3.5

TighterThanTwoCoatsOfPain

1echidna wrote: »

Nothing wrong with a falling market. My wife and I plan to sell, live with a relative whilst we take our time on a falling market.

I feel you may have missed the boat... its been done. You had to have completed your sale a while ago to be one of the big winners there... Lets say there's another 15% to come off the current 'average' home of 150k.. would you give your house up for £20k?

lostinrates

michaels wrote: »

Another useless idea because:
1) We all have different commitments on our salary - loans, child maintenance, student loans etc - hence affordability will differ for anyone
2) Interest payments depend on interest rates which depend on inflation - if inflation hits 20% and interest rates 25% then 4x income is completely unaffordable
3) Personal preferences - some will be happy with no/old car no meals out, ciggies or alcohol in order to have a nicer house, others obviously have different spending priorities - shouldn't each person be allowed to chose what share of their income they spend on their mortgage?

Any of the people saying this is a good idea got a counter arguement for any of these?

I have another....salary. The argument for afordability is really convincing to me and I see the broad brush wisdom of a salary based multiple but the more people earn the higher percentage of it they can devote to whatever takes there fancy...including housing if they so wish. Personally, we hope to secure a high multiple loan because we will still be within affordable income for 'the rest of the stuff of life' and we hope not to have to move again..or not often.

chucky

macaque wrote: »

For those of you waiting for a bounce in house market, I suggest you put the new car brochures in the bin immediately.

The FSA are going to link mortgage offers to income. One suspects the figure will be in the range of 3.5 to 4.0 X income. House prices are going to have to drop a long way to get back into this zone (incomes are also falling).



http://financialadvice.co.uk/news/7/mortgages/9821/FSA-set-to-tighten-UK-mortgage-lending-rules.html

In his 1997 Budget speech, Gordon Brown said, “I will not allow house prices to get out of control and put at risk the sustainability of the future”. The lending rules being proposed by the FSA are the obvious way of controlling speculation. So if Gordon knew it had to be done and how to do it, why did he do nothing? Are modern politicians so devoid of concern for the common good that they are prepared to destroy the country for a few more years in office?

the article says nothing about multiples, did you make that bit up? - but anyway...

When you say that the "FSA are going to link mortgage offers to income. One suspects the figure will be in the range of 3.5 to 4.0 X income." Do you mean that this will happen every where in the UK?

If so can I have one of those £6 million pound houses please? The ones that only people on £1.75 million (3xsalary) a year will be allowed to buy. What a silly point you're trying to make monkey boy

whathavewedone

I can't believe that you need to pay £250k for a studio flat in a rough part of London.

I sold a one bedroom flat (built in 2002) in summer 2006 for £166k. I had paid £155k for it. It was in Brixton, 10 minutes walk from the tube and in perfect condition. It was also completely secure and the design was nicer than your bog standard new build.

It did me nicely as a FTB. I expect the value now would be around what I paid for it.

My husband sold a 3 bedroom victorian house in Plaistow (which isn't a very nice part of London admittedly) for 249,950k in summer 2006. It was sold again in summer 2007 for 275k. Probably now worth 200k. He had paid £130k for it in 1999, put a new kitchen and bathroom in, redecorated it and rented it out for a few years before we moved in ourselves.

So even in London there were areas where you could get affordable houses and flats during the boom.

As part of a couple with a new baby I was happy enough living in Plaistow for a year. Okay so the shops weren't up to much but it was only a stones throw away from Canary Wharf. The house was really nice too. Could have easily stayed there until we needed to think about schools.

mitchaa

No, no, no, no, no,

The average salary has been done to death in the past, the mean salary of £26k is skewed in both directions. Although the figures take into account low % high earners, they also take into account the high % low earners.

48hr week consultants on £150k pa and 16hr week cleaners on £5k pa are all bundled into together. There are far more low earners than there are high so the mean figure is 'skewed' in both directions.

If you actually look at the average FT salaries for both male and female then the TRUE average FT working couple are bringing in around £60k pa. (£33k male £27k female) if you take median FT, its around £50k (£27k male, £23k female)

Why include PT workers in the figures? Anyway, taking EVERYTHING into account the national average stands at £26k working FT or not.

Restrict this to 3.5x and add a 10% deposit, 1/2bed houses should be priced around £100k. (They are already in most areas north of the M25)

DO NOT MISTAKE THIS FOR THE PRICE OF AN AVERAGE HOME THOUGH, as a singleton on average salary should not be able to afford an average home otherwise we go down the road of 2x average singletons being able to afford 5bed countryside mini mansions, middle income earners affording mini castles, and a couple of high earners being able to afford mini villages.

House prices at £140k so not long to go now will be affordable for all average families, no matter what way you look at the figures.

Restrict lending to 4x for singles and 3x for couples and associate the average home with the couples figures.

IveSeenTheLight

mitchaa wrote: »

If you actually look at the average FT salaries for both male and female then the TRUE average FT working couple are bringing in around £60k pa. (£33k male £27k female) if you take median FT, its around £50k (£27k male, £23k female)

According to this
http://www.statistics.gov.uk/downloads/theme_labour/ASHE_2008/tab7_1a.xls

Male Full Time is £631.10 per week mean (£33,000 per year) or median is £521.20 per week (£27,250 per year)

Female Full Time is £485.50 per week mean (£25,400 per year) or median is £412.00 per week (£21,500 per year)

So a full time couple on average take in £55,400 mean or £48,750 median averages

NOTE** the spreadsheet also shows part time averages.

kennyboy66_2

I am by no means a doom-monger, but my wife bought her first house in 1995.
A 3 bed terrace in quite a nice part of a Northern city for £45k (average price nationally was about £68k)

She was earning £15k at the time (average FT earnings where something like £17.5k).
5% deposit.

You would need to earn at least £45k (actually a bit more) now to afford the same house assuming a 5% deposit.

It made me think that;

1) Prices need to fall much further that I thought likely a few months ago.
2) She was very lucky to buy at that time.

My gut feeling is a similar house in the same road needs to fall to around £100k, they are currently advertised at £150k and peaked at about £197k in late 2007.
A couple of sales right at the end of 2008 for £145k.

sunshinetours

kennyboy66 wrote: »

I am by no means a doom-monger, but my wife bought her first house in 1995.
A 3 bed terrace in quite a nice part of a Northern city for £45k (average price nationally was about £68k)

She was earning £15k at the time (average FT earnings where something like £17.5k).
5% deposit.

You would need to earn at least £45k (actually a bit more) now to afford the same house assuming a 5% deposit.

It made me think that;

1) Prices need to fall much further that I thought likely a few months ago.
2) She was very lucky to buy at that time.

My gut feeling is a similar house in the same road needs to fall to around £100k, they are currently advertised at £150k and peaked at about £197k in late 2007.
A couple of sales right at the end of 2008 for £145k.

Or houses were underpriced for the market in 1995 following the previous recession?? Not arguing just pointing out there could be a number of reasons

kennyboy66_2

sunshinetours wrote: »

Or houses were underpriced for the market in 1995 following the previous recession?? Not arguing just pointing out there could be a number of reasons

Indeed - that is probably part of it.

I do know that prices in that road were very stable between about 1993 and 1997, there were at least 5 sales within £3k either side of the house in question.

IveSeenTheLight

kennyboy66 wrote: »

I am by no means a doom-monger, but my wife bought her first house in 1995.
A 3 bed terrace in quite a nice part of a Northern city for £45k (average price nationally was about £68k)

She was earning £15k at the time (average FT earnings where something like £17.5k).
5% deposit.

You would need to earn at least £45k (actually a bit more) now to afford the same house assuming a 5% deposit.

It made me think that;

1) Prices need to fall much further that I thought likely a few months ago.
2) She was very lucky to buy at that time.

My gut feeling is a similar house in the same road needs to fall to around £100k, they are currently advertised at £150k and peaked at about £197k in late 2007.
A couple of sales right at the end of 2008 for £145k.

Bear in mind that 1995 was the trough of the last house price correction.
You seem to be looking for approx 50% fall in house prices from peak.
That is some margin in my opinion.

Take my post above, where the UK average salary for a mean average couple is £55,400 or median at £48,750

Do you really think that house prices will be below 2x income even without a deposit?