MSE News: Halifax: House prices up again in August (+0.8%)

mr_fishbulb

HAMISH_MCTAVISH wrote: »

The proportion of disposable earnings devoted to mortgage payments – a key affordability measure - has fallen significantly over the past 21 months.

Nationally, typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in 2007 Quarter 3 to 29% in August 2009.

Notably, mortgage payments relative to earnings are now below the long-term average of 35% recorded over the past 25 years.

The price to earnings ratio is creaping up though as the HPI increses:

Apr - 4.25
May - 4.38
June - 4.36
July - 4.36
August - 4.39

Also the affordability applies more to current owners on existing trackers or SVRs than it does to FTBs applying for a mortgage.

HAMISH_MCTAVISH

mr_fishbulb wrote: »

Also the affordability applies more to current owners on existing trackers or SVRs than it does to FTBs applying for a mortgage.

No, thats not right.

The Halifax specifically state typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in 2007 Quarter 3 to 29% in August 2009.

Treadmill

So the average FTB saving for a 20% will now need to find another £128 quid

mr_fishbulb

HAMISH_MCTAVISH wrote: »

No, thats not right.

The Halifax specifically state typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in 2007 Quarter 3 to 29% in August 2009.

So how can they remain low if interest rates stay the same and house prices go up?

What happens when they reach critical levels where FTBs struggle to enter the market (again)?

Edit - I'd also like to know what they consider a "typical mortgage" for a new borrower is. Interest only or repayment? Fixed or variable?

HAMISH_MCTAVISH

mr_fishbulb wrote: »

So how can they remain low if interest rates stay the same and house prices go up?

Because bank margins can fluctuate.

Base rates are only one part of the equation. Bank margins above base for mortgage lending still fluctuate, and they are currently dropping (slightly) as competition returns to the markets. Not so much on fixed rates, although they will over winter, but for now certainly on tracker products.

HAMISH_MCTAVISH

mr_fishbulb wrote: »

What happens when they reach critical levels where FTBs struggle to enter the market (again)?

FTB's are currently at 36% of the market. But average rental yields are currently higher than average mortgage payments for BTL investors as well.

FTB's have not been a big part of the market for many years. And thats not why prices crashed. They crashed because funding was withdrawn. Funding has been increasing steadily for many months now, and so have prices.

Unless funding drops off a cliff again, or supply vastly increases, theres no reason why prices will fall much, other than small seasonal dips over winter.

mr_fishbulb

HAMISH_MCTAVISH wrote: »

FTB's have not been a big part of the market for many years. And thats not why prices crashed. They crashed because funding was withdrawn. Funding has been increasing steadily for many months now, and so have prices.

The reason funding was withdrawn in the first place is because people were overstretched, unable to pay their mortgage and were defaulting on their loans. Because the loans had been chopped up and sold off as securities, banks could not tell how much of the bad debt they were exposed to so stopped lending. Yes predominantly in the US but repos and payment misses were increasing in the UK too.

The lenders didn't suddenly decide to withdraw funding for the sake of it.

HAMISH_MCTAVISH

mr_fishbulb wrote: »

The reason funding was withdrawn in the first place is because people were overstretched, unable to pay their mortgage and were defaulting on their loans.

In the USA, not here.

Because the loans had been chopped up and sold off as securities, banks could not tell how much of the bad debt they were exposed to so stopped lending.

True. But they also, more importantly, stopped lending to each other.

Yes predominantly in the US but repos and payment misses were increasing in the UK too.

UK lending was nowhere near as bad. And UK default rates are still extremely low by comparison. UK mortgage arrears are under 2.5%, and repo around half a percent.

The lenders didn't suddenly decide to withdraw funding for the sake of it.

No. They stopped lending necause they lost access to all their funding to lend with. They didn't stop because they wanted to. They stopped because they couldn't get the funds to lend. They were forced to stop, it wasn't some sudden awakening....;)

And now that lending for new purchase has been increasing steadily for months, so have prices.

Graham_Devon

HAMISH_MCTAVISH wrote: »

FTB's are currently at 36% of the market. But average rental yields are currently higher than average mortgage payments for BTL investors as well.

FTB's have not been a big part of the market for many years. And thats not why prices crashed. They crashed because funding was withdrawn. Funding has been increasing steadily for many months now, and so have prices.

Unless funding drops off a cliff again, or supply vastly increases, theres no reason why prices will fall much, other than small seasonal dips over winter.

No, Hamish.

No matter how much you say all this stuff, funding was not simply withdrawn. Property crashed. It crashed for a reason. it crashed because the funding you are talking about that was withdrawn was funding such as 125% mortgages. We had 125% mortgages because people simply could not afford to buy a home in this country. So, more than the cost of the home was lent to allow people to buy.

No matter how many silly affordability figures you give us (which relies hugely on todays base rate and couples both working full time etc) the fact remains property crashed because prices were not affordable, and still aint.

So keep giving us the figures, keep telling everyone property is more affordable now than ever. It's simply NOT TRUE in the real world. It may be true on a piece of paper. But out there in the real world, we have crashed because your argument is simply not true, and does not apply to the real world.

Bankrupcy rates are going up, stress releated to finance going up, benefits bill to keep people living going up etc etc etc. I just wish you would stop painting this rosy picture of yours and spurting out the same figures which are massively influenced by base rates, and LOOK at the real world out there.

HAMISH_MCTAVISH

Graham_Devon wrote: »

No, Hamish.
snip
.

Oh look, a shiny thing......:rolleyes:

If nobody could afford to buy they wouldn't be buying. (76,000 last month alone)

If nobody could afford to pay more, then prices wouldn't be rising. (up 8.5% this year so far)

The only reason prices fell was because lending was withdrawn. Lending has been increasing, and so have prices.

It really is that simple.