If you're better than most analysts and can accurately predict the housing market then buy and mortgage when prices are low and sell and rent when prices peak. Otherwise it's a better long-term investment to have a mortgage, it also gives you something to borrow against (more cheaply) if you have a financial emergency.

I had an interesting conversation with a Malaysian bloke. He didn't see the point in paying a mortgage only to leave a house for his children when he died.
He fed and educated them he should spend money now making life as good as possible.
He thought we were mad the way we had to own our house.

Dancake – me and my missus did exactly that when we moved from Leeds to Exeter.
Granted – we were hugely fortunate in that we sold at the absolute peak (completed about a month before things started to slide! phew!). We made about £15k, paid off some debt (only some, depressingly), and have been renting much nicer houses, for the same money as our mortgage was in Leeds ever since.

Benefits:
– Exeter is way nicer than Leeds (sorry Leeds folk!)
– We rent in the nicest area of Exeter, whereas we owned in one of the least-nicest in Leeds
– We could never afford the mortgage on the place we rent!
– When the boiler dies – it's someone elses problem!
– Interest rates? WGAF? not us.

Downsides
– We are paying for our landlords to have a nice investment
– No hope in hell of getting back on the property ladder now you need huge deposits and since the house prices in Exeter never fall, god knows when we will.

I loved owning our house, but if money is tight and you have a mortgage and some equity – to me, it seems like a no brainer. Sell up and free yourself of the horrible life-limiting factor that is debt! enjoy your life.

Sounds like the original poster has been living beyond his means and if he does sell his house is unlikely to make the kind of investment that will leave him comfortable in the future.
He talks about taking his son somewhere nice which I would read as an expensive holiday. Truth is most young kids will apreciate their parents spending time with them more than great scenery or exotic locations. My 8 year old's best holiday last year was the weekend we went camping and surfing in Cornwall.
He has to accept that he has already spent tomorrow's money and make some cutbacks until he's straight again.

Or just learn to live with debt and not feel guilty about it?

I'd say 'go for it' and sell your house now while its still worth something before the next impending downturn.

Houses are currently way over valued, still way above the long term earnings and affordability averages. A true crash has only been avoided by the current low interest rates artificially propping up the market, but when interest rates start to rise, as they will surely have to, just watch for the big fall out in the housing market.

The last housing price rise was fueled by a mixture of greed (people convinced by the media that a house's primary purpose was as an investment – rather than as somewhere to live) and reckless and irresponsible lending by the banks to people who really couldn't afford to buy but got caught up in the media hype.

The banks have had their fingers well and truly burned so I can't see them returning to their old lending ways any time soon, meaning that house prices will have to return to levels affordable to first time buyers otherwise no-one's going to be able to move anywhere.

Personally I can't understand the attitude of many of people who seem hell bent on getting onto the property ladder no matter what. When you see the crummy places people have stretched themselves to buy just to say they are on the ladder, you have to wonder!

Me, I'm happy to carry on renting my nice new flat, and then just see what happens.

Mostly Balanced – easy to be holier-than-thou, but not hugely helpful to the OP I should imagine, it's clear that he's miffed about getting in debt – at least he's trying to do something about it!
Debt can come for all kinds of reasons, not just being a shopoholic or a credit card bashing lunatic!

Think:
– Unwell loved one needing care
– Loss of job
– Business problems
– Accident leading to loss of earnings
– Higher education as an investment to improve your career, then graduating from said education to find the economy is fubarred.

You can be careful but you can never prepare for everything!

I love being lectured on why house prices have risen by buy-to-letters…

I wasn't trying to be holier than thou, just realistic. I get the impression from the OP that he is looking for a means of continuing to spend on his lifestyle at the expense of long term planning. I think if he had been the victim of misfortune he would have told us.

Not misfortune.

Went absolutely mental on credit from the Moment I started earning…

He talks about taking his son somewhere nice which I would read as an expensive holiday. Truth is most young kids will apreciate their parents spending time with them more than great scenery or exotic locations

sure I mean "expensive holiday" not just for my son, but for my wife who works her arse off every day. Any why shouldnt I show him something different? Our holidays are weekends away with all of us, dogs and all, and we have fantastic times every time .That said, I know my own Son; he would think it would be f**king brilliant.

Any why shouldnt I show him something different?

TBH – because you can't afford to

It's obvious that you can't afford your current lifestyle so you need to change something.
Selling your house will work for now but you may well be back in the same situation in a couple of years time.
My advice would be to take some pain for the next 2 or 3 years & try to change your life style

Sorry if I sound harsh – it's not meant to be

Harshness is not a bad thing !

I made a right mess of things but we get by ok I guess.

I mentioned "greed" in the original post. It all boils down to that I think. Thanks for all the comments. I know what I am doing which is what I am now!

cheers, Dudes

Shorting a market is riskier than being long but only if you have to buy back in at some point; with housing you don't. Unless you think money is going to get easier to borrow then there's no reason to think prices will rise rapidly. The average British house price has been close to the maximum that can be borrowed on the average wage for years. Prices have risen because people have been able to borrow more in relation to what they earn. In the British market where potential demand always outstrips supply it's the ability to pay that dictates price.

I rented a property I couldn't have afforded and watched our local property market. When I reckoned prices were about as low as they were likely to go and would in all probability rise I bought. The money we'd saved and speculatively invested in other ways was by then enough to buy something nice without a mortgage.

Nice story Edukator, it may be that people like you put an end to the wild fluctuations that property prices have seen in the last 20 years. Until recently I wouldn't have thought that there were enough people out there clued up enough to watch, wait and pounce to affect the market, but with all the 'Homes Under The Hammer' type programmes on TV that's probably changed.

wild fluctuations that property prices have seen in the last 20 years

I don't believe there's been wild fluctuations in the last 20 years
Until recently it's pretty much been up

The average house price in 74 was about £10 000 so that graph must be inflation adjusted. Inflation adjusted wages nearly doubled over the same period. So if house prices nearly quadrupled then house prices doubled in relation to wages up to the 07 peak, the reasons:

Women's income being taken into account by mortgage lenders.
The ratio of permitted borrowing to earnings increasing.
Self certification.
Deposits demanded decreasing.
Mortgage lending periods increasing (soemtimes beyond life expectancy!)
Salesmen working as bankers.

If the borrowing conditions were the same as in 1974 the average house price would be around £100 000 IMO. How serious are the regulators about cleaning up the banking industry and returning to more rigorous lending practices? On that depends the price you can expect to pay.

If you look at alternative investments the FTSE was at 60 at the end of 74, multiply it by 4 as Nationwide appear to be doing for house prices and you get 240 in 74 and over 5000 at the end of the period. So shares have done much better in capital value and paid a dividend similar to a rental income over the period without the hassle.

They're just markets and if you read the influences right you'll profit and if you don't you'll get stung. You don't have to invest in any market.

That graph looks scary to me and shows the bubble that has formed in UK housing. George Soros warned in his speech last week in Davos about the authorities responses to "mini crises " we have seen over recent years. Every time they happened, Central Banks added more funds to the markets and "eased" and just poured more cash into the financial system.

This supplied the absolutely enormous amount of funds that the Banks used to purchase assets …eg grant lots and lots of mortgages at silly rates, and extend credit where it was not wise to do so. Our Regulators and Politicians knew exactly what was happening but failed to act. Politicians have made rising house prices part of their policy, and have been fairly big investors themselves. Unfortunately most people dont recognise bubbles until its too late.

Its interesting now that cooking and "talent programs" seem to be replacing the endless property ones. I think buying a property and adding "a coat of magnolia, new carpets and new curtains" is not going to make many people rich in the next few years!

The graph shown above shows that whilst the overall long term trend for house prices is upwards (as with the majority of items), anybody who times their house purchases correctly can stand to have either a much nicer house than they otherwise would have, or a life with much more disposable income.

Why oh why people in this country see house price rises as a good thing is beyond me. It is the single biggest purchase that the majority of people ever make, and people seem to think that high prices are a good thing! Each time the Nationwide or Halifax announce a high price rise, the media portray this as a good thing for our country. Nobody applauds cars/bikes/food/holidays going up in price, so why houses?

I know this mini rant doesn't help the OP, so maybe I'm getting a bit off topic!!

one key thing to consider – rental on a given place is only likely cheaper in the short term..

lets say your house costs £1200 pm on a mortgage, or £1000 on a interest only mortgage and the equivilent would cost £800 to rent. Assuming interest rates stay broadly the same, you'll be paying the same amount every month for your time. on the other hand, rent increases broadly in line with inflation – currently averaging around 2.5% pa. By 10 years in you're paying the same amount as the interest only mortgage, and by 17 years in you're onto the repayment mortgage – after 25 years the interest only mortgage would have cost you a total of 10% less than the rent (despite looking 20% more expensive on paper) and the full mortgage only 10% more (but it'd give you an asset at the end of things)

it obviously comes down to a whole lot more than that. Personally, with a kid, I'd not consider the rental option if owning was out there – chances of having to move every 6 months just isn't worth it. I'd be careful of jumping on the consolidation option as well though – putting your 20k onto 5% over 20 years will probably cost more in the long run than leaving it on 10% for 5 years (cba to do the maths).

tighten your belts, cut up the credit cards, and push through

I am a fair bit older than you and have owned several houses but for various reasons I'm currently renting. The pro's and cons for me are as follows :-

Pro's – No liability for repairs etc. able to move location easily if required, sometimes cheaper than a mortgage but not at the moment.

Cons – No long term security ie. fixed term contract, no investment value, rental still has to be paid after retirement, lack of desire to 'improve' a property for the benefit of owner & only short term benefit for tenant so you end up 'making do' with existing decor/carpets etc. Rentals tend to be in clusters so neighbour changes frequent and can be good or bad.

I will be buying my own house again as soon as I am in a position to. My advice would be to hold onto your current property if you can as you will find it very difficult to buy again in a few years time. Slumps in the market do not happen very often and you will be selling low and buying high in the future.

From that graph I'd say there's a few people on here who have also been over here http://www.housepricecrash.co.uk

There's a wealth of information on the forum. Just be aware that as the title of the site suggests the majority opinion on the housing market is that we are heading downhill in the near future.

Speak to an advisor but I don't think you should be selling up to release the equity. Apart from your mrs not having to work everything else is a luxury and you would be better off with some assets and savings.

At 35, I only have a few years left before a new mortgage is beyond me.

Sorry but this is pish. My parents-in-law are looking to move and they're not having any problems getting a mortgage and they're the wrong side of 50. Admittedly they're not going to be given a 40year term but even so…

The whole attitude we have to buying houses is different to most other countries. Of course our daft rental laws where you have no security does not help, nor the " an englishmans home is his castle"

A lot of folk get the sums wrong as well. My flat cost me £50 000 and 17 yrs on is worth more than £200 000. Seems like a good buy. However the mortgage interest and stuff means I have actually paid more than £100 000 including repairs and renovations and I still owe many tens of thousands. ( I also have an unusual huge repair bill of £40 000 but will discount this) It is often not as profitble or as good an investment as people think.

However now is not the time to sell IMO – My bet is houses will continue to rise in value.

So to the OP – If possible I'd remortgage to clear your debt and then live within your means.