Why is property unaffordable for even the relatively well-off among the population?

chucky

ILW wrote: »

That assumes currently very low interest rates. would mortgage be less than rent at 8 or 9%?

new borrowers can't and don't really take advantage of these "very low rates" unless you have a 50% deposit. even then they're not very low rates".

it's people moving to their lenders SVR's or the old style trackers that are benefiting not new borrowers which the poster is.

GDB2222

This affordability argument runs and runs. When the government only allowed the banks to lend 3 x salary, houses cost 3 x salary. Now that you can get say 6 x salary, houses cost 6 x salary. Is anyone better off as a result? Not really.

What will happen if interest rates go back up again? That's the big question, to which the only answer seems to be that interest rises are not imminent.

ILW

GDB2222 wrote: »

This affordability argument runs and runs. When the government only allowed the banks to lend 3 x salary, houses cost 3 x salary. Now that you can get say 6 x salary, houses cost 6 x salary. Is anyone better off as a result? Not really.

What will happen if interest rates go back up again? That's the big question, to which the only answer seems to be that interest rises are not imminent.

Seems a pretty good point to me.

chucky

GDB2222 wrote: »

This affordability argument runs and runs. When the government only allowed the banks to lend 3 x salary, houses cost 3 x salary. Now that you can get say 6 x salary, houses cost 6 x salary. Is anyone better off as a result? Not really.

What will happen if interest rates go back up again? That's the big question, to which the only answer seems to be that interest rises are not imminent.

when did they have this in place?

FTBFun

chucky wrote: »

when did they have this in place?

Hang on - isn't one argument that the reason property prices is high is because of "government intervention"?

Yet apparently property prices weren't high when the government set the affordability requirement (apparently) i.e government intervention.

There is no consistency in any of these arguments.

GDB2222

chucky wrote: »

when did they have this in place?

When nearly all the lenders were building societies, until the 70's and 80's. Then Maggie liberalised things.

chucky

GDB2222 wrote: »

When nearly all the lenders were building societies, until the 70's and 80's. Then Maggie liberalised things.

i'm not sure that was the case in the 70s or 80s - as i understand it there were no fixed rules in place by government.

borrowers who were starting off on 'professional' careers were lent more than the standard 3 times salary. i'm defining a 'professional' career as a would be a future high earner...

the difference is that high multiple mortgages in the last 10 years haven't been underwritten as well as they would have been in the 70s and 80s. the lending rules were much tighter - not everyone could get a mortgage.

JonnyBravo

MrPThomas wrote: »

Why is property still unaffordable for even the relatively well-off among the population?

I'm a little confused by this,. I class myself as relatively well off but I can afford property.
In fact, I think I've got two houses. Admittedly I've got someone else helping pay for one of them.
To check I'm not dreaming I've been up the road to see if it's still there and yep it seems real enough.

GDB2222

chucky wrote: »

i'm not sure that was the case in the 70s or 80s - as i understand it there were no fixed rules in place by government.

borrowers who were starting off on 'professional' careers were lent more than the standard 3 times salary. i'm defining a 'professional' career as a would be a future high earner...

the difference is that high multiple mortgages in the last 10 years haven't been underwritten as well as they would have been in the 70s and 80s. the lending rules were much tighter - not everyone could get a mortgage.

The Building Societies were regulated by the Registrar of Friendly Societies. (I remember going along to see them as I set up some Friendly Societies at the time - no quill pens in sight, amazingly.)

There was just a nudge and a wink system of doing things. There were rules in place but it was all done behind closed doors. The friendly Societies all had to meet 'prudential' requirements and have filed business plans - and these were tiny societies. I'm sure the same applied to building societies. To remain authorised you had to comply with the Registrar's requirements. So, if he said 3x max lending, that was it.

I think the rules were gradually relaxed from 3 x main earnings, to 3 + 1. Maybe there was some dispensation for yuppies, I really can't remember too well.

The thing is that during the 70's there was a limited amount of mortgage money to go around, and when that was gone people had to wait until the next month.

I have no doubt that that sort of thing kept a lid on house prices and helped direct finance into commerce. It also led to the growth of mortgage brokers/ IFAs who had good connections with the local branch of the building society and could get you a mortgage when you needed it. Small price to pay if you had to take out an endowment policy at the same time.

ukcarper

I got my first mortgage in 1972 and it was more than 3x my salary in fact is was more than 3x + 1x. I think the relaxing of lending criteria had a lot to do with HPI. But saying that the house I bought with that mortgage was £8k earlier in 1972 the same type of house was £5.25k and they were almost £11k by 1973. That’s a lot of HPI even with the high inflation and stricter leading criteria in place at the time