The UK has, for the last few years, been experiencing a boom in house prices. Double-digit annual growth has become the norm.
The result has been a feel good factor, among the home owning classes; as they perceive their personal wealth to be increasing exponentially.
Pepped up by their new wealth, they have indulged in an orgy of consumerism; financed by credit secured against their homes.
I warn you of two problems with this:
- Bull cycles (upward price appreciation) do not last forever, there will be a downturn.
- Borrowing long to invest short is foolhardy in the extreme.
My advice to these foolhardy people is as follows; don’t treat your home as an investment, you have to live somewhere.
Carry on like this and you will be swamped by debt, which you can’t service; which will result in you having nowhere to live.