This is bizarre. An interest rate cut is expected soon and houses are not selling...

IveSeenTheLight

baileysbattlebus wrote: »

Salaries are vastly different now, you can't equate this time and the last time on mortgage payments and house prices - you need to look at affordablility

According to the Halifax:
At the peak of the last housing bubble average UK house prices were 5 x income
At the peak this time average UK house price was 6 x income

Last peak mortgage payments Uk average = 36.5% of salary
This peak mortgage payments UK averagae = 24.5% of salary

Where we live in the south east it was 7.54 x salary and 41% of income on the mortgage
This time it was 7.59 x salary and 24.5% of income

In reality it wasn't so different, the difference now is people have more of their salaries left after paying the mortgage.
Property was as far out of reach then for some buyers as it is now.

And people will say "oh but inflation was high", yes it was, but the gap between inflation and salary rises was bigger than it is today.

This is for Q2 2008
"With the median pay rise standing at 3.2%, and retail prices index inflation rising to 4.6%, pay rises are running at 1.4 percentage points below RPI inflation. Pay rises have not stood this far below inflation since October 1990 (when the IRS median pay settlement stood at 9.1% against inflation at 10.9%)"

Great post, good facts, thank you

moanymoany

The price drops are different for different areas.

Also, some people are prepared to reduce their property to ensure a sale.

I'm finding an average of 5% - 7% in Geriatrica-On-Sea where we are looking. In Nearby Town the drops are between 10% - 20%.



I remember first setting up home. All we thought about was the rent - the shillings/half crowns for the gas and electricity meters and the incidentals of life came as a surprise as they were much more than we expected.

In the end we moved to cheaper rooms - few could afford a whole 'self-contained' flat, that was what we aspired to.



I saw an interview with a debt counsellor who said people concentrate on the repayment aspect. They don't look very hard at the total amount. So, because you can afford £750 a month mortgage repayment, you take it. This is one reason for house prices rocketing up.

Years ago we all knew interest rates can go up - and up - and up! Now people are not so aware. I know of one woman who was told - in all seriousness - by a young mortgage advisor that interest rates had never been more than 6%.

Although we are hearing about probable interest rates of between 2% - 3% what people are paying for their mortgages does not seem to be related in any way to the low interest rates we have now! How can we think that lower rates will be reflected in what people will pay for their mortgage?

IveSeenTheLight

Gorgeous_George wrote: »

Take a young couple with a typical £150K mortgage and let's see what may happen.

Repayments, even if the interest rate falls to 3.5%, are £750 per month! Affordable when the young couple first set up home all starry-eyed but increasingly less so when the unexpectedly high gas/electric bills fall through the door. Add increasing petrol costs to get to work and higher food prices and suddenly life is tough.

We all know what they can do to entertain themselves for free but then baby number one comes along and drains any last 'savings'. Mum gives up work or goes part-time and the mortgage needs to be paid with just one wage coming in.

Life's tough and low inflation doesn't help this young couple.

GG

"unexpectedly high gas/electric bills fall through the door" - Okay, there is a lag, but concensus is that with oil price having halved, gas and electricity is expected to drop.

"Add increasing petrol costs " - This has come down already, back to circa 2006 prices

"higher food prices " - this is also going down now.

"baby number one comes along and drains any last 'savings'. Mum gives up work or goes part-time and the mortgage needs to be paid with just one wage coming in" - Okay agreed, everyone knows that having a baby is a drain on resources. It always has done and always will do. Take your example of a £150k hose being £750 per month. With an average wage of circa £25k, the take home will be approx £1500, so still maintainable to make that mortgage payments. Remember the mum could also be working part time taking in circa £750 per month which pays for the mortgage.

I don't take the baby argument and loss of second earnings. Having a baby is a life changing fact. You have to adapt, both for life with a new baby and from a financial perspective. You can't expect to have a baby and life to go on with no differences.

Life is about choices and what you make with what is available.
It's not about moaning about what you can't have.
If you can't have it and really want it, its up to you to go out and do something about achieving that goal.
If that means you want something that is unaffordable, you have to save up, train and develop to increase your income etc in order to be able to afford it.

dealornodeal_3

GDB2222 wrote: »

That's just a nice, refined way of saying "ya talking cobblers", isn't it?

Whos talking cobblers?

mbga9pgf

IveSeenTheLight wrote: »

"unexpectedly high gas/electric bills fall through the door" - Okay, there is a lag, but concensus is that with oil price having halved, gas and electricity is expected to drop.

"Add increasing petrol costs " - This has come down already, back to circa 2006 prices

"higher food prices " - this is also going down now.
.

All oversold. Just wait and see them rocket back up once the traders realise people still need to eat, be warm and fill their cars up during a recession.

Combined with OPEC cutting production, I reckon Oil will be above $100pb winter next year.

Lets face it, your arguments for high house prices suck dont they? And with the guardian predicting prices down 25% this time next year, your bleating sounds increasingly desperate. Face it, the Crash is here!

hethmar

Thanks for the link being. It does say that the drop in prices is actually less in October than in the last 3 months doesnt it? Or am I reading it incorrectly? Im honestly interested where the 20% from last year is showing as Im thinking of buying at some point a retirement place.

For those of us who are mathematically challenged, on the approvals graph - could you explain why the "approval" price was so much higher than the asking price up to October 07 please.

IveSeenTheLight

mbga9pgf wrote: »

Lets face it, your arguments for high house prices suck dont they? And with the guardian predicting prices down 25% this time next year, your bleating sounds increasingly desperate. Face it, the Crash is here!

Your new here (or maybe an alter ego I don't know).
Go and have a read back through some other posts I have made before you assume or think I am desperate.
I regularly post about understand regional variances and that affordability is the key.

neverdespairgirl

baileysbattlebus wrote: »

In reality it wasn't so different, the difference now is people have more of their salaries left after paying the mortgage.
Property was as far out of reach then for some buyers as it is now.

There are a couple of things you haven't taken into account, though. Firstly, there is an increased tax burden and no MIRAS.

Secondly, a lot of people owe a fortune in student loans

Thirdly, the level of personal debt excl. student loans is much higher.

All those impact on affordability.

Lotus-eater

Fourthly, people expect to have a much higher level of living. They expect to be able to buy new big purchases all the time.

SingleSue

"Add increasing petrol costs " - This has come down already, back to circa 2006 prices

Wish they would tell my fuel station then! The price of a barrel may be down to 2006 levels but the price at the pump is not yet down to what it was at the start of this year although it is getting closer for petrol, diesel is still plus £1 a litre.

Think I will do a little dance when the litre amount exceeds the pound amount at the pumps instead of the other way around.....the staff will allow it, they know I am weird! :rotfl: