We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
House Prices, Interest Rates and Affordability

marc-h_2
Posts: 146 Forumite


One thing always puzzles me when people are stating that house prices need to fall along way to make them affordable. Surely the fact that interest rates over the last 10 years have been really low compared to other times in recent history effects affordability as much as the actual price of houses? Houses may have been cheaper in the 80s compared to salaries but interest rates were over 10% so affordability would have been worse if anything. If we genuinely want house prices to half then interest rates need to be double what the have been in recent years, surely? I'm not talking about the current rate which is artificially low but the average over the last 10-15 years.
I am in my 20s but I feel many people of a similar age have developed an "entitled to" attitude, they are entitled to a good job a nice house and an expensive lifestyle. In the past people would have saved and worked hard to afford a house, now young people want it immediately and complain that they can't afford it immediately.
Whenever interest rates are low and we aren't in a recession house prices will stay high and continue to rise. It doesn't make them unaffordable though. That's how I see it anyway. I would genuinely like someone to explain the fundamental flaw in my logic, as I currently feel like I am in a tiny minority that see it this way.
I am in my 20s but I feel many people of a similar age have developed an "entitled to" attitude, they are entitled to a good job a nice house and an expensive lifestyle. In the past people would have saved and worked hard to afford a house, now young people want it immediately and complain that they can't afford it immediately.
Whenever interest rates are low and we aren't in a recession house prices will stay high and continue to rise. It doesn't make them unaffordable though. That's how I see it anyway. I would genuinely like someone to explain the fundamental flaw in my logic, as I currently feel like I am in a tiny minority that see it this way.
0
Comments
-
I agree in part the total cost of a house is what you pay back after interest.
I dare say in terms of that against salary I dare say the 70's & 80's were a lot more expensive.
The risk is if rates did shoot up to 10%+ again. But there is nothing on the horizon to suggest that, it is more than likely rates will stay historically low than shoot up in the next 5 years.
After that who knows?0 -
I feel many people have developed an "entitled to" attitude, they are entitled to a good job a nice house and an expensive lifestyle. In the past people would have saved and worked hard to afford a house, now young people want it immediately and complain that they can't afford it immediately.
I agree with this so much that a single thanks doesn't credit it enough...It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
In the 80's people weren't paying 5 or 6 times their annual salary, like they have over the last few years.
Not to mention the only reason for these historically low interst rates, was primarily to stop a catastrophic breakdown of the housing market.
There is some assumption here that the last ten years is how it's going to be, but the recent economic breakdown shows this decadence is unsustainable.0 -
In the 80's people weren't paying 5 or 6 times their annual salary, like they have over the last few years.
Not to mention the only reason for these historically low interst rates, was primarily to stop a catastrophic breakdown of the housing market.
There is some assumption here that the last ten years is how it's going to be, but the recent economic breakdown shows this decadence is unsustainable.
I'd like to see a comparison of monthly income vs monthly mortgage costs for now and in the 80s. To most people it doesn't matter what the salary multiple is when buying a house, they only care if they can afford the monthly payment. If interest rates are low then a mortgage will be cheaper so the affordability remains the same.0 -
These figures sort of show what I was trying to say, it is showing mortgage interest payments as a % of income by year.
1974 - 16.3
1975 - 15.0
1976 - 14.3
1977 - 13.3
1978 - N/A
1979 - 15.5
1980 - 18.4
1981 - 17.9
1982 - 16.8
1983 - 14.7
1984 - 16.8
1985 - 19.2
1986 - 17.8
1987 - 17.9
1988 - 18.5
1989 - 23.5
1990 - 27.1
1991 - 21.80
1992 - 17.5
1993 - 13.2
1994 - 12.0
1995 - 12.5
1996 - 11.2
1997 - 14.1
1998 - 15.0
1999 - 12.9
2000 - 14.3
2001 - 13.4
2002 - 12.20
2003 - 11.8
2004 - 15.0
2005 - 16.3
2006 - 16.8
2007 - 20.00
Average - 16.15
In 2007 we were at a high point but not exceptionally so, and the fall in house prices since then probably brings the figure almost back in line with the trend.0 -
Interesting that 20% seems to be the magic number for falls in prices / recession.
I think that may also point to why base rate will most probably stay low for a long time.
Any shift above 5.5% base will cause a recession again by the look of that.0 -
...
I am in my 20s but I feel many people of a similar age have developed an "entitled to" attitude, they are entitled to a good job a nice house and an expensive lifestyle. In the past people would have saved and worked hard to afford a house, now young people want it immediately and complain that they can't afford it immediately.
....
I sort of agree with this. On the other hand I (early 30s) have a lot o friends who HAVE saved a lot, who do have a good job and who are in varying degrees responsible. Its these people who should be able to afford ''decent'' if not average accommodation. One example I give is a colleague of DH, who at around our age, saving for several year, ought with his gf an ex-LA flat on a well known for the wrong reasons estate in NW London. He earns a six figure salary and bought a 2 bed ex LA flat because it was the biggest/best he felt he could afford (I think nicer could have been found fo the money personally, but..this flat cost what it cost.....). something suggests to me this is a problem. wher do the people who that flat was built for, and sold to...where will they live?0 -
lostinrates wrote: »I sort of agree with this. On the other hand I (early 30s) have a lot o friends who HAVE saved a lot, who do have a good job and who are in varying degrees responsible. Its these people who should be able to afford ''decent'' if not average accommodation. One example I give is a colleague of DH, who at around our age, saving for several year, ought with his gf an ex-LA flat on a well known for the wrong reasons estate in NW London. He earns a six figure salary and bought a 2 bed ex LA flat because it was the biggest/best he felt he could afford (I think nicer could have been found fo the money personally, but..this flat cost what it cost.....). something suggests to me this is a problem. wher do the people who that flat was built for, and sold to...where will they live?
Actually London may be the (rather large) exception. I live in Yorkshire and was probably basing what I said on wages and house prices around me. If people who are responsible and have savings and are in a good job can't afford the mortgage on an good house something is wrong. Is that a problem created by what London has become and it's popularity?0 -
These figures sort of show what I was trying to say, it is showing mortgage interest payments as a % of income by year.
1974 - 16.3
1975 - 15.0
1976 - 14.3
1977 - 13.3
1978 - N/A
1979 - 15.5
1980 - 18.4
1981 - 17.9
1982 - 16.8
1983 - 14.7
1984 - 16.8
1985 - 19.2
1986 - 17.8
1987 - 17.9
1988 - 18.5
1989 - 23.5
1990 - 27.1
1991 - 21.80
1992 - 17.5
1993 - 13.2
1994 - 12.0
1995 - 12.5
1996 - 11.2
1997 - 14.1
1998 - 15.0
1999 - 12.9
2000 - 14.3
2001 - 13.4
2002 - 12.20
2003 - 11.8
2004 - 15.0
2005 - 16.3
2006 - 16.8
2007 - 20.00
Average - 16.15
In 2007 we were at a high point but not exceptionally so, and the fall in house prices since then probably brings the figure almost back in line with the trend.
The problem with this, is it only measures those who can afford houses in the first place.
You could have had 85% owners in the 80's, compared to 10% owners today (due to people not being able to afford homes) and the numbers would still suggest that houses were affordable. Simply because it only looks as that who were able to secure a house.0 -
Lets look at 2007 again shall we?
£180,000 average price.
£26,000 average wage.
For a single wage, the multiple would be nearly 7x annual salary.
Take home pay would be approx £1650.
Mortage payment (@4%) £960 per month (repayment) £600 interest only.
Perspective, it's a wonderful thing.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 352K Banking & Borrowing
- 253.5K Reduce Debt & Boost Income
- 454.2K Spending & Discounts
- 245K Work, Benefits & Business
- 600.6K Mortgages, Homes & Bills
- 177.4K Life & Family
- 258.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards