Cheapest Houses since 1999

JonnyBravo

Thrugelmir wrote: »

Absolutely fact. Check it out.

I think you need to check it out.

The amount you repay (as a precentage of the total loan) over, for example, the first 4 years varies according to the rate you're paying (assuming a flat rate).
eg 2% for 25yrs and you'll have paid roughly 12.5% of the loan in 4 years but 6% and it's near to that 7.5% you stated.


It's obvious when you think about it, if the interest and therefore the monthly payment is a larger nominal amount then the line which is a plot of "percentage of monthly payment used for interest" vs time has a much steeper gradient than that line where the total monthly payment is a smaller nominal amount.

JonnyBravo

the_flying_pig wrote: »

Thrugelmir's figure [7.5% paid off after 4 yrs] is correct for interest rates at 6.5%.

e.g. if rates are zero you'll have paid off 16% of the balance [since all mortgage payments go straight towards capital repayments].

e.g. if rates are 15% you'll have paid off only a couple of percent.

etc.

here's what the repayment schedule looks like for 5% and 10% rates.

:T

Spot on

HAMISH_MCTAVISH

the_flying_pig wrote: »

Thrugelmir's figure [7.5% paid off after 4 yrs] is correct for interest rates at 6.5%.

Then Thrugelmir is being a very naughty boy, because the number of people that have actually paid that much in the last few years must be vanishingly small.

Even putting aside all the low lifetime trackers that were around pre-crash, had you walked into any high street branch of major lenders such as Nationwide or Lloyds TSB you could have had a 100% LTV mortgage at base + 0.5% for 2 years, reverting to base plus 2% for life. And a great many people do.

Assuming a purchase at absolute peak in Q3 2007, the numbers work out roughly as follows:

200K mortgage.

After 4 years 25K of the capital has been repaid, 175K remaining.

After 5 years 32K of the capital has been repaid, 168K remaining.

The mortgage payments in total, capital and interest, would have been equivalent to a rental yield of 5.3%,which is pretty much bang on the national average.

The property value today, based on the Nationwide average, would be 180K.

So for those on a typical variable rate mortgage in 2007, and assuming average falls from peak and average rents, it is now cheaper to have bought at absolute peak, even with a 100% mortgage, than to have rented the same property since.

This is why time is the enemy of housing bears.;)

DervProf

HAMISH_MCTAVISH wrote: »

This is why time is the enemy of housing bears.;)

That may well be true, but past performance.......... etc.

purplelila-2007

If house prices were so affordable - then why aren't people buying ??

Why have transactions reached record lows?

And why do most people of my generation despair at not being able to afford their own home .

HAMISH_MCTAVISH

purplelila-2007 wrote: »

If house prices were so affordable - then why aren't people buying ??

Because of mortgage rationing.

It really is a crime that the young of today are being excluded from taking advantage of some of the cheapest housing costs (as a percentage of income) in the last couple of decades.

Why have transactions reached record lows?

They haven't.

Record lows were at nearly half of todays levels.

And why do most people of my generation despair at not being able to afford their own home .

Well, according to the most recent survey on the matter, because they know they won't be able to get a mortgage.

DervProf

HAMISH_MCTAVISH wrote: »

Because of mortgage rationing.

It really is a crime that the young of today are being excluded from taking advantage of some of the cheapest housing costs (as a percentage of income) in the last couple of decades.

Well, there has to be some way of "sharing" the limited amount of property between prospective purchasers. I`ve said before, and I'll say it again, unleashing more credit into the property market now will only bring forward bigger problems in the future. Of course, those with an eye on HPI and lining their own pockets will only welcome more lending, claiming that it's unfair on FTBers that they require a 10% deposit.

Given the mistakes of 2001 - 2007, I think the current situation is about the best we can hope for. Going forward, it isn't just a return to easier lending conditions that we need.

HAMISH_MCTAVISH

DervProf wrote: »

Going forward, it isn't just a return to easier lending conditions that we need.

No, it's more house building that we need.

But that won't happen without an increase in lending.

After all, builders won't build what they can't sell......

Le_Chuck

HAMISH_MCTAVISH wrote: »

Because of mortgage rationing.

It really is a crime that the young of today are being excluded from taking advantage of some of the cheapest housing costs (as a percentage of income) in the last couple of decades.



.

give it rest. What do you propose 5x, 6x, 7x, 8x salary multiples?
where do we stop?

The problem is house price/salary ratio is too high, why can't you see that as its blindingly obvious.

DervProf

HAMISH_MCTAVISH wrote: »

No, it's more house building that we need.

But that won't happen without an increase in lending.

After all, builders won't build what they can't sell......

I agree.

However, I suspect that if banks were to start lending to FTBers with lower deposits, it would be seen as everything been OK again (like eveything was OK in 2005/6). You'd certainly be giving it :beer:, and I`'d certainly be predicting another lending/price boom, followed by a bust which might not be so easily "controlled".