And therein lies the problem. The system. What you need is something unconventional. "They" can take it all away if it's entrusted to the system.

I'm all for stability, but do we all need to own our own homes? What's with the freakin obsession?! Interest rates and inflation and RPI and the economy, it's all gay. If people were less sucked in by booms and had a little more patience, we wouldn't be in this "mess". Though frankly, it's barely affecting me beyond future job prospects. I'm just as skint as I was!

IMHO low rates will simply encourage another boom for the next generation to bang on their credit cards. Nature is cyclical you see, and so is the economy.

The problem with houses is that people don’t use them for what they are designed for. A house is meant to be lived in. Using it in some kind of speculative game is jut foolishness.

OMG!! How much [LIFTED] sense can you talk in one post! I'm so glad somebody else understands the fundamental flaw in the "market". It's [LIFTED], that's the flaw. All I want is to be able to afford a home. I don't care how it happens and I don't want a bloody investment - I just want somewhere to live that is within my modest means.

A friend of ours rents. She refuses to play the “game” as she calls it. So she moves every couple of years, and has lived in some rtaher interesting buildings and houses. I’d be OK with renting too, but the house we have was so damn cheap that it would be silly to not buy it. It was a repossession, and cost buttons - even at the time it was bought.

The problem, as you can probably guess, is that the house is worth as much as the last one of its kind to be sold, and whilst a profit would be made from a sale, we are effectively then locked to spending a lot more for something similar elsewhere. In my mind, the profit from the sale would be pointless because we cannot “do better” if we sold, and we would be financially worse off for no apparent gain. So I’m not bothered really. We’re not in a bad area, a few minutes walk from the country and fairly close to London if we want to go there (and not that far from Brussels or Paris by way of the Eurostar by way of extension), so I’m pretty relaxed. All we have to do is convince my other half’s parent that no, we really DON’T want to move because it will cost so bloody much to do so. They have bought into the property speculation game so much that retirement is not an option because of their mortgage. A cautionary tale for all of us.

On the continent, the “need” to own a house is far less ingrained and you will find more people renting. To me, a more sensible approach. It seems to me that you need almost three incomes to afford a house these days.

Is deflation such a bad thing? Look at the price of computers, they are always coming down. Yet we still buy.

I would like to see mortgages restricted to building societies who are only allowed to fund their mortgages with depositors savings. Then interest rates for savers will be higher. If banks are excluded from this market then they cannot use cheap funds from China to stoke up a property bubble. House prices will be a lot more stable. That plus higher capital gains tax. If long term mortgage rates were stable around the 5% to 7% mark then they would remain affordable.

Houses are still too expensive and have another 20 to 30% to fall.

Don't take it the wrong way but you are obviously out of your depth here. I haven't read so much nonsense in post for quiet some time. Economics is a complex subject so what you read in a newspaper or see on telly isn't really enough for you to understand how the economics work.

I know this a friendly discussion but you have to draw the line somewhere. Right thing for me to do would be to explain why I disagree with you but I seriously doubt that would get us anywhere.

Back on the subject, I agree not everybody can own a house. But if you have a choice you should choose to own one if you can. There are ways to extract money from it in retirement (e.g. Lifetime mortgages) and I think it is silly to be paying the mortgage of someone else...

I've just returned from France where I was visiting my retired parents.

They're suffering a double blow at the moment. Not only have their stocks and shares investments been practically wiped out and generating no interest, but the painfully low pound means that their pensions are only worth half what they were a few years ago. Add to that equation the fact that fuel prices have doubled, and their income now barely covers the cost of running the cooker. Luckily they have a wood burning stove, so they won't freeze this winter.

I'd love to know what they could possibly have done to guard against the current situation. They worked and saved all their lives, invested in low-risk products and always followed the most sensible seeming independent financial advise. Many people in their situation are having to sell up and move back to Britain, and they all blame it on one man. Having sold off the family jewels for half their worth, it seems he's now pawning the furniture and remortgaging the house. If Brown was to visit my elderly ex-pat friends in Europe, it would be a creaky blur of walking sticks and lynching rope.

I hope to retire some day before I die, and right now I have no idea how to prepare for it. Pensions used to be a good investment, but it doesn't seem that way any more. I'm seriously considering keeping a hoard of gold pieces in a chest buried four paces south of the apple tree.

As to property prices and home ownership, if you look around the world you'll see various models. Most people in this country (England) live in absolute luxury. It was recently exclaimed that my parent's car lived in a house all to itself, which in many countries would be considered a mansion and could home five families of ten people. Hell, it even has running water and electricity which is more than most people have.

Yeah, the pound is devastating at the moment! I get some inheritance from my mum soon and it would have been worth 30% more 2 years ago than it is now. because the Pound has crashed...

As to housing, as Paulzolo say, a house is there to be lived in. I'm buying a house at the moment, it is relatively cheap, but we are looking at it as being "our" place for at least the next 20 years...

This is as much the problem as the problem itself (oohh - recursion). Economics is deathly complicated, yet we are all subject to its twists and turns. Very few people understand the complexities, yet we go along with it. What information we do get depends on the information that we are fed by the media, which tries to explian it to us in ways that we can understand. Do you expect everyone to have the in depth knowledge to comprehend what is really going on?

So, Amnesia10’s post may be over simplistic in its outlook, but it illustrates a few points:

1 - People make assumptions on how the system works based on observation. Building Societies have a lot of depositors’ money, therefore that money should be used to loan mortgages.

2 - Prices are coming down, people buy more things, companies still make profits based on volume sales.

Both of these are valid suppositions to make, especially if you assume that there is a finite amount of cash floating about. The realities are more complex and bothersome, especially when it comes down to the banks and building societies making money based on loans. Basically, when a building society or bank loans some money, it invents the cash. The loan agreement acts as some kind of indemnity.

This is a rather nice explanation on how the US banks work. I suspect ours work in a similar fashion.
http://www.youtube.com/watch?v=Hg_1iXbIjFQ

The Money as Debt series on YouTube is worth watching too.
http://www.youtube.com/watch?v=mIIAvdJv ... re=related

An entirely subjective opinion and only one perspective on what "paying rent" means.

With a mortgage, you are effectively paying rent to a bank. If you fail to pay rent or your mortgage, you lose your home.

You mean you get kicked out of the home the bank owns and allows you to live in for a price. What I meant was, the whole obsession with "dead money", or "paying someone else's mortgage", or "home ownership" is often looked at in what strikes me as a rather odd way. Paying rent or a mortgage, amounts to the same thing. It's a payment for the privilege of living somewhere. The end result may differ, but there are pros and cons for both and it's not as simple as you must have a mortgage or you're doing the wrong thing.

The end results differ in such an enormously significant way that it's impossible to overlook.

Generally speaking, a 20 year mortgage on a typical house will cost less each month than renting the same house. After 20 years, you live rent-free.

Most people want to live for more than 20 years. Unless you have itchy feet, it's "normal" to settle down and raise a family in a single location. Even if you do need to move, you can take the mortgage with you - it just takes more effort than upping sticks on a rental.

Owning is more effort than renting. This is true of most things that save you money; such as making your own diner rather than ordering take-out. In the end though, I know which I prefer. I know how to cook and I'm not that rich.

But that's just it JJ. It's a preference. Not a right. Not an absolute. Not so "normal" that to not be interested in doing it means you're an idiot. Most people might want to live for more than 20 years. But not everybody wants to live in the same house, or town, or country, or with the same people for that length of time. A 20yr mortgage is a damn site more expensive than renting at the moment. Certainly down here. Maybe it's different oop North? Not to mention, there are depos to be found and contingency funds to repair broken plumbing etc. Also, if you do decide you want to move, you have to wait for somebody to buy your house.

The obsession with owning is part of the reason for the current situation. For a lot of people there's no need and in fact, they might well be better off renting. Buying need not be the default option. They both have merit for different people.

This is very true.

If you look to our past or to other parts of the world, then you will see that the rich land-owning elite are the people with power while the proletariat rent.

Since the invention of the "Mortgage" (literally, "death pledge"), more people have the option of becoming land owners.

Maggy approved. The little baby Jesus would not have approved. "Neither a borrower not a lender be, you capitalist scum".

It is indeed a part of our modern financial mess. Because the cost of property is so inflated, the cost of labour is similarly inflated. If we could all rent for £10 a week, then we could all live on something approaching a sensible salary instead of insisting on £5 an hour or more.

However, since I live in this reality I chose to rent an attik for 10 years while saving to buy. I have now bought, and if I jiggle the numbers it works out as £10 a month for a 3 bedroom house - assuming I live to 70. You will never rent a house for that.