How about investing in bitcoin? Last year it was $3 per usd, and now it is $48 per usd. A ~1,600 % in return !!
I am aware of its increase (though a year ago my only awareness was people mining for it) - but what is the risk? Seems to me it is something that could easily crash, all the mind so given its meteoric rise - or is that just my financial naivety/ignorance/lack of understanding? On the cusp of retirement, with enough (I think) for a just comfortable retirement, I don’t want risk!
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@Innocent_Bystander, you know that I am joking ! However, it could be a good investment option for someone who has a couple of million dollars to spare. 
Perfect.
I find this an interesting statement given our history related earlier. In the 1980s when we took out our two endowment backed interest only mortgages, the monthly payment of interest + endowment premium was slightly more than the amount due under a standard repayment mortgage (25 years in each case). And we had no option but to take an approved policy with a “known” firm (I don’t recall what regulation was in place in those days).
Indeed, we suffered a slighter higher rate of interest (1/4%, I think) on the mortgage for the privilege of having an endowment-backed interest only loan!
I know I was influenced to go that route partly by the projected bonus (in 25 years’ time) but also because the MIRAS (tax saving) was more beneficial … something that disappeared a few years later.
Hence I don’t see how you can control your investments so as to achieve a better return than the mortgage interest you’re incurring. Is it simply that any good policy should outperform the current low interest rates … or have times changed so that the borrower no longer needs to underwrite the loan with an investment policy not under his/her direct control?
Apologies for taking this thread away from its subject matter.
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I relate to this, its a good strategy for some, and one I have partly utilised in my time with mortgages
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I believe it’s no longer a requirement to have an investment policy. It’s perfectly ok to have nothing, and to clear the mortgage by downsizing. I’m not saying it’s remotely sensible, and for the majority of people a straight repayment mortgage is the sensible thing. At least you know it will go down over time, and if you get one with flexibility you can pay off chunks with bonuses or whatever, and save huge amounts of interest.
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Correct. There are few lenders who will accept an investment strategy to repay the mortgage, even if you can show them you already have investment capital sufficient to cover the mortgage ten times over!
You have to put down that the ultimate method of repayment would be to sell the property.
You are right, it is tricky to control investments with anything approaching surety of outperforming the mortgage interest, especially when interest rates were (briefly) so very high.
However over a long term, such as a couple of decades or more, a reasonably decent investment strategy should outperform the debt in this capitalist world of ours.
Though a key point to remember is that the amount of interest charged on the debt remains ‘high’ throughout as the debt doesn’t decrease and the amount of beneficial growth on an investment gets better the longer the growth has to compound.
And it is much easier to manage more effectively with today’s wealth of investment options, information, data availability and low interest rates than it was in the ‘80’s.
Yep, the maths of total outlay changes dependent on rates and the amount selected for an investment/endowment, usually assuming a 6/7% pa growth rate.
Investment linked mtgs became relatively cheaper than repayment mtgs when rates were very high c. 1988 to 1991, one of the reasons for their popularity.
Australian banks tend to strictly limit interest only mortgages to a 5 year term, even for investment properties - which I find a little harsh but nonetheless understandable given how many people get into difficulties
Can you then get another 5 years?
A tangent this, sorry, but quite interesting I thought.
Chatting to son of a friend earlier who wanted to get 2nd opinion on mortgage he’s been offered which, at c.2%, he thought was on the high side!
2% !!!
Jesus, what are all these people going to do if their rates move to 4 or 5% next time round?
The Horror.
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I still remember the financial shock of the mortgage rate increasing from 13% to 15% one day. Fortunately it didn’t stay that high for too long.
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Having had mortgages continuously from 1975 to just a few years ago I remember that all too well! Fortunately that particular peak was short-lived - but even if such an extreme may be extremely unlikely to recur, people taking out mortgages need to bear in mind that double or triple current extremely low rates is by no means impossible, and things can change quite rapidly.
The highest our got to, in 1992 I think, was 15.4%. I was working in the council’s technical team at the time, which did all the money market stuff, and on Black Monday things were rather interesting. I think interest rates rose 3% or more in one day, as the Bank of England tried to hold the GBP in the ERM. How we’d have laughed if someone had said that one day the base rate would be 0.1%.
We retired folks need higher interest rates on our savings, which of course is diametrically opposed to the interests of borrowers. We’ve just moved our holiday fund from NS&I, which pays a paltry 0.1% and will now be positively raking it in at 0.35% at Nationwide. That’s a 350% improvement!
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I echo that! Back in 92 I had just moved house and taken out a new mortgage when that news came, and as we’d gone for the max we could get, at a rate Already so high we couldn’t imagine it increasing (IIRC at that time it was twice joint salary or 3x highest +1x lowest) it was an extremely worrying 24 hours!
Silly me, it was Black Wednesday, not Black Monday, 16 September 1992. I’m confusing Black Friday and Blue Monday.
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I wouldn’t apologise , mortgages being repaid, can be the precursor to early retirement.
Paid off my mortgages in 2002, then the money I was paying for my mortgages went into my AVCs and they helped me open the parachute for very early retirement
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I remember that day. I had recently taken redundancy and was about to do a degree as a mature student. I had 3 part time jobs, 2 lodgers and would do other bits of work as and when to keep my head above water. Not a good day or few months afterwards as I recall interest rates did get hiked for a bit afterwards.