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

1246720

Comments

  • twadge_face
    twadge_face Posts: 594 Forumite
    I like these MoneyWeek charts... :)


    mwk_propertychart2.gif




    mwk_propertychart3.gif



    mwk_propertychart5.gif

    ;)
    Long live the faces of t'wunty.
  • ukcarper
    ukcarper Posts: 17,337 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Houses in my street have double since 1999 and that is in actual terms not taking into account inflation which I think is typical
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker


    mwk_propertychart3.gif


    That's a pretty drawing.
  • twadge_face
    twadge_face Posts: 594 Forumite
    That's a pretty drawing.

    I know! Primary colours and everyfink. :)
    Long live the faces of t'wunty.
  • mbga9pgf
    mbga9pgf Posts: 3,224 Forumite
    edited 26 March 2010 at 6:38PM
    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 what do you say to the fact that my wife and I have been saving for over 4 years, have a deposit that is 2 times my salary, yet I still cannot afford the home my parents bought when they first got married (after saving for 1 year)? We have been saving 80% of takehome by the way.

    When you consider my father was not earning a realative income anywhere near mine, my mother stayed at home to bring us up and we are planning to get a mortgage on 2 incomes (nice to be able to actually HAVE kids, never mind, I will leave that to the chavette scum), its easy to see you are talking complete and utter hoop.
  • ukcarper
    ukcarper Posts: 17,337 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I all depends when they bought you only have to look at twunk_faces first graph to see that.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    marc-h wrote: »
    Do you think the same applies to the graph posted above which is based on average mortgage payments against average wages?

    What is an average mortgage payment?

    Someone buying 11 years and has resided in the same property since. Will have paid 50% of the purchase price of someone else did 5 years later.

    There are differing levels within this average. Unfortunately a high % of more recent borrowers are far far above the average. This is weighting the average higher than in reality it should be. As the amount of credit in the system is unsustainable (around £500 billion currently). Until capital debt is repaid and as a nation we earn the money in the future to fill this void. Then the average mortgage repayment will slowly drop.

    As for future wage growth that's an interesting topic for another thread. As the boom years for disposable income created by the importation of cheaper products from the Far East are drawing to a close.
  • twadge_face
    twadge_face Posts: 594 Forumite
    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.
    Yeah, I think there is a grain of truth in what you say here.
    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.
    Banks won't loan greater than 75% of a property's supposed value without punitive interest rates and associated charges. This is a fact. Why are the banks doing this? They are pricing RISK into their business model.

    Yes, they are pricing in the strong possibility of 25% drop in prices... they're happy to risk your money, not theirs.

    Affordability is highly subjective. For example, house prices could be allowed to go up forever if only there were 30, 40, 50 year mortgages, etc... on top of 10x, 15x, 20x salaries, etc... and increasingly negative real interest rates, etc...

    But this is the hook: the UK has deviated so far from the norm that corrective action shall occur, and in fact BEGAN to occur only to be apparently curtailed due to heavy-handed government intervention and inordinate low volumes of property changing hands.

    @marc-h, you may want to consider what was published today on ThisIsMoney regarding affordability:
    A crude survey by property website Zoopla earlier this month concluded that, based on the fact that rates are low and have made repayments dirt cheap, property affordability is at its best level since 2003. So surely prices will rise? Quite possibly, but remember that the survey doesn't consider that low rates are largely only being enjoyed by those with large amounts of equity in their homes.

    The second, far more important point is that when rates rise, that affordability pendulum will swing in an instant. A rise to just 3% would send mortgage costs soaring. A rise to 5% would precipitate an outright collapse.
    Happy days! :eek:
    Long live the faces of t'wunty.
  • phil_b_2
    phil_b_2 Posts: 995 Forumite
    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.

    Looking at the average wage/house-price ratio is a bit out-dated IMO. Its a very simplistic algorithm that ignores other real-world factors.

    We of course know what the average wage and house-price is, but what about the average overall income of that average household? I.e what if the average priced house typically has 2 people in it paying the mortgage?

    I personally don't think a single person on average wage should be able to afford the average house. They would be lower down the ladder than that.

    the avergae house to me is a 3-bed semi. It's not a 6-bed mansion but not a 2-bed terrace or one bed flat either.
    The average 3-bed semi will be a family household accomodating more than one adult paying the mortgage.

    All if's, but's and maybe's but most assumption are.
  • phil_b_2
    phil_b_2 Posts: 995 Forumite
    A rise to 5% would precipitate an outright collapse.

    A rise to the normal rate which was being serviced before?
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

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

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.