The effects of inflation

Required Reading


  


The effects of inflation


Buying a property entails as far as most people are concerned borrowing the money to do so. At times of high inflation, it is an excellent idea to buy a property, the value of which is probably increasing at least in line with inflation, by means of a fixed loan.

The technical term used here is 'gearing'. If you borrow £118,000 to buy a house costing £120,000, for example, and it appreciates by 20% a year for the next three years, it will be worth £134,560 at the end of that time -that's £114,560 profit for the £12,000 that you put down.

Obviously, you will have been paying interest on the loan in the meantime (and possibly repaying a bit of capital), but, when you consider that the mortgage payments were probably little more than the comparable rent, you have without doubt made a very shrewd investment of that £12,000.

Some observers maintain that the 'profits' that house-buyers make on their property are illusory -after all, when they move, they'll find that anywhere else they want to buy will be just as expensive.

That's not strictly true. There are plenty of people today -not excessively well off-who are living in houses worth perhaps £250,000 with a mortgage of just £125,000.

They haven't needed to borrow more because of the profits made on their previous property. So they have genuinely benefited -it's not simply a matter of 'paper profits'.


More on mortgages

So you want a mortgage?


Home-buying for beginners

Buying a home, most people will tell you, is the biggest investment you will ever make. It is certainly likely to be the biggest purchase that you will ever make; whether it turns out to be an investment in the sense that it will reward you with an increasing real value, so that when you come to sell you will make a decent profit, is another matter.

At any rate, for most people, buying a place to live in opposed to renting one, or sharing accommodation with parents the most sensible and often the only possible option to take.

The increase in owner-occupation

The growth in 'owner-occupation' property in this country has been steadily increasing over the century. In 1914 . . .... see: So you want a mortgage?


Current Mortgage Offers

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