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Debate House Prices


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House Prices, Interest Rates and Affordability

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Comments

  • Blacklight
    Blacklight Posts: 1,565 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    marc-h wrote: »
    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.

    So true. Far too many spoiled little kids running around these days influenced by the easy fame of reality shows and chaps-from-minority-ethnic-backgrounds-or-of-mixed-race-that-aren't-entirely-indigenous-to-Northern-America on MTV talking about clubs, rolex's, Lamborghini's and girls with nowt on.
    marc-h wrote: »
    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.

    Which is what a lot of people still don't seem to realise. Affordability should be based on ability to pay what you would like to pay, not on some multiplier of gross income that doesn't really mean very much.
  • Blacklight
    Blacklight Posts: 1,565 Forumite
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    nembot wrote: »
    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.

    Try looking at homeowners average income and disregard the people who earn £7k. It skews your calculation.
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
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    Blacklight wrote: »
    Try looking at homeowners average income and disregard the people who earn £7k. It skews your calculation.

    But again, you are reverting to homeowners affordability.

    Not overall affordability.

    Two very very different things. Homeowner affordanility will ALWAYS make houses look affordable....as it's measuring those who can afford, completely ignoring anyone who cannot.
  • ManAtHome
    ManAtHome Posts: 8,512 Forumite
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    marc-h wrote: »
    These figures sort of show what I was trying to say, it is showing mortgage interest payments as a % of income by year.
    Is that just interest?

    For example a £125k mortgage at 10% interest rates, you pay £12,500pa interest, and £5,000pa to cover capital over 25 years.

    A £250k mortgage at 5% is same interest, but needs £10,000pa to cover capital.

    So a comparison really needs to be based on repayment mortgage terms, not just interest.
  • marc-h_2
    marc-h_2 Posts: 146 Forumite
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    1_fullsize.bmp

    This graph shows average mortgage payments against average earnings. The dip since 2007 has already taken it back below the line.
  • marc-h_2
    marc-h_2 Posts: 146 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    edited 26 March 2010 at 5:27PM
    ManAtHome wrote: »
    Is that just interest?

    For example a £125k mortgage at 10% interest rates, you pay £12,500pa interest, and £5,000pa to cover capital over 25 years.

    A £250k mortgage at 5% is same interest, but needs £10,000pa to cover capital.

    So a comparison really needs to be based on repayment mortgage terms, not just interest.

    The graph above may be a slightly better indicator.

    Although I have just realised the ridiculously low interest rates that are bound to rise at some point may have affected the results here slightly.
  • Really2
    Really2 Posts: 12,397 Forumite
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    Two very very different things. Homeowner affordanility will ALWAYS make houses look affordable....as it's measuring those who can afford, completely ignoring anyone who cannot.

    But if that is the case and house prices rise that means that it is indeed true we are short of houses and there is competition for property above the average wage.
    The people who can not afford will not until there is enough supply surely?
  • Blacklight
    Blacklight Posts: 1,565 Forumite
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    But again, you are reverting to homeowners affordability.

    Not overall affordability.

    Two very very different things. Homeowner affordanility will ALWAYS make houses look affordable....as it's measuring those who can afford, completely ignoring anyone who cannot.

    Oh come on. Who's in a position to buy a property without earning a decent living a long term stable job with prospects? Before you even think about making a commitment like that you need to be on £20k minimum.

    Discount the people not in any position to be lent a substantial sum - that's really what I meant by 'homeowners'.
  • lostinrates
    lostinrates Posts: 55,283 Forumite
    I've been Money Tipped!
    edited 26 March 2010 at 5:33PM
    marc-h wrote: »
    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?


    I don't know about every area. I know that parts of other places are as expensive as the most expensive areas in London. Salisbury's Cathedral Green rivaled prices, per square foot of London.....meaning the areas around were pushed up too...noone NEEDS to live in one road/square of a town, but they might need to live withing walk of a central area.

    I have examples I won't give on line of houses that have more than tripled and quadrupaled in ten years. I have a new example of a house that have gone up by 900% in just under 15 years in sw england. Not even the kitchen and bathroom have been replaced in that time. A new conservatory was added, and it is a lovely house, but almost ten times the price? ETA; some wondows were changed too, which will have improved the value of the home.

    eta: Actually, I thnk my maths is wrong, oooppps, or the first figure....it might be less...I'll have to check, on the conservative side I will suggest it could be as low an increase as 700%...
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
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    Blacklight wrote: »
    Oh come on. Who's in a position to buy a property without earning a decent living a long term stable job with prospects? Before you even think about making a commitment like that you need to be on £20k minimum.

    Discount the people not in any position to be lent a substantial sum - that's really what I meant by 'homeowners'.

    I didn't make any suggestion as to who is and who isn't.

    I stated it's no good basing overall affordability of houses, on those who can afford mortgages.

    Which has what has happened in this thread. Surely it's very simple to see why this comparison simply does not work?

    If I show a graph stating that it costs Bentley owners with loans on their bentleys, 10% of their income each month, does that show Bentleys are affordable to the nation? Or does it show Bentleys are affordable to those who can afford bentleys?
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