UK Gross Mtge Lending Eases To GBP10.3B In May - CML

chucky

Graham_Devon wrote: »

Not really a fair comparison though.

It's the two ends of the stick. The absolute highest and the absolute lowest of any particular month.

It's two months compared against each other, completely missing the average payment.

you can't compare at all Graham - you also have inflation and salaries to factor in too. also it's this national average thingy that makes no sense anyway.

the comparison was very rough and just comparing mortgage interest for two dates. i think that it proves that property may have been more over-valued then.

i agree with the lowest (today) because i took Thrugelmier's average SVR of 4.64%. the 14% is actually quite low too - i could have taken 16% (BR of 14% + 2%) which would have made it look much worse.

Generali

StevieJ wrote: »

They went to 14.875% on Oct 6th 1989 and stayed there until Oct 1990, not 15% I grant you, I can confirm that mortgage rates were above 15% during that time.

http://www.bankofengland.co.uk/statistics/rates/baserate.pdf

True. The myth though is that rates hit 15% as a result of the ERM debacle in 1992(?). In reality the rise was announced but never enacted.

Graham_Devon

chucky wrote: »

you can't compare at all Graham - you also have inflation and salaries to factor in too. also it's this national average thingy that makes no sense anyway.

the comparison was very rough and just comparing mortgage interest for two dates. i think that it proves that property may have been more over-valued then.

i agree with the lowest (today) because i took Thrugelmier's average SVR of 4.64%. the 14% is actually quite low too - i could have taken 16% (BR of 14% + 2%) which would have made it look much worse.

Agreed.

Personally I think what would make it look much much worse is if you factored in the mortgage multiples at the two times, and see which would have put the most strain on the mortgage owner.

StevieJ

chucky wrote: »

you can't compare at all Graham - you also have inflation and salaries to factor in too. also it's this national average thingy that makes no sense anyway.

the comparison was very rough and just comparing mortgage interest for two dates. i think that it proves that property may have been more over-valued then.

i agree with the lowest (today) because i took Thrugelmier's average SVR of 4.64%. the 14% is actually quite low too - i could have taken 16% (BR of 14% + 2%) which would have made it look much worse.

In the interests of fair play you need to make allowance for the Miras tax saving, tax allowable up to 30k I believe, although as you say mortgage rates were probably higher.

Thrugelmir

chucky wrote: »

mortgage amounts were lower then with higher rates but smaller repayments.
today mortgage amounts are larger, rates are lower but higher repayments
compared all of this to salaries of each time too - looking at face value, it is cheaper now.

in saying that, i've done a rough calculation

1991 Average House Price = £60k, 14% Mortgage rate - BR+2%
Interest Repayment was £700 a month on 1991 salary

2009 Average House Price = £155k , 4.64% Average SVR
Interest Repayment is £599.33 a month on today's salary

Yes much cheaper in real terms in 2009.

Using the figures you quote the cost of a 25 year repayment mortgage would have been £727 in 1991 compared to £883 in 2009.

If we had 14% interest rates the cost of the same mortgage now would be £1,880. A figure I doubt would be beyond the reach of an average mortgage holder.

StevieJ

Generali wrote: »

True. The myth though is that rates hit 15% as a result of the ERM debacle in 1992(?). In reality the rise was announced but never enacted.

I think he actually (in panic) anounced 17% and then threw the towel in, you are correct though the rise was not enacted and fell back to the previous days rate.

inspector_monkfish

Generali wrote: »

True. The myth though is that rates hit 15% as a result of the ERM debacle in 1992(?). In reality the rise was announced but never enacted.

i can remember interbank gbp deposits going through at 40%, possibly higher on that day

but i was just a lowly menial in the back office of a small german bank back then....:D

chucky

StevieJ wrote: »

In the interests of fair play you need to make allowance for the Miras tax saving, tax allowable up to 30k I believe, although as you say mortgage rates were probably higher.

Thrugelmir wrote: »

Yes much cheaper in real terms in 2009.

Using the figures you quote the cost of a 25 year repayment mortgage would have been £727 in 1991 compared to £883 in 2009.

If we had 14% interest rates the cost of the same mortgage now would be £1,880. A figure I doubt would be beyond the reach of an average mortgage holder.

As Stevie says we should include Miras too.
i'm not sure about Graham's argument regarding salary multipliers but it is important, agreed.

Even taking all of this into account it disproves many theories that people on here claim that housing was cheaper in the 1980s or even early 1990s compared to now.

Thrugelmir

chucky wrote: »

Even taking all of this into account it disproves many theories that people on here claim that housing was cheaper in the 1980s or even early 1990s compared to now.

I agree with you on this point. The distortion being created by the availability of cheap money. Now we are going through the correction phase of higher interest rates and falling house prices.

inspector_monkfish

chucky wrote: »

As Stevie says we should include Miras too.
i'm not sure about Graham's argument regarding salary multipliers but it is important, agreed.

Even taking all of this into account it disproves many theories that people on here claim that housing was cheaper in the 1980s or even early 1990s compared to now.

i feel a song coming on....

http://www.youtube.com/watch?v=5eU9a4Wh2ig&feature=related