-0.5% interest mortgages
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@Steve_The_Cynic said in -0.5% interest mortgages:
Quantitative Easing isn't exactly the same as printing more banknotes, but it isn't far from it.
QE has less printing of banknotes and more technical jargon, and is therefore 100% less embarrassing to politicians.
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@acrow said in -0.5% interest mortgages:
@Steve_The_Cynic Alternatively, they think that either the interest rates will rise eventually, or they'll be able to pick up a lot of well-kept real-estate for a pittance (if deptors default).
Not within the next 10 years, no.
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@Carnage said in -0.5% interest mortgages:
@DoctorJones said in -0.5% interest mortgages:
Negative interest sounds great when you think about borrowing money, but what about a savings account? Would people be inclined to let their money sit there and shrink over time?
Most savings accounts have an interest so low that the inflation is multiple times higher, so the money will have less and less worth even if it's a slightly larger number.
I think mine was at 0.03%. I closed that and moved all that money to another entity (around 2% now)
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@Mason_Wheeler said in -0.5% interest mortgages:
Instead of going to the building industry
Speaking as a homeowner - that money now goes to a different part of the building industry! (Home ownership is a never-ending bill of maintenance)
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@dcon Wow, where are you getting a 2% yield on a savings account today?
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@Mason_Wheeler said in -0.5% interest mortgages:
@dcon Wow, where are you getting a 2% yield on a savings account today?
Fidelity (brokerage). It's sitting in a money market. (that's also where my IRA sits, separate account obviously)
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@LaoC said in -0.5% interest mortgages:
@acrow said in -0.5% interest mortgages:
@Steve_The_Cynic Alternatively, they think that either the interest rates will rise eventually, or they'll be able to pick up a lot of well-kept real-estate for a pittance (if deptors default).
Not within the next 10 years, no.
I believe it will. And I've bet accordingly, as I earlier posted.
The current situation of negative interest is untenable in the long run. And worse, it is unprofitable for the central banks. Direction will therefore change. Of that we can certainly agree, can we not? And I think it'll be a lot faster than 10 years when it does.
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@acrow You'd like to think that, sure, but the US and Europe are just starting to tread on the path that Japan's been on for the last couple decades and, well... they've been on it for a couple decades. Disturbing but true.
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@acrow said in -0.5% interest mortgages:
@LaoC said in -0.5% interest mortgages:
@acrow said in -0.5% interest mortgages:
@Steve_The_Cynic Alternatively, they think that either the interest rates will rise eventually, or they'll be able to pick up a lot of well-kept real-estate for a pittance (if deptors default).
Not within the next 10 years, no.
I believe it will. And I've bet accordingly, as I earlier posted.
How would it make sense for them to offer -0.5% fixed for 10 years then?
The current situation of negative interest is untenable in the long run. And worse, it is unprofitable for the central banks. Direction will therefore change. Of that we can certainly agree, can we not? And I think it'll be a lot faster than 10 years when it does.
What I said in that other thread applies here as well: it's not like central banks could set interest rates however they please. If on average over the country businesses get a ROI of 1% a year, there will be few people who'd take a credit at 2% to finance a new one. Or the other way round, before a bank promises you 2% on your deposits, it has to be reasonably confident that it will find someone who pays it 2%+x. Of course it's untenable in the log run, but what can you do? Capitalism is untenable in the long.
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@LaoC waaaaaay back in the day, there was a good system in place to prevent this kind of mess. In the Law of Moses, it was specifically forbidden to make any loan for a period of longer than 7 years, and every 50 years was a special holiday where all outstanding debts were to be forgiven.
It's not about capitalism; it's about the orthogonal concept of whether your legal system encourages or discourages unlimited and perpetual indebtedness.
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@Mason_Wheeler said in -0.5% interest mortgages:
and every 50 years was a special holiday where all outstanding debts were to be forgiven
Every 7 years.
However, back then houses were much less expensive than today (for a good reason). No long-term loans would mean no house mortgages. Can you imagine our current society without mortgages? Everyone would have to live with their parents until 40!
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@Gąska I can imagine an alternative scenario: without 30-year mortgages making them viable, the massive price inflation we've seen in housing since their introduction would not have happened, and houses would be much more affordable than they are today. (And housing crashes would not be a thing that happens.)
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@Mason_Wheeler dunno. Houses are much more advanced technologically nowadays. Laying bricks costs money, as well as all the utilities. I don't know how much lower the prices could potentially get without the mortgage pumping them up, but my guess would be no more than 2x.
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@Gąska And let's not forget the effects of welfare. According to news, some 60% of people renting get "housing support" from the government here. It's been critisiced of raising the cost of housing.
And then there's political demand for lower energy consumption, with no regard for exactly where in the EU area you live. Meaning, houses have to be insulated and mechanized now, instead of just burning some wood or oil like we could do last century, to keep warm.
And then there's the ordnance on just how many people are allowed to live in a building of a given size...
TL;DR: The politicos made this expensive. It doesn't have to be.
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@LaoC said in -0.5% interest mortgages:
What I said in that other thread applies here as well: it's not like central banks could set interest rates however they please. If on average over the country businesses get a ROI of 1% a year, there will be few people who'd take a credit at 2% to finance a new one. Or the other way round, before a bank promises you 2% on your deposits, it has to be reasonably confident that it will find someone who pays it 2%+x. Of course it's untenable in the log run, but what can you do? Capitalism is untenable in the long.
On the other hand, if the central banks raise the interest rates, business that lives on borrowed capital will move to more profitable projects. Or fold and release the human resources to do something more profitable. Which is how capitalism is supposed to work.
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@Mason_Wheeler Japan has a national debt of interesting size. Makes me wonder if all these national debts have anything at all to do with the central bank interest rates.
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@Gąska said in -0.5% interest mortgages:
Can you imagine our current society without mortgages? Everyone would have to live with their parents until 40!
Because everyone who moves out of their parents' house goes and buys their own on credit instead of renting?
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@Mason_Wheeler said in -0.5% interest mortgages:
@LaoC waaaaaay back in the day, there was a good system in place to prevent this kind of mess. In the Law of Moses, it was specifically forbidden to make any loan for a period of longer than 7 years, and every 50 years was a special holiday where all outstanding debts were to be forgiven.
It's not about capitalism; it's about the orthogonal concept of whether your legal system encourages or discourages unlimited and perpetual indebtedness.
Back in the day, the only projects that took more than seven years were the ones ordered by the king, and by definition he didn't need to borrow, he just took and mandated.
If a scheme like this was compatible with capitalism, I assume someone would have tried. But it's quite clear why it's not when you remember that one's savings are the other's debt. You can't invest in something and expect a return without someone being indebted to you.
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@acrow said in -0.5% interest mortgages:
@LaoC said in -0.5% interest mortgages:
What I said in that other thread applies here as well: it's not like central banks could set interest rates however they please. If on average over the country businesses get a ROI of 1% a year, there will be few people who'd take a credit at 2% to finance a new one. Or the other way round, before a bank promises you 2% on your deposits, it has to be reasonably confident that it will find someone who pays it 2%+x. Of course it's untenable in the log run, but what can you do? Capitalism is untenable in the long.
On the other hand, if the central banks raise the interest rates, business that lives on borrowed capital will move to more profitable projects. Or fold and release the human resources to do something more profitable. Which is how capitalism is supposed to work.
There is no reason why more profitable projects wouldn't be favored by investors anyway if they were available. Why would I give my money to someone who offers me 1% a year if someone else would give me 5%?
It's not like there were heaps of companies with highly profitable business models just waiting for someone to work for them because everybody is busy working for the guys who don't make any money.
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@Gąska said in -0.5% interest mortgages:
@Mason_Wheeler dunno. Houses are much more advanced technologically nowadays. Laying bricks costs money, as well as all the utilities. I don't know how much lower the prices could potentially get without the mortgage pumping them up, but my guess would be no more than 2x.
You can try to get an idea of this by looking at the price of newly built houses in the lower-priced areas of your country (state, whatever...). This cannot be below the actual cost of materials and labour (unless the house building is directly subsidised one way or another, but out of "special development zones" or other similar schemes, I guess it shouldn't be the case) otherwise the builder would be losing money. The cost of materials is probably roughly similar everywhere in your country, and while the cost of labour may change a bit, overall it should stay roughly comparable. Deduct the average land price for that area, and you probably get an estimate of a minimum price that actually building a house (plus some margin for the builder) can cost, regardless of the location.
In France, I would say that for a standard detached family home (two levels, 120 sq.m) and excluding the land price, this is around 100-150 k€ (very, very rough number of course, there is no such thing as a "standard" house). In many urban areas (e.g. close to Paris), you won't find anything below 500 k€, if not a million or more (for a similar house). So while this isn't quite the same as "what would be the price without mortgages", the ratio between minimum cost of building and actual prices seems to be at least x5 or even x10.
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@topspin said in -0.5% interest mortgages:
@Gąska said in -0.5% interest mortgages:
Can you imagine our current society without mortgages? Everyone would have to live with their parents until 40!
Because everyone who moves out of their parents' house goes and buys their own on credit instead of renting?
That would be even worse, as 90% of people would end up on permanent rent. Home owners would be few and far between. Inheritance would be near zero for most people. It would be like Chicago everywhere, except worse.
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@LaoC said in -0.5% interest mortgages:
@Mason_Wheeler said in -0.5% interest mortgages:
@LaoC waaaaaay back in the day, there was a good system in place to prevent this kind of mess. In the Law of Moses, it was specifically forbidden to make any loan for a period of longer than 7 years, and every 50 years was a special holiday where all outstanding debts were to be forgiven.
It's not about capitalism; it's about the orthogonal concept of whether your legal system encourages or discourages unlimited and perpetual indebtedness.
Back in the day, the only projects that took more than seven years were the ones ordered by the king, and by definition he didn't need to borrow, he just took and mandated.
Well, maybe in Asia. Here in Europe, it was different. Absolutism didn't really take off until after middle ages, and it lasted relatively short time. Before that, kings very much did borrow money on regular basis. Loans were the main source of income for Knights Templars, for example, which led to their eventual banishment.
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@acrow said in -0.5% interest mortgages:
@Mason_Wheeler Japan has a national debt of interesting size. Makes me wonder if all these national debts have anything at all to do with the central bank interest rates.
Japan has 220% of GDP, Denmark has 16%. Norway has the highest public assets worldwide ("debts" of -90% GDP) and its interest rate is creeping around between 0 and 1% these years.
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@Gąska said in -0.5% interest mortgages:
@LaoC said in -0.5% interest mortgages:
@Mason_Wheeler said in -0.5% interest mortgages:
@LaoC waaaaaay back in the day, there was a good system in place to prevent this kind of mess. In the Law of Moses, it was specifically forbidden to make any loan for a period of longer than 7 years, and every 50 years was a special holiday where all outstanding debts were to be forgiven.
It's not about capitalism; it's about the orthogonal concept of whether your legal system encourages or discourages unlimited and perpetual indebtedness.
Back in the day, the only projects that took more than seven years were the ones ordered by the king, and by definition he didn't need to borrow, he just took and mandated.
Well, maybe in Asia. Here in Europe, it was different. Absolutism didn't really take off until after middle ages, and it lasted relatively short time. Before that, kings very much did borrow money on regular basis. Loans were the main source of income for Knights Templars, for example, which led to their eventual banishment.
Did any of them observe something akin to the Shmita?
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@LaoC said in -0.5% interest mortgages:
@acrow said in -0.5% interest mortgages:
@LaoC said in -0.5% interest mortgages:
What I said in that other thread applies here as well: it's not like central banks could set interest rates however they please. If on average over the country businesses get a ROI of 1% a year, there will be few people who'd take a credit at 2% to finance a new one. Or the other way round, before a bank promises you 2% on your deposits, it has to be reasonably confident that it will find someone who pays it 2%+x. Of course it's untenable in the log run, but what can you do? Capitalism is untenable in the long.
On the other hand, if the central banks raise the interest rates, business that lives on borrowed capital will move to more profitable projects. Or fold and release the human resources to do something more profitable. Which is how capitalism is supposed to work.
There is no reason why more profitable projects wouldn't be favored by investors anyway if they were available. Why would I give my money to someone who offers me 1% a year if someone else would give me 5%?
Did you notice that there are a lot of companies (not just Tesla) that are huge, but don't seem to make a profit. Yes, why do they exist? Who the hell gave them money if they're not producing value?
It's not like there were heaps of companies with highly profitable business models just waiting for someone to work for them because everybody is busy working for the guys who don't make any money.
My company has trouble recruiting people for software development (embedded). While, AFAIK, there are at least 3 universities pumping out software engineers in this country, at least one of which teaches C and C++. Where are they all hiding at? If we have a 100% employment rate for software engineers in profitable businesses, and by extension tax-producing ones, then why is the Finnish government still sinking into debt? Why is EU?
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@remi What's the smallest apartment size allowed in Paris, and France overall?
In Finland, the minimum apartment size is 20m2 (except dedicated student-flats, which may be 16m2), and Helsinki mandates a minimum of 80m2 average apartment size in newly constructed buildings.
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@Gąska said in -0.5% interest mortgages:
That would be even worse, as 90% of people would end up on permanent rent. Home owners would be few and far between.
What would be the big difference between that and people "owning" the houses on a mortgage, apart from the fact that renters don't carry debt? AFAICT "buying" a house on a mortgage basically comes down to telling a bank to buy a house and then paying the bank a rent for the privilege of being allowed to pretend the house is actually yours.
Of course in theory, you could pay down the mortgage and end up actually owning the house eventually; but at least where I live this seems to not be very common, most people just tend to roll them over. But then I live in the country which is lowest-ranked on wikipedia's list of countries by home ownership rate so maybe that's just a local thing. We also have an actual fortune tax, so being rich in assets you can't easily liquefy is kinda expensive.
Honest question btw, no troll intended.
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@LaoC said in -0.5% interest mortgages:
@Gąska said in -0.5% interest mortgages:
@LaoC said in -0.5% interest mortgages:
@Mason_Wheeler said in -0.5% interest mortgages:
@LaoC waaaaaay back in the day, there was a good system in place to prevent this kind of mess. In the Law of Moses, it was specifically forbidden to make any loan for a period of longer than 7 years, and every 50 years was a special holiday where all outstanding debts were to be forgiven.
It's not about capitalism; it's about the orthogonal concept of whether your legal system encourages or discourages unlimited and perpetual indebtedness.
Back in the day, the only projects that took more than seven years were the ones ordered by the king, and by definition he didn't need to borrow, he just took and mandated.
Well, maybe in Asia. Here in Europe, it was different. Absolutism didn't really take off until after middle ages, and it lasted relatively short time. Before that, kings very much did borrow money on regular basis. Loans were the main source of income for Knights Templars, for example, which led to their eventual banishment.
Did any of them observe something akin to the Shmita?
Of course not. They hated Jews.
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@acrow said in -0.5% interest mortgages:
Did you notice that there are a lot of companies (not just Tesla) that are huge, but don't seem to make a profit. Yes, why do they exist? Who the hell gave them money if they're not producing value?
That's mostly on the promise of future profits, a model made popular by Amazon from what I've heard. The idea is to sink money into the operation until you dominate the market, have enough clout to bully out all competition, and have hordes of captive clients. Then you reap huge profits off of your quasi-monopoly.
Oversimplified to the point of hyperbole, but that's the gist of it as I understand it.
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@acrow said in -0.5% interest mortgages:
If we have a 100% employment rate for software engineers in profitable businesses, and by extension tax-producing ones, then why is the Finnish government still sinking into debt? Why is EU?
Because even if it has lots of tax income, the government is spending even more. Don't forget that part of that spending is "servicing" (paying the interest on) the debt.
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@ixvedeusi said in -0.5% interest mortgages:
@Gąska said in -0.5% interest mortgages:
That would be even worse, as 90% of people would end up on permanent rent. Home owners would be few and far between.
What would be the big difference between that and people "owning" the houses on a mortgage, apart from the fact that renters don't carry debt?
- the risk of rent raising suddenly, especially after ownership change (sure, theoretically, taxes and maintenance costs can rise unpredictably too, but in practice they don't very much);
- home owners becoming de facto a higher social class than everyone else, which could potentially lead to some groups lobbying the government for laws that make it hard for general population to become home owners even if they have the money (see: lawyers, architects and other regulated professions);
- as mentioned, children would be left without much inheritance. Inheriting a house is a lot of money.
Of course in theory, you could pay down the mortgage and end up actually owning the house eventually; but at least where I live this seems to not be very common, most people just tend to roll them over.
Weird. Over here, nearly everyone pays up their mortgage by the time they're approaching retirement.
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@acrow said in -0.5% interest mortgages:
@remi What's the smallest apartment size allowed in Paris, and France overall?
I'm not sure there is one, since I vaguely remember some stories about people selling basically cupboards as "studio flats" in Paris. There is a minimum size for renting (9 sq.m I think), but nothing prevents you from selling something smaller.
I don't think there is a minimum size under which you're not allowed to live in (public authorities can deem a building "unfit for living" e.g. when it's close to collapsing and that would make entering -- and living -- in it illegal, but I don't think that could apply to a single flat (well, room...) in an otherwise normal building). I know that some people declare various garages etc. as being flats where they live for various administrative purposes (typically being in the catchment zone of some sought-after school), I don't think there is any real minimum size that applies.
In Finland, the minimum apartment size is 20m2 (except dedicated student-flats, which may be 16m2), and Helsinki mandates a minimum of 80m2 average apartment size in newly constructed buildings.
For newly built flats... I also don't know. I wouldn't be surprised if there is some sort of minimum size, but it's hard to find (searching for "minimum size new build" gives me results about the minimum size for a house, which isn't the question here). I suspect that in practice the minimum size will be the same as the minimum size for renting (9 sq.m) since it wouldn't make much sense for a builder to build something that cannot be rented after (that would limit a lot the potential buyers!). A quick search shows nothing below 15-17 sq.m (for student flats), so it seems this is quite similar to what you say.
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@ixvedeusi said in -0.5% interest mortgages:
What would be the big difference between that and people "owning" the houses on a mortgage, apart from the fact that renters don't carry debt?
In Sweden, the rent is high enough that you can actually pay the interest and make payments on the loan if you buy a similar apartment or house for the same amount. There may be geographical differences, like in Stockholm where the ceiling on rent makes the market weird.
So if you have the capital necessary to take a loan, it's cheaper than renting.
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- after the first lease expires, your landlord can refuse another one, and the land can later be sold out from under you (which has happened to us twice in as many years). As long as you're making mortgage payments, the bank can't foreclose.
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@pie_flavor well, the laws are more civilized here in Europe and you can't do these things here. But there are other reasons why the building changing hands can be awful.
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@ixvedeusi said in -0.5% interest mortgages:
@Gąska said in -0.5% interest mortgages:
That would be even worse, as 90% of people would end up on permanent rent. Home owners would be few and far between.
What would be the big difference between that and people "owning" the houses on a mortgage, apart from the fact that renters don't carry debt? AFAICT "buying" a house on a mortgage basically comes down to telling a bank to buy a house and then paying the bank a rent for the privilege of being allowed to pretend the house is actually yours.
It seems very unlikely to me that your monthly payments to the bank only cover interests (I know, interests-only mortgages are a thing in some parts of the world, but this is definitely not the rule for normal buyers), or that renting the same flat from a landlord would cost you the same as those monthly payments (if the rent just covers the monthly payment of interests, not capital, by the landlord, they would not gain anything by investing and renting the flat to you). So I can't really believe that you would not reduce your debt and therefore be better off in the end.
Of course in theory, you could pay down the mortgage and end up actually owning the house eventually;
Even if you don't end up owning it in full (which around here is the norm when you retire, but I know that Neutral-Chocolate-Land is a weird place so maybe it's not...), you own something, so you've gained something by owning rather than renting. Of course this relies on the market not taking a plunge larger than what you've gained, but in that regard real estate is an investment like all others, "value of shares may go up and down", "you may not recover the full value of your investment", "smoking kills" etc.
We also have an actual fortune tax, so being rich in assets you can't easily liquefy is kinda expensive.
Is there an exemption for your main residence? This is how it works (worked, I think the law was changed a couple of years ago) in France, and avoids most issues in cases like you mention.
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@Gąska which one is the thing you can't do? Refuse a lease, or sell even without a lease?
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@Gąska said in -0.5% interest mortgages:
the risk of rent raising suddenly, especially after ownership change (sure, theoretically, taxes and maintenance costs can rise unpredictably too, but in practice they don't very much);
On the other hand you're exposed to sudden raises in interest rates (which could hurt quite badly e. g. if the current state of extremely low rates ever ends). Yes, initially that's less of a problem with a fixed-rate mortgage, but if you intend to roll it over you will still eventually need to renegotiate it with the new interest rates.
@Gąska said in -0.5% interest mortgages:
home owners becoming de facto a higher social class than everyone else
Is a problem if there is an actual advantage to owning as opposed to renting, otherwise I don't really see why that would be the case. It also seems to me like just one more example of the general fact that money begets money: The rich have more power and thus can do better lobbying in order to stay rich, news at 11.
@Gąska said in -0.5% interest mortgages:
as mentioned, children would be left without much inheritance. Inheriting a house is a lot of money.
To me that seems like begging the question: it presupposes that those who have a house have more wealth; I mean the children could also just inherit the money in liquid form, and it's much easier to carve out a junk of that to pay any inheritance tax with.
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@LaoC said in -0.5% interest mortgages:
Why would I give my money to someone who offers me 1% a year if someone else would give me 5%?
That's actually not a hypothetical question. People do it all the time, buying government bonds at extremely low yields when they could be buying high-yield corporate bonds. In fact, the low-yield bonds issued by the US Treasury are some of the most popular financial instruments in the entire world.
When you understand why this is the case, you will have learned something valuable.
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@Carnage said in -0.5% interest mortgages:
So if you have the capital necessary to take a loan, it's cheaper than renting.
I would have thought that that depends a lot on how much money of your own you put into the house, and thus how big a mortgage you'd have to take. You'd also have to consider the additional costs of owning the house (maintenance work, insurance, taxes, administrative overhead, notary's fees, ...).
I would indeed expect that renting would be somewhat more expensive than owning, as, in addition to the above, the landlord 1) wants to make a profit and 2) has to take on additional risks (e. g. going after bad payers etc). On the other hand, if you buy a house you'll have a lot of money tied up in it, which otherwise you'd have at your disposal to invest in a more flexible manner.
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@Gąska said in -0.5% interest mortgages:
the risk of rent raising suddenly, especially after ownership change (sure, theoretically, taxes and maintenance costs can rise unpredictably too, but in practice they don't very much);
Concerning this, here we have rather strong renter protection laws, which limit the allowed maximum rent increase.
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@remi said in -0.5% interest mortgages:
Is there an exemption for your main residence?
Not that I'd know of. The house you own is part of your fortune, and that's it. What's even worse is that, as far as I understood, if you live in a house you own you have to pay income tax on the rental value of the house, as if you were making an income from renting the place out to yourself... I'm still hoping I somehow got this wrong, I cannot for the sake of me understand how anyone ever looked at that law and thought "yep, makes perfect sense"
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@ixvedeusi said in -0.5% interest mortgages:
@Gąska said in -0.5% interest mortgages:
the risk of rent raising suddenly, especially after ownership change (sure, theoretically, taxes and maintenance costs can rise unpredictably too, but in practice they don't very much);
On the other hand you're exposed to sudden raises in interest rates
Are we still talking about a world without mortgages?
@Gąska said in -0.5% interest mortgages:
home owners becoming de facto a higher social class than everyone else
Is a problem if there is an actual advantage to owning as opposed to renting
Like, you have a home of your own. That's a big advantage. And in a world without mortgages (so without interest rates etc. because all houses are bought with cash), it would be much cheaper than rent in 30-year timespan, considering that with mortgages, they're about the same. Poor would stay poor on a much bigger scale than they do now.
@Gąska said in -0.5% interest mortgages:
as mentioned, children would be left without much inheritance. Inheriting a house is a lot of money.
To me that seems like begging the question: it presupposes that those who have a house have more wealth; I mean the children could also just inherit the money in liquid form, and it's much easier to carve out a junk of that to pay any inheritance tax with.
You're forgetting about rent. There would be no liquid money to share instead of the house because whatever would've gone into paying up mortgage for the house, would be spent on rent instead.
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@ixvedeusi said in -0.5% interest mortgages:
I would have thought that that depends a lot on how much money of your own you put into the house, and thus how big a mortgage you'd have to take. You'd also have to consider the additional costs of owning the house (maintenance work, insurance, taxes, administrative overhead, notary's fees, ...).
The legal lower limit for own capital in housing loans is 15%. It's possible to take a separate and really expensive loan to cover the 15%, but that's stupid.
And generally it's TCO that's cheaper. Exceptions exist of course.
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@ixvedeusi said in -0.5% interest mortgages:
What's even worse is that, as far as I understood, if you live in a house you own you have to pay income tax on the rental value of the house, as if you were making an income from renting the place out to yourself...
Here in Poland, the tax is only from the land, and only based on area (the local government decides the rate per square meter). And it's quite low - my parents pay about 100€/year for a small house with quite a bit of backyard. For comparison, the average net salary in Poland is about 850€/month. Though I heard other countries have it much worse.
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@Gąska said in -0.5% interest mortgages:
Are we still talking about a world without mortgages?
Well, no, we're talking about the current state of affairs (as I know it around here) as contrasted against a world without mortgages. You said that a world without mortgages would be much worse than the current state, because everyone would have either stay with their parents or (shock, horror!
) rent. Then I opined that, if you think of owning with a mortgage as the bank owning the house and the interest being the rent payment, the two look remarkably the same. Thus my comments were always about the actual world, not the hypothetical one. Sorry if that wasn't clear.
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@ixvedeusi ah, okay. Well, then I agree that they are somewhat the same. The only major difference is the end result: you owning the house after 30 years, or you not owning any house after 30 years and still having to pay rent every month and having nothing significant to leave for you children. And it's quite major difference - especially when you consider that retired people have much less income than working people (details may vary by country but that's the general trend in every system; in Poland, which I know might be a quite extreme example, the retirement pension is often 2x lower than the salary before retirement - and the more you were earning, the bigger drop).
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@acrow said in -0.5% interest mortgages:
Where are they all hiding at?
In countries with shorter winters?
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@ixvedeusi said in -0.5% interest mortgages:
@remi said in -0.5% interest mortgages:
Is there an exemption for your main residence?
Not that I'd know of. The house you own is part of your fortune, and that's it. What's even worse is that, as far as I understood, if you live in a house you own you have to pay income tax on the rental value of the house, as if you were making an income from renting the place out to yourself... I'm still hoping I somehow got this wrong, I cannot for the sake of me understand how anyone ever looked at that law and thought "yep, makes perfect sense"
Uh, yeah, that sounds deeply fucked.
(for the rental tax part, are you sure it's not just that the land tax that everyone pays is indexed on the rental value? that's how it's supposed to work in France, except of course that the rental value is just a notional one computed on some basis 40 years ago, so it's sometimes widely off, but the point is that it's just a tool to try and adjust the land tax paid by everyone, not an additional tax on hypothetical income)
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@Gąska said in -0.5% interest mortgages:
The only major difference is the end result
Yes, though I'm still a little bit doubtful about how much difference that really makes, at least as things stand here. It all depends on how much of the total sum you'd have paid in rents is really left over after subtracting the total cost of ownership of the house (which is the amount of money you could put into repaying your debt); but answering that would require actually doing the sums on at least one realistic example, taking into account all costs etc, and that won't happen any time soon because
Since we have a reputation of being rather rich and money-pinching people, and we have a very low ratio of house ownership, I'd expect that a lot of people have already done so and decided it's not worth it around here; but I concur that that could very well be a real-world incarnation of
@Gąska said in -0.5% interest mortgages:
home owners becoming de facto a higher social class than everyone else, which could potentially lead to some groups lobbying the government for laws that make it hard for general population to become home owners
Shmita - Wikipedia
