How did people not see it coming?

HAMISH_MCTAVISH

ILW wrote: »

Thing is though, many that did overborrow are now being rewarded with incredibly low interest rates and are laughing at those that tries to do the "right thing". Probably always been the same.

Thing is though, very few people "overborrowed".

The average loan to income ratio amongst actual mortgage borrowers never crossed 3.5 times income even at peak. It's now closer to 3 times income for FTB's. And the average for 2TB's is around 2.75.

As for "doing the right thing", it turns out that with hindsight, it was actually "doing the wrong thing" in many cases.

History has repeatedly shown that the best way to get ahead in terms of lifetime housing costs is always to stretch yourself a little and buy as young as possible. And nothing in the last few years has changed that.

What we do laugh at are those that claim there is now a "new paradigm"..... That things will somehow be "different this time"...... Like those that predicted 50% falls by Xmas 2009, or that rents would crash and force all the BTL-ers to sell up, or any of the current crop of bear memes that are equally laughable.

Graham_Devon

HAMISH_MCTAVISH wrote: »

The average loan to income ratio amongst actual mortgage borrowers never crossed 3.5 times income even at peak. It's now closer to 3 times income for FTB's. And the average for 2TB's is around 2.75.

You got a link to the figures Hamish?

I know you will be able to back it up, I just want to look into how they are made up, as this seems highly at odds with everything else.

I'm assuming its based on household income, not average wage type income?

I saw something the other day which suggested house prices were more affordable based on the mortgages...but they didn't include the massive deposit put down by those FTB's of nearly 25%, which obviously made the mortgage smaller, and houses more affordable....but in reality, they'd basically wiped 25% off the house price to make their calculations!

ILW

HAMISH_MCTAVISH wrote: »

Thing is though, very few people "overborrowed".

The average loan to income ratio amongst actual mortgage borrowers never crossed 3.5 times income even at peak. It's now closer to 3 times income for FTB's. And the average for 2TB's is around 2.75.

As for "doing the right thing", it turns out that with hindsight, it was actually "doing the wrong thing" in many cases.

History has repeatedly shown that the best way to get ahead in terms of lifetime housing costs is always to stretch yourself a little and buy as young as possible. And nothing in the last few years has changed that.

What we do laugh at are those that claim there is now a "new paradigm"..... That things will somehow be "different this time"...... Like those that predicted 50% falls by Xmas 2009, or that rents would crash and force all the BTL-ers to sell up, or any of the current crop of bear memes that are equally laughable.

By doing the right thing, I meant not running up a lot of debt and taking on a mortgage which one could afford to pay as well as putting away some savings so as not to rely on the state as soon as a minor emergency arose. The people who did that do seem to lose out. I guess that we have a society which now expects to take risks but get bailed out by others if their gamble does not pay off.

HAMISH_MCTAVISH

Graham_Devon wrote: »

You got a link to the figures Hamish?

Latest data here.

http://www.cml.org.uk/cml/media/press/2771

It's gone up a bit since I last checked, currently 3.26 for FTB's and 2.89 for 2TB's.

I know you will be able to back it up, I just want to look into how they are made up, as this seems highly at odds with everything else.

I'm assuming its based on household income, not average wage type income?

It's based on borrowers income. Whether that borrower be a single or a couple.

It doesn't prove whether houses are or are not expensive compared to the any of the various permutations of average wage.

It does prove that most borrowers do not overstretch themselves, which is the point being discussed.

System

Nice link

Dunno if my maths is right but the average FTBer mortgage appears to be 118k.

Any idea what the average repayment would be on that for said FTBer?

HAMISH_MCTAVISH

Joeskeppi wrote: »

Nice link

Dunno if my maths is right but the average FTBer mortgage appears to be 118k.

Any idea what the average repayment would be on that for said FTBer?

A full repayment mortgage on £118,000 at 5% would be £697 per month, comprised of £491 of interest and £206 of capital repayment.

Average deposit is currently around 25% though, and mortgage interest on a 75% LTV mortgage would be more like 3% rather than 5%.

A full repayment mortgage on £118,000 at 3% would be £564 per month, comprised of £269 of interest and £265 of capital repayment.

This, combined with the deposit, would purchase you a house costing £153,000. Pretty close to the average house price.

Average rent is currently £691 per month, by comparison.

Percy1983

Its true that measuring percentage of wages to mortgages of those who have them will always yield similar results, they don't consider the ever growing numbers of those priced out.

Really2

The only people who could have cooled down the PIIGS in the boom were the ECB by raising rates.

One size does not fit all, so these countrys had booming economys and interest rates way below what they should have been which lead to speculation.
Had they been able to set their own rates the mess would not be as big.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Latest data here.

http://www.cml.org.uk/cml/media/press/2771

It's gone up a bit since I last checked, currently 3.26 for FTB's and 2.89 for 2TB's.



It's based on borrowers income. Whether that borrower be a single or a couple.

It doesn't prove whether houses are or are not expensive compared to the any of the various permutations of average wage.

It does prove that most borrowers do not overstretch themselves, which is the point being discussed.

Thanks, I just wanted to look into it, as it seemed to suggest something extremely different to everywhere else.

Indeed, as you say, it's just based on the mortgage, so this has changed from 1 wage earner taking out a mortgage, to a couple taking out a mortgage over the years. Yet the data simply suggests nothing has changed.

At least it does take into account the deposit in this one. This suggests that even though a deposit of 25% is put down, and the LTV is 76%, the numerator is still increasing.

Therefore, I don't think it can really be used as a measurement, as basically at the moment, it's saying 3 quarters of a house currently costs on average 3.26x the persons / couples income.

In reality, the HOUSE itself, is up at 4.34x household income, and thats probably in most cases on a dual income.

I know this is not what's being discussed on this thread....but the above only measures those who have actually been able to manage it. Pretty dire when you look at it in that respect.

eamon

Enough of the maths etc, nobody likes a killjoy when there is property !!!!!! to enjoy and the entertainment providers want to be paid.