58% of properties can be bought by "average income"

Graham_Devon

chucky wrote: »

no Brit you are confusing yourself again in your blind obsession on you not being able to afford to buy - don't try and confuse others.

there is a difference between being able to afford mortgage payments and being able to afford to buy a house.

the affording the mortgage payments is the easier part - getting the deposit for the right mortgage is the hard bit which most FTB's will struggle with.

Yes. And that's exactly what he said.

When mortgage rates or interett rates go back up again, it will make affordability even worse than it is now.

FATBALLZ

HAMISH_MCTAVISH wrote: »

No, the median wage for full time employees is £25,800.

Fairly certain that is the mean, not the median. £20k median is probably about right, ie 50% of full time workers earn less than that. We have a lot of factory workers/cleaners and not many investment bankers (despite what the media tell you).

Cleaver

Is it just me, or do other people have a sneaking suspicion that when we have this 83 page debate every 3 months, just somehow people in the real world are going about their normal everyday lives which includes buying the odd house?

ukcarper

it's happening

dazeruk

HAMISH_MCTAVISH wrote: »

Why would you need a mortgage of £188,423?

The "average" house is only £167,000.....

The "average" house in areas outside London/SE is far less.

And presumably the 58% of properties that can be bought by the person on 25.8K per year (more like 80% of properties outside London/SE) are the ones below 150K..... 35K deposit and 4.5 times income is a stretch but doable.

I used a house price of £188,423 as that is the figure that Zoopla quote as now being as affordable as in 2002.

From Zoopla

'It judges a home to be ‘affordable’ if one-third of the median income is sufficient to cover mortgage repayments. In 2002 using one-third of income to meet mortgage repayments allowed a purchase of £118,934 whereas today, given the current low financing costs and increased incomes, the same proportion of income finances a purchase of £188,423.'

They actually quote an average house price of £211,056 as being affordable by 58% of buyers.

Which would make the maths

From HAMISH_MCTAVISH the gross median income in 2009 for full-time employees in the UK was £25,800.

From http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=15313

A mortgage of £211,056 is 8.2 times gross median income.

A gross income of £25,800 produces net income of around £19,726.

Estimated from http://i-resign.com/uk/financialcentre/tax_calculator.asp

A third of this income would be £6,575 per year or £547 per month.

This MSE link shows the average rate for someone with 25% deposit is 4.06% fixed for 2 years.

http://www.moneysavingexpert.com/news/mortgages/2010/01/fixed-mortgage-rates-fall

So in this case the individual would need to get together a deposit of £52,764. Not sure how long this would take to save on a net income of £19,726.

Taking this off the £211,056 gives a mortgage of £158,292 (which is 6.1 times income).

Feeding these figures into this mortgage calculator

http://www.cml.org.uk/cml/consumers/calculator/mortcalculator

(£158,292 at 4.06% for 25 years)

A repayment mortgage would cost £849.74 and interest only £535.55 a month.

So the figure is lower than a third ((£535.55 * 12) / £19,726 = 32%) on an interest only mortgage where the buyer has a deposit of £52,764

For a repayment mortage it works out at (£849.74 * 12) / £19,726 = 52% of income.

Conclusion

Their figures look OK if you only consider full time employees, can get a mortgage of 6 times your salary, have a deposit of £52,000 and only pay the interest and make no attempt to pay off any capital.

chucky

HAMISH_MCTAVISH wrote: »

No, the median wage for full time employees is £25,800.

I doubt they'd include part timers in the survey, as it would be pointless to include someone working 12 hours in a pub on the weekends as a potential house buyer..... And ridiculous to expect house prices to be affordable for such a person anyway.

what people need to realise is that not everyone in this median calculation will be able to be a home owner.

it's pointless comparing an average salary to the average home price.

probably easier if you compare the average home-owner salary

moggylover

spaceboy wrote: »

House prices are still too high guys, and there's still a shortage of affordable homes in areas outside the South East - try Edinburgh for example! Rents are still too high as well - there's a HUGE discrepency between council house rents and the private sector. Absolutely massive.

Seems like a really badly done survey if you ask me.

Oh and people who currently own houses are obviously going to think house prices should stay high because they dont want to lose money. But they should have realised this would happen when they were deciding to buy.

I own myown house: I still think the house prices are bl00dy ridiculous:D Not every property owner is a pl0nker with an agenda like Hamish and the BTL crowd you know.;)

zappahey

ukcarper wrote: »

is that average wage where house is or average wage

Or is it the average wage of housebuyers, since there will always be a sector of the population who will never be able to afford to buy a house.

There always has been and always will be.

stueyhants

chucky wrote: »

what people need to realise is that not everyone in this median calculation will be able to be a home owner.

it's pointless comparing an average salary to the average home price.

probably easier if you compare the average home-owner salary

That's fine chucky, as long as this calculation is not used to argue affordability at the whole population level. Houses are affordable to an ever decreasing number of people, but across the whole population affordability is decreasing.

HAMISH_MCTAVISH

FATBALLZ wrote: »

Fairly certain that is the mean, not the median. £20k median is probably about right, ie 50% of full time workers earn less than that. We have a lot of factory workers/cleaners and not many investment bankers (despite what the media tell you).

No, the median full time wage is £25,800. It's in the ONS link earlier.

Mean is more like £30K.