Why invest at all when fixed-rate savings account are so high? [6-month "update"]

[monad_wisdom]

@ebmommypayne No tax on your cash ISA either so we're back to square one

 

[wondering1985]

@ebmommypayne True but that’s max £20k

 

[imsome]

@wondering1985 £20k a year. If you stuff it for a decade the current market jumps we're seeing make for some decent returns.

 

[goof]

@david_thesalmst 5% easy savings is (for me) more profitable than rent from a second property

 

[lancemarshall]

@goof How come that is? Mortgage repayments for second property eating up your rental income?

 

[goof]

@lancemarshall £1000rent -£500mortgage -20% tax.
V
£620 monthly interest easy access money

On a rental property you need to expect extra cost for wear and tear

 

[quentin]

@goof I'm not saying it's better to invest in property, but you're not taking into account the huge factor of the increase in value of the property.

 

[mrsc49017]

@quentin Is it a huge factor? Property value increases aren't even beating inflation.

 

[glenny61]

@mrsc49017 My flat has stayed at the exact same nominal price since 2007.

 

[ojusvee06]

@glenny61 Yet my house has more than doubled in value since I bought it in 2009. You just bought at the worst possible time (through no fault of your own).

 

[glenny61]

@ojusvee06 I bought it in 2017 for the same price it sold at in 2007. I'm selling it now for the same price again.

 

[quentin]

@mrsc49017 Yes. Isn't it? Do you have any data over a fair period of time that shows house prices increase slower than inflation (genuine question)? There may be short term anomalies but that would be like pointing to a market crash and saying investing in index funds don't beat inflation. You've got to look at longer term trends. https://www.statista.com/statistics/751605/average-house-price-in-the-uk/

 

[mrsc49017]

@quentin once you account for inflation you see we've peaked in 2007 https://www.housepricecrash.co.uk/indices-nationwide-national-inflation/

 

[quentin]

@mrsc49017 Thanks, I was looking for something like this. The trend (red line) is going up, meaning house prices increasing in real terms (higher than inflation). I get that the there was a peak in 2007 but looking at the trend, I think it's a reasonable assumption to make that house prices rise higher than the rate of inflation.

 

[goof]

@quentin Yes on a very long term can be the case

 

[lize]

@goof i never get the logic of categorising mortgage repayments as negative cost. you’re basically getting someone else to pay off the house for you

 

[imsome]

@lize Not on an interest only mortgage which many btl are

 

[lize]

@imsome you’re still getting someone to pay the interest, and as interest only mortgages have lower repayments you will be also partially getting money to save towards the final payment

 

[imsome]

@lize Money is fungible, doesn't really matter if you see it as the tenant paying the interest or the landlord. It's still a cost that has to be paid in relation to the property so arguably does reduce profit.

The final repayment will likely be made through the sale of the property. People use BTL for income not long term growth as there are far better options for that.