Flamin' 'Eck, English House Prices Are Cheap.....

IveSeenTheLight

the_flying_pig wrote: »

(a) house prices (the point of this thread) are not cheap by any stretch of the imagination. in fact they're very expensive; but

You still think they are expensive, however: -

IveSeenTheLight wrote: »

http://www.lloydsbankinggroup.com/media/excel/2010/HPIQ3/221010Affordability.xls

It seems the House Price - Earnings is currently 4.59 while the 27 year average is 4.05 (This doesn't consider the deduction of a deposit)

House prices are 0.54 of a single mans wage higher than the 27 year average.

Considering the ways in way people by now compared to previously (joint, shared etc) this means that house prices are actually lower as a multiplier per individual buying property

To clarify.
Single buyer previously bought a £100k property, now buys jointly / shared property for £150k meaning their percentage is only £75k

With nett migration increasing and supply of properties not matching the same percentage, this only goes to indicate the increasing likelyness of multiple occuoancy properties

Very simplistic means and not ideal in my opinion but explains why prices are higher than historical past.

ultrawomble

IveSeenTheLight wrote: »

When you compare the mortgage repayments as a percentage of income is currently 29.7% compared to the 27 year average of 36.9%

So while the price to wages is higher than average, the repayments as a percentage of income is lower than average.

Always handy to have Facts to consider

True, but isn't that because of the very low interest rate of 0.5%. For example, go back 10 years to 2000 Q3 and the mortgage repayments as a percentage of income stood at 30.4% on the back of a 6% base rate. Go back 15 years to 1995 Q3 and a level of 25.3% was achieved on the back of a 6.625% base rate.

So the question is, if people are experiencing ~30% on a 0.5% base rate, what will it rise to on say a 5% base rate?

N1AK

IveSeenTheLight wrote: »

Always handy to have Facts to consider

Or attempt to mislead others with, as you have done here

We've just gone through a price crash and we're still 13% above the long term average. If you look at the average until before the last bubble it was ~3.65.

If you are suggesting that the historical data can be used to predict future trends then we should expect house prices to return to around 3.65x earnings. That isn't what you're suggesting, you're just using the latest property peak to skew the long term average.

ultrawomble

ultrawomble wrote: »

So the question is, if people are experiencing ~30% on a 0.5% base rate, what will it rise to on say a 5% base rate?

Bad form to answer one's own question, but the last time the base rate was at 5% (Nov 2006 - Jan 2007) the mortgage repayments as a percentage of income was around 44% (c.f. ~25% on a base rate of ~6.5% in 1995). Seems to me that houses have become less affordable.

IveSeenTheLight

ultrawomble wrote: »

True, but isn't that because of the very low interest rate of 0.5%. For example, go back 10 years to 2000 Q3 and the mortgage repayments as a percentage of income stood at 30.4% on the back of a 6% base rate. Go back 15 years to 1995 Q3 and a level of 25.3% was achieved on the back of a 6.625% base rate.

So the question is, if people are experiencing ~30% on a 0.5% base rate, what will it rise to on say a 5% base rate?

Certainly I am not discounting that a lower base rate will have helped people on trackers.

Many of those will have elapsed and many lenders SVR's are not BoE linked.

Of course it helps, however many lenders did not keep the margin between the Boe base rate and the mortgage rate as it fell.
I once had a base rate + 0.26%. You can't get that nowadays, so realistically, new mortgage propducts will be much higher than the 0.5% base rate

Base rates have been 0.5% since Mar 09 and there are many indicators that their not going to be rising soon or fast

When they do, won't people have the opportunity to fix?

In the meantime, many owners have the opportunity to pay off homes while the rates are lower.

chucky

ultrawomble wrote: »

Bad form to answer one's own question, but the last time the base rate was at 5% (Nov 2006 - Jan 2007) the mortgage repayments as a percentage of income was around 44% (c.f. ~25% on a base rate of ~6.5% in 1995). Seems to me that houses have become less affordable.

why are you using the base rate to compare against mortgage repayments?

IveSeenTheLight

N1AK wrote: »

Or attempt to mislead others with, as you have done here

I don't try to mislead others.
I present facts as they are, open to be discussed and debated.
Maybe if I didn't give facts as many others do you could try to say I'm missleading

N1AK wrote: »

We've just gone through a price crash and we're still 13% above the long term average. If you look at the average until before the last bubble it was ~3.65.

Looking at the Nationwide 30 year trend, were not 13% above the long term trend, were actually below it

(See Long term real house price trend on page 3)
http://www.nationwide.co.uk/hpi/historical/oct_2010.pdf

N1AK wrote: »

If you are suggesting that the historical data can be used to predict future trends then we should expect house prices to return to around 3.65x earnings. That isn't what you're suggesting, you're just using the latest property peak to skew the long term average.

Certainly I don't believe that historical trends predict future performance.
I do believe in reacting to the situation and positioning myself to take advantage.

I doubt house prices will return to 3.65x earnings (especially single) ever. Reality just would not allow that in the current circumstances.

ultrawomble

chucky wrote: »

why are you using the base rate to compare against mortgage repayments?

Simply because if you read the definitions on the front page of the link provided by IveSeenTheLight you will see that the percentages are calculated on 'new advances to households'.

The mortgage to earnings ratio is calculated using the Halifax standardised average house price (seasonally adjusted), average disposable earnings (calculated from average earnings for all full time employees (ASHE)) and the Bank of England monthly average rate for new advances to households (CFMBJ95).

I take that to mean new mortgages that will be tied to the current base rate in some manner - that will exclude all form of ongoing sub-base rate and base +0.5% etc. deals of yore. Ergo, a new mortgage tied to a base rate of 0.5% currently consumes ~30% of income, whereas when the rate was last at 5% (Nov 2006 - Jan 2007) it consumed 44% of income. That is why I pointed out that in 1995, a new mortgage against a base rate of ~6.5% consumed only ~25% of income. Property is therefore less affordable.

Graham_Devon

ultrawomble wrote: »

So the question is, if people are experiencing ~30% on a 0.5% base rate, what will it rise to on say a 5% base rate?

It's currently lowish....that's all that matters

Please. Do not look any further into this.

chucky

ultrawomble wrote: »

Simply because if you read the definitions on the front page of the link provided by IveSeenTheLight you will see that the percentages are calculated on 'new advances to households'.



I take that to mean new mortgages that will be tied to the current base rate in some manner - that will exclude all form of ongoing sub-base rate and base +0.5% etc. deals of yore. Ergo, a new mortgage tied to a base rate of 0.5% currently consumes ~30% of income, whereas when the rate was last at 5% (Nov 2006 - Jan 2007) it consumed 44% of income. That is why I pointed out that in 1995, a new mortgage against a base rate of ~6.5% consumed only ~25% of income. Property is therefore less affordable.

despite what many frothing numpties on here may tell you or even think; base rates and mortgage rates aren't the same thing...

it would best if you compared actual mortgage rates against actual mortgage repayments to come to a sensible conclusion...