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May 8, 2022

The Sunday Times – My big house doesn’t make me rich, it makes me anxious

Something happens the moment you buy a house. People assume that you’re rich in a way they don’t when you rent, or even when you own a flat. It is absolutely pointless trying to tell them that you’ve never felt poorer or worried about money more — they won’t believe you.

Suddenly, because you own a home, you are part of the landed gentry, a property owner, someone with security.

When people make this assumption about me, my instinct is to explain that my house (which is a wreck) is a financial sinkhole. I throw all my money down it. The more I chuck in, the more the hole grows, and eventually my money can’t go anywhere else. On paper I seem richer, but my bank balance tells another story.

I don’t explain this though, because instead I smile and say how lucky we are to live in the house we do.

UK property prices are crackpot. Don’t take my word for it, just ask Madonna. She’s a multi-multimillionaire and even she was flabbergasted by how much a property over here cost.

“I’m not going to spend my life savings on some damp house,” she told The Sun in 2000. “What’s with your real estate here?”

I remember closing the newspaper in a huff when I read this and brooding over how I would never, ever, be able to buy a house . . . then eight years later I managed it. And that’s when you discover that there is something else that happens the instant you buy your first home: you go from wishing that house prices would fall, to praying that they rise for ever more.

When we bought our flat interest rates were 5.3 per cent, which makes them considerably more expensive than they are today, even though the Bank of England raised rates on Thursday to 1 per cent — the fourth rise since December.

Mortgages will get more expensive, but whether it will also spell the beginning of a slowdown for property prices is another matter.

If the Centre for Economics and Business Research is right and prices go down a modest 2 per cent next year, it will mean that my recent house move was made right at the top of the market, just as we’re about to tip into a recession.

Buying a house was meant to be about financial security, but that’s a long way off.

Many of us are in the same boat. We’re over extended: borrowing larger sums of money, and paying them off later and later in life with mortgages that extend past retirement. This is true for flat owners too, though not to the same extent. Having a house gives you options, but it also means financial pressure for a long time.

What matters at the moment is my ability to pay the mortgage, not what I paid for a house that I never plan to leave.

Taking out a big mortgage is not always a good idea, but it does come with an upside, which is that it’s a leveraged bet — you stake £50,000 but you get the rewards of the growth on the full £250,000 that you have borrowed.

In a market where interest rates are low, that’s a no-brainer. And I managed to secure a very cheap five-year fix, so I’m insulated for now, which means that I shouldn’t be losing sleep over house prices falling — but I am.

That’s because we have a very complicated attachment to our housing market in this country. It starts with the idea that owning a home makes you wealthy, when actually all you have is an asset that has some theoretical value, but which many of us never cash in.

Owning a home doesn’t make you rich, having no mortgage does — and on that score I will not be rich for another couple of decades.

When you’re young, the injustice of some people being unable to afford to get on the housing ladder while others see their housing wealth grow, may burn, but once you get on the ladder yourself, these feelings usually recede.

They return as your children turn into lolloping, hungry, know-it-all teenagers and you become uncertain about how they will ever buy a home themselves.

That’s when the guilt kicks in and you find yourself arguing that things were actually just as bad when you were a first-time buyer. Or you may find yourself declaring that the market is dysfunctional and in need of urgent fixing to prevent you having to hand over large chunks of your precious equity to see your children right.

There is a another part of me that thinks it is indecent that prices have become so detached from the general economic situation; that while some people are suffering from the financial storm caused by Covid, other people are making money on their properties.

And of course there is anxiety: I can afford (just about) the debt I’ve taken on, but only if nothing about the economy changes.

There must come a point at which we will start thinking that we have over-extended ourselves.

Politicians are always searching for answers to fix the housing market, but it is the great unsolvable problem. It’s easy to say “build more houses”, but the practice is far more complicated.

It seems impossible to find a solution that homeowners and would-be buyers can both swallow.

We all want to be seen to be doing the right thing, but actually no one who owns a property wants prices to crash and that’s because you know the reality: owning a home doesn’t make you richer, it often just makes you more anxious.

Read the full article

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