced bread and some wouldn’t touch them with a bargepole but I can tell you leaseholds are neither good nor bad – they just are – and you can evaluate their investment potential just as you would a freehold property. The issues are: firstly, the length of the lease remaining – and this is a constraint put on by finance providers and they like to see a decent length left in the lease – say 75 years (although different providers will vary). If you are looking at a property with less than that negotiate for the freeholder to extend it as part of your deal. If they won’t do that then you can always extend the lease later and the Leasehold Advisory Service (www.lease-advice.org) will help to calculate a price. Secondly, of course, there will be an ongoing (normally monthly) charge payable to the freeholder and/or management company. Find out what that is and build it into your calculations to see if the investment works or not. And that’s it! No big deal just a slightly different method of evaluation.
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