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Wednesday, 20 September 2017

Still haven't bought a house...


OK, so I'm still here busy squirrelling away more than 30% of my take-home pay and using a low-cost global index tracker (this is a change to previous posts, where I preferred separate regional indices, but the principle is the same) and a low-cost broker.

I've been looking at houses and calculating how much I would save by buying rather than renting. It turns out that it would roughly halve my costs (i.e. 100% of my rental payments are currently "wasted", whereas about 50% of the monthly costs of ownership would be "wasted" - i.e. interest repayment, property tax, property maintenance etc. using typical figures and current interest rates.)

Sounds like a no-brainer, right?

The thing that makes me worried, a little like the picture of this blog post, is that last point.

Interest rates.

I know that we're not living in a "normal" interest rate environment right now, but I have ~25 years to pay off a mortgage. It's very likely (guaranteed?) that those repayments are going to go up, as pointed out in a recent article.

What to do?

For the moment, I'm happy to wait and see what happens. My overriding hunch is that the piper will need to be paid (i.e. we've been living beyond our means in the developed world since at least the 80s and those debts will have to paid back), which means that interest rates will go up (or, similarly, that inflation will go up, but wages won't) and that demographics will kick in (alluded to in an earlier post).

Only the benefit of hindsight will tell...