First time buyers priced out...

geneer

Graham_Devon wrote: »

As expected. No answer. Just trying to be an internet warrior at every turn.

The doggy barks.
But theres just. No. Bite.

Cleaver

julieq wrote: »

affordability for a couple is good in most parts of the country and the only thing pricing them out is mortgage rationing.

Graham_Devon wrote: »

Affordability is good.....but they can't get enough debt...therefore they can't afford it....but erm, affordability isn't the issue?

So they can't afford it then? Affordability isn't good. What she's actually saying is credit isn't great right now compared to the hand outs people got leading up to the crash.

I like my ferrari's. Affordabilty is good for me. But the damn banks won't give me a 30 year loan secured on the car. I could afford the repayments, but for some reason, the lending is rationed. It's the banks fault I can't have the ferrari.

I can afford it though. Just, well, not without the banks giving me the money. Does that make sense? I know it doesnt...but go along with it. It makes me feel better, as deep down, I KNOW I can afford a ferrari.

Graham, I have to ask, are you being deliberately obtuse purely for the sake of it? You know full well that this isn't what Julie is saying. I pretty much agree with her point that 'affordability for a couple is good in most parts of the country', but maybe not with the same passion. For most couples earning a semi-decent, average wage, they can borrow up to 3.5x their salaries and afford to buy an above average house in most parts of the country.

Let's not get bogged down in average salaries and average house prices as we'll be here until 2045, but according to the BBC the average house price in 8 out of 12 regions is £177,000 or below, which is around 3.5x the joint wage of a couple earning about £25,000 each. As I say, we can get in to the detail, but that's about right.

So in terms of 'affordability', Julie is pretty much correct. Most (which is a subjective term, granted) couples can afford to comfortably borrow a managable amount to buy a pretty average house in most areas of the country, at least in terms of what we've historically deemed as 'affordable'. There are obviously a number of people who can't and that's where I am in complete agreement with you that it would be nice to see prices fall in some regions so that people can afford to buy. As I've said before, I have no idea how a FTBer in Kent, Cornwall or London even begins to buy somewhere semi-decent as a first home. And it seems that we're right at the limit of affordability, so I think stagnation for a decade may be in sight, but lets not get off topic.

The point Julie was making is that most couples, on a fairly standard joint wage, can 'afford' to borrow £150,000 (for example) and 'afford' the monthly repayments on a 4% to 8% mortgage, which is the rates we're likely to see over the next decade. What I think she was then saying is that most banks seem to be requiring a 20% deposit (or more), which is much more difficult for the couple to manage. On a typical £170,000 house it'd be £40,000 minimum with fees, which seems excessive if the couple can 'afford' the house.

Your example about you not being able to afford a Ferrari is beyond ludicrous, as it has nothing to do with the point at hand. Presumably, if you're on a typical wage like I am, you can't afford a Ferrari, whichever way you look at it. Unless you have £100,000+ saved up, or are willing to find a bank who will lend you £100,000 as an unsecured loan on a vastly-depreciating asset, then you can't afford one. This is very different to a couple borrowing 3x their earnings on a secured loan to buy an asset which the bank are fairly certain will retain the bulk of its value or, in all probabilty, rise in value over the medium to long term.

So I agree with Julie, most couples can 'afford' to buy a house. This doesn't mean that I feel that all houses are fairly priced, or that it wouldn't be beneficial to society to see falls. But this has nothing whatsoever to do with you not being able to 'afford' a Ferrari. In my humble opinion all of your 'it makes me feel better, I KNOW I can afford a Ferrari...' ranting just makes you sound really obtuse and unable to debate with Julie's points.

chucky

Cleaver wrote: »

Graham, I have to ask, are you being deliberately obtuse purely for the sake of it? You know full well that this isn't what Julie is saying. I pretty much agree with her point that 'affordability for a couple is good in most parts of the country'

i wouldn't bother Mr Cleaver, you'll just get him going round in circles diverting the subject being very good at being obfuscatory.

Graham_Devon wrote: »

As expected. No answer. Just trying to be an internet warrior at every turn.

Graham_Devon

Cleaver wrote: »

Your example about you not being able to afford a Ferrari is beyond ludicrous, as it has nothing to do with the point at hand. Presumably, if you're on a typical wage like I am, you can't afford a Ferrari, whichever way you look at it. Unless you have £100,000+ saved up, or are willing to find a bank who will lend you £100,000 as an unsecured loan on a vastly-depreciating asset, then you can't afford one. This is very different to a couple borrowing 3x their earnings on a secured loan to buy an asset which the bank are fairly certain will retain the bulk of its value or, in all probabilty, rise in value over the medium to long term.

No, seriously. Whats the difference?

Howcome I can't afford a ferrari because I can't afford the deposit (as you say).

But I CAN afford a house, but it's the banks stopping me, because I can't afford the deposit.

It's not ludicrous. You have just spelt out exactly what I meant.

If you can't afford the deposit, and there isn't a product willing to lend to you until you have it. You can't afford the house.

Change the ferrari for any product you like if its the ferrari thats at issue.

Cleaver

Graham_Devon wrote: »

No, seriously. Whats the difference?

Howcome I can't afford a ferrari because I can't afford the deposit (as you say).

But I CAN afford a house, but it's the banks stopping me, because I can't afford the deposit.

Okay, let's make this a bit more simple (although I'm still pretty sure you're being obtuse for the fun of it, but there we go).

Case Study 1
I have Graham Devon in front of me who earns £30,000 and wants to buy a Ferrari which costs £100,000. He has £10,000 in savings to put towards the car and wants to borrow the remaning £90,000 as an unsecured personal loan.

Case Study 2
Joe Bloggs earns £30,000 and wants to buy a house which costs £100,000. He has £10,000 in savings to put towards the house and wants to borrow the remaining £90,000 as a secured loan against the property.

Okay. So both people earn exactly the same amount, both have exactly the same amount of deposit / savings and both want to buy an asset costing exactly the same amount. Are both of them 'affordable'? Well, under your thinking, both must be either affordable or unafordable, because you don't see any difference whatsoever between the two purchases.

Let's look at it from the banks point of view. Graham wants to borrow three times his salary to buy an asset which will be worth 30% less the minute he buys it and will probably be worth 50% less within a couple of years. If he loses his job and can't pay back the loan, the bank have absolutely no way of getting their money back. If I were a bank, I would argue that this is not a risk I'd want to take. I would therefore not lend you the money, and nor would any other bank. We all know this. So, what situation are you in? Well, you don't have enough savings to buy the car and no bank in their right mind would lend you the money. Therefore, you can't 'afford' the Ferrari. Can we at least agree on that? Because you can't get the money in any way, shape or form, you can't afford the car.

In recent years, case study 2 would be deemed 'affordable', at least in the traditional point of view. What would a bank think? Well, Joe Bloggs is buying an asset that traditionally retains, or increases, in value and is putting forward a deposit of 10%, so the bank will not lose any money if Joe stops paying his loan unless the asset falls more than 10%. Joe will be borrowing as a secured loan against the house and needs to borrow 3x his salary, which the bank are comfortable he can afford each month. And, as we've already seen, if he loses his job then the bank have an asset of equal value to the loan to take from Joe as a repayment. Traditionally, this would be seen by a bank as an 'affordable' purchase for Joe.

Has that helped? Have I demonstrated effectively why, using general common sense, Joe can afford a house whilst you can't afford a Ferrari? Why one example demonstrates affordablity whilst the other doesn't?

Cleaver

Graham_Devon wrote: »

It's not ludicrous. You have just spelt out exactly what I meant.

If you can't afford the deposit, and there isn't a product willing to lend to you until you have it. You can't afford the house.

Change the ferrari for any product you like if its the ferrari thats at issue.

Ahh, you see this is why I think you're being obtuse for the hell of it. Of course, if we're going by the dictionary definition of 'affordable', then obviously any house that someone won't lend you the money for is technically 'unaffordable'. I'm sure Julie will be along soon, but I reckon she mean what most people, and traditionally, we've deemed as 'affordable'.

Let's say I earn £100,000 and want to buy a house that's £80,000. I have a £50,000 deposit and just want to borrow £30,000. Is that house 'affordable' for me? 99.9% of people would argue that it is, comfortably. But if I can't find a bank that lends me the money, you're saying that it's technically unaffordable? I guess that technically you're correct, but that's obviously not what Julie meant in the spirit of her post, and you know that. In the example above, I can obviously 'afford' the house and you'd state that the banks were all being unreasonable. I think what Julie was arguing was that we have a similar situation at the moment, albeit obviously not with such extreme figures and a lot more grey area.

Graham_Devon

Cleaver wrote: »

Okay, let's make this a bit more simple (although I'm still pretty sure you're being obtuse for the fun of it, but there we go).

Cleaver, I know what all this is about. Howcome you never pick up on chucky for this obtuse stuff...yet he can go round spinning anything said on every single thread even to the point of outright abuse?

I KNOW what you are saying.

So another example. Myself and my mate both have business's. We approached the bank to expand, about 3 years ago. We couldn't afford to expand ourselves, but could afford the monthly repayment on the loan, we had everything worked out in the business plan.

We stated what we could afford to pay back. How we were going to pay it back. Even how we could pay it back early.

Didn't get the finance.

We couldn't afford to expand. There is no other way of looking at it. Without the product, we could not afford to buy what we wanted to buy in order to expand.

Yet the argument seems to be that indeed we could afford it. Affordability wasn't an issue. So if thats the case, howcome there was no way for us to proceed at the time? If we could have afforded it, we would have proceeded.

We couldn't afford it, because the product wasn't there to enable us to proceed.

It's not being obtuse. It's simple reality. The products are not there. It doesn't matter if they can afford x amount a month, as without the initial help, they can't do it...i.e. can't afford that house.

And that boils down to everything in life. With houses its slightly different, as we appear to have fallen into this mindset that lending is a right. And that, appears to be the issue here. The lending isn't there, people assume it's some kind of right, and therefore blame the banks with quotes such as "mortgage rationing" as if we all have a right, but they are holding it back from us.

And yes, I'm going on the dictionary definition. Why would I ignore the actual definition of "afford" and simply join in the mindset of suggesting we can all afford X Y and Z but are being stopped by nasty rationing? Products change. They changed from 100% to 110% to 125%. They have now reverted back. We all have access to the same products now. If thats changed what we can buy, then it's also changed what we can "afford". Suggesting we can afford something, on the premise of lending that was, or we have a "right" to, is just ignoring the reality of where we are now.

Call me obtuse for that all you that. But the products aint there. They may be one day. But right now, they are not. We can only work with what we have, and what we can afford, instead of suggesting we can afford things, if only lending was back where it was at one time.

I "can" paint my lounge. But if I don't have access to paint, it's going to be difficult. What julie seems to be suggesting is that I can paint my lounge, with or without paint, I can paint it. Yes, indeed, I CAN paint it....but I need the paint to be actually able to proceed with that thought.

chucky

Graham_Devon wrote: »

Cleaver, I know what all this is about. Howcome you never pick up on chucky for this obtuse stuff...

this isn't about me and it's not even about you. but anyway that's not important and you;re trying to deflect the conversation as usual.

let's give this a go for the umpteenth time...
affordability is being able to afford to pay for their mortgage.

mortgage rationing prevents people buying because they can't get a mortgage due to high LTV requirements for FTBs.

so when julie says this, she's absolutely right despite you trying to be clever.

Graham_Devon wrote: »

You are never gonna change her mind.

I mean, look at this for a messed up sentence...

affordability for a couple is good in most parts of the country and the only thing pricing them out is mortgage rationing.

Cleaver

Graham_Devon wrote: »

And yes, I'm going on the dictionary definition. Why would I ignore the actual definition of "afford" and simply join in the mindset of suggesting we can all afford X Y and Z but are being stopped by nasty rationing? Products change. They changed from 100% to 110% to 125%. They have now reverted back. We all have access to the same products now. If thats changed what we can buy, then it's also changed what we can "afford". Suggesting we can afford something, on the premise of lending that was, or we have a "right" to, is just ignoring the reality of where we are now.

Call me obtuse for that all you that. But the products aint there. They may be one day. But right now, they are not. We can only work with what we have, and what we can afford, instead of suggesting we can afford things, if only lending was back where it was at one time.

It's okay, you win. I agree with you. If we're going by a dictionary definition of afford, then you're quite correct. If a bank isn't offering any mortgage products then no house is affordable to anyone, no matter how much they earn. Let's just stop now.

System

Cleaver wrote: »

Okay, let's make this a bit more simple (although I'm still pretty sure you're being obtuse for the fun of it, but there we go).

Surely the main point is you don't get a 25-30 year car loan either.