Handy little website courtesy of the IFS - "Where do you fit in"?

LydiaJ

Hamish

Thank you for trying to reply to my points. But I still don't understand. You seem to be saying that buying a house is hard work but anyone can do it if they are prepared to prioritise financial success and security over everything else.

Is that really what you're saying? Do you think it's reasonable that house buying is only available to those who prioritise finances over everything else? Do you think it's desirable that everyone should prioritise finances over everything else?

One of the reasons I don't own a house is because my then husband and I didn't buy one in our 20s, which was because although I was earning full time he was being paid a tiny salary to work with disadvantaged kids and do various other semi-voluntary roles. The other reason why I don't own a house is because he has since left me so I am now bringing up two kids on my own.

I fully accept that those things mean that I will never be able to have a house that is as large, as expensive or as nice as the sort of house I would have been able to buy if things had been different. But I think we are a sick society if we are content with a system in which any deviation from the "earn as much as you can" script, at any point along the path of your life, means you can't buy a house at all.

In particular, a society in which house buying is mainly or exclusively for the DINKS is not sustainable. Somebody has to have kids or who's going to staff the care homes when we're all in our 80s and 90s?

One day I hope to be able to buy a house where I can live with my kids, in the area of the country where I am living now because this is where (a) my jobs are and (b) my kids are close enough to their dad to be able to see him frequently and (c) I can visit reasonably often to help my elderly dad care for my disabled mum. At present, it's totally unaffordable for me, despite a decent deposit and an income that's slightly above median on that graph (including maintenance from my ex).

HAMISH_MCTAVISH

mbga9pgf wrote: »

So, where do you expect rates to be going to then once the BOE start to suck up the QE?

I expect rates to stay below 5% for the next decade, in fact, 5% may be too high.

After the 1930's crash, base rates stayed at 2% for 18 out of the next 20 years.

Want to comment on the BOEBR/Typical mortgage rate split between then and now? If rates get up to 4% over the next few years, you will be looking at 8% mortgage rates easily, thats with a 25-40% deposit.

Nonsense.

Yes, affordability would decrease IF bank margins didn't decrease, because although current base rate is 0.5%, almost nobody is paying that. 5% is more like it for most people.

Base rates are a reasonably good proxy for mortgage rates, but of course there is some slack in the system due to fixed rates, bank margins, etc.

Although base rates are currently 0.5%, mortgage rates are closer to 5% on average. However back in 2007, base rates were closer to 5%, but mortgage rates were around 5% too.

In order for base rates to climb to 4% or 5% from 0.5% in a couple of years, the economy would have to be in full on boom mode to generate massive inflation. The only way the economy could expand that quickly would be if bank lending and market liquidity was at 2007 levels or better. And if that happened, bank margins would decrease back to 2007 levels as well, as competition generates lower prices.

The chances of high base rates in the next decade is staggeringly low. And the chance of base rates rising markedly without bank margins decreasing is also staggeringly low.

In other words, the amount most people pay for mortgage rates was around 5% in 2007, it's still around 5% today, and it will likely remain around 5% in the future.

Housing is about to get a damn sight more unaffordable,

Yes it is.

But not for the reasons you state.

Besides, late 2011 will see me reaching savings at 3X my salary. I wouldnt mind betting I will get a pretty plush pad with the falls we will see between now and then virtually mortgage free.

There will be no further significant falls. The bottom of this cycle was back in feb 09.

You already missed the cheapest prices.

But you may have one last opportunity to buy at close to them during the dip over this winter. :money:

mbga9pgf

Answer me one simple question. Where is the money coming from,to increase house prices, in the face of record taxation hikes,reduced public spending,a record deficit, record personal borrowing, unemployment heading over 3 million,mortgage interest relief about to run out for many, the end of the international RMBS markets and the likelihood of maximum salary multiples con straining lending once the credit crunch is over?


If we have record low interest rates for a long time, this suggests low inflation, thus low wage inflation, thus no mechanism for increased house prices.

All bits answered please, not just one section of the question.

Hamish, you are going to be proved so wrong over the next 24 months, I cant wait to see your rants 2 months into a Tory government!

mbga9pgf

julieq wrote: »

Why on earth would there be 8% mortgage rates on 4% base rates?

Typical trackers are averaging between 2%-6% above BOEBR currently.

HAMISH_MCTAVISH

LydiaJ wrote: »

Hamish

Thank you for trying to reply to my points. But I still don't understand. You seem to be saying that buying a house is hard work but anyone can do it if they are prepared to prioritise financial success and security over everything else.

Is that really what you're saying? Do you think it's reasonable that house buying is only available to those who prioritise finances over everything else? Do you think it's desirable that everyone should prioritise finances over everything else?

What I'm saying is that people have to make choices in their life, and that those choices have consequences.

Young people do have to make an active decision to be financially responsible, to progress their careers, to make good decisions and take on the responsibility of planning their financial future.

That may well mean choosing to have kids later in life and working hard in jobs that provide financial rewards earlier in life, so as to build up a sound foundation for success and security.

One of the reasons I don't own a house is because my then husband and I didn't buy one in our 20s, which was because although I was earning full time he was being paid a tiny salary to work with disadvantaged kids and do various other semi-voluntary roles. The other reason why I don't own a house is because he has since left me so I am now bringing up two kids on my own.

And that is unfortunate. But the reality is that those choices mean it will be difficult for you to buy a house now. Society does not owe you a house. The markets do not need to crash because you want a house. You are probably a very nice person, you probably are very deserving of a house, but at the end of the day the decisions you made earlier in life mean it will be difficult for you to buy one now.

I fully accept that those things mean that I will never be able to have a house that is as large, as expensive or as nice as the sort of house I would have been able to buy if things had been different. But I think we are a sick society if we are content with a system in which any deviation from the "earn as much as you can" script, at any point along the path of your life, means you can't buy a house at all.

It's not about "earn as much as you can"..... It's about earn enough to support the lifestyle you wish to have. For some people, renting or living in a council house is an acceptable compromise to do a low income job they love. For others, working hard in a well paid job they dislike is an acceptable compromise to have financial security and provide for their family.

We all have to make choices. And live with their consequences.

In particular, a society in which house buying is mainly or exclusively for the DINKS is not sustainable. Somebody has to have kids or who's going to staff the care homes when we're all in our 80s and 90s?

Yes, people have to have kids. But people should also make sure they are financially stable and can support their kids BEFORE they have them. Having kids is a choice, and a responsibility. You need to be able to pay for them if you are going to have them, and paying for them means working and earning enough to support them and house them.

One day I hope to be able to buy a house where I can live with my kids, in the area of the country where I am living now because this is where (a) my jobs are and (b) my kids are close enough to their dad to be able to see him frequently and (c) I can visit reasonably often to help my elderly dad care for my disabled mum. At present, it's totally unaffordable for me, despite a decent deposit and an income that's slightly above median on that graph (including maintenance from my ex).

And yet in some parts of the country you can buy a house for 39K.

The distribution of housing in this country is uneven, there are areas where it is very expensive, and areas where it is very cheap. But this is down to supply and demand in those local areas.

The only choice you, or anyone else, has is to move to an area with cheaper housing, or earn enough to buy housing in an expensive area.

That is the only choice.

Everything else is just wishful thinking.

LydiaJ

When you write like that you seem a reasonable and decent person - much more so than when you are making sweeping statements about housing being affordable in general. Thank you.

But I still think the proportion of the population who are priced out is unsustainably high. I don't know what will happen next, so we shall all have to wait and see how things pan out.

HAMISH_MCTAVISH

LydiaJ wrote: »

When you write like that you seem a reasonable and decent person - much more so than when you are making sweeping statements about housing being affordable in general. Thank you.

You're welcome.

Although I still believe housing is affordable in general....:p

But I still think the proportion of the population who are priced out is unsustainably high. I don't know what will happen next, so we shall all have to wait and see how things pan out.

I think with 70% of houses being owner occupied, the highest percentage in history, it is difficult to make a case for a large percentage of the population having been priced out.

The exact opposite in fact.

Cleaver

I just want to point out that on a lovely, sunny, saturday afternoon you guys have spent hours debating interest rates on an internet forum. Do something else for a while.

(yes, I realise the irony of my post)

mbga9pgf

HAMISH_MCTAVISH wrote: »

You're welcome.

Although I still believe housing is affordable in general....:p



I think with 70% of houses being owner occupied, the highest percentage in history, it is difficult to make a case for a large percentage of the population having been priced out.

The exact opposite in fact.

Apart from the fact that we are in the worst recession globally since the last great one thanks to overly loose lending policies and over lending on housing in particular. Seems a hefty price to pay for greedy home owners to feel smug about the value of their homes

tommy75

Well the graph tells us what most people earn in the UK and from the votes on here it tells us what most MSE users earn and now I understand why they think housing is affordable. Thankyou mbga9pgf, this is a very important thread.