Ramsgate Homeowners Pocketed £218k Each in the Last 20 Years
Since 2001, UK average house prices have risen by an astonishing 187.2% across the UK, while in London the figure is 247.6%.
Looking back at the people that bought in those first few years of the new Millennium. What effect has it had on them.
· The average house price in Ramsgate has increased by 255.9% to £302,600 in the last 20
years, a profit of £217,600
· That means, when adjusted for inflation in those two decades, Ramsgate house prices
have risen in real terms by 183.8%
· What does this mean for existing Ramsgate homeowners and first-time buyers trying to
get on the Ramsgate property ladder?
Since 2001, UK average house prices have risen by an astonishing 187.2% across the UK, while in London the figure is 247.6%.
Looking back at the people that bought in those first few years of the new Millennium, few of those buying or selling property in 2001 could have forecast the massive financial impact that their decision then would have on the rest of their lives.
In those years, there have been winners and losers, where some Ramsgate buyers have made hundreds of thousands of pounds and Ramsgate renters have paid out tens of thousands of pounds and yet been unable to buy their first home – but life is often not as simple as that, so in this article I wanted to discuss the matter further.
The average house price in Ramsgate has increased by 255.9% to £302,600 in the last 20 years, a profit of £217,600.
Now of course these are average prices and don’t take inflation in to consideration.
Yet even when adjusted for inflation, Ramsgate house prices have still risen by 183.8% in the last 20 years.
Characteristically, the longer a homeowner has owned their Ramsgate property, the larger the gain when they sell. Yet most of these profits are never seen by Ramsgate homeowners. It has never been money in the bank unless you sell up and downsize or move somewhere cheaper. Instead, these gains are re-invested back into the housing market when they buy their next home.
So, whether the gains are banked or tied up in their bricks and mortar, it looks like all the Ramsgate homeowners are in the driving seat.
What about all the Ramsgate first-time buyers, priced out of the market and unable to get on to the property ladder?
Are the young of Ramsgate losing out again?
Reading the newspapers you would think so, yet nothing could be further from the truth. In fact …
It’s 22.8% cheaper today to buy a house
in Ramsgate compared to 2007
That isn’t a typo!
In 2002, 28.4% of a first-time buyer’s household income went on the mortgage payments. Today, that figure stands at 37.7%, yet in 2007, it was 48.8% ... hence why it’s cheaper today!
Of course, for most young Ramsgate potential first-time buyers, the other largest barrier to home ownership is the matter of raising an adequate deposit.
Rising rents (and future energy prices) won’t help and will in fact make this problem worse, giving ambitious Ramsgate first-time buyers not much left at the end of the month to save a deposit for their first home.
With soaring Ramsgate house prices, this means the amount Ramsgate renters need to save for their deposit is growing year on year.
For these annoyed renters, there is the unpleasant irony that if they could only get on the Ramsgate housing ladder, they would find themselves better off. They would spend a lower proportion of their monthly take home pay on keeping a roof over their heads.
Some people in the press have suggested the older generation, with all the equity tied up in their homes over the last 20 years, should release some of the money and give it to their children or grandchildren to help them on the ladder, maybe?
Reports in the press have also described many homeowners in their 60’s (and older) changing their plans to move home. Many were planning to downsize, to release the tied-up equity in their home. That equity would either be used to invest in the bank to produce an income for them and/or to help their children (sometimes even grandchildren) on to the property ladder.
Yet with the interest paid by banks and building societies on any lump sum being very low, to many mature homeowners it hardly seems worthwhile making the move to downsize. This means many younger would-be first-time buyers are missing out on help from the Bank of Mum and Dad (or the Bank of Grandad and Grandma) with their deposit.
However, the problems caused by low interest rates could also be their saviour.
Many older homeowners have turned to equity release, thus allowing them to get hold of a share of the equity amassed in their property, in exchange for a tax-free lump sum of cash.
Cash that could be used to help with
deposits for their children/grandchildren?
The mature homeowner then stays in their larger family home and helps their family buy a property.
Whilst I am not a mortgage adviser (and you must take proper advice from a qualified mortgage broker), equity release mortgages don’t have end dates and the interest payments are rolled up (until you pass away). This means that there aren’t any monthly payments.
The interest rate you pay is normally fixed for the mortgage and because interest rates are so low, that means the debt shouldn’t balloon up. And should you decide to sell in a few years’ time, you just pay back the capital, redemption fee and the small amount of interest accrued.
Now of course, that does mean there will be less for
your offspring to inherit when you pass away.
Equity release mortgages though have had some bad press recently. In the past they were unregulated and pricey. Yet today, there is more protection for borrowers.
One answer to the growing interest debt is to pay part or all the monthly mortgage interest charged, yet you must have the income for that.
You also need to take advice on how the equity release will affect your liability for nursing home fees and inheritance tax. Also, if only one person in your home is the owner of the property, if that homeowner dies, the partner who is not on the mortgage (because only owners can go on a mortgage) won’t have any right to stay in the family home.
Finally, if you are planning to move, don’t just compare the interest rate, but the redemption charge for early repayment – some of them can be very high.
My advice – take professional advice and speak to your family and involve them. Yes, we have all built up some amazing equity in our Ramsgate homes, and yes, there is potential to help the younger generations with that wealth. Just go in with your eyes open and know all the facts, all the pros and all the cons – then decide what is best for you with all that information to hand.
What are your thoughts, as a mature Ramsgate homeowner or a first-time buyer, on this? It would be good to hear from you.
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