Halifax Jan +0.6% MoM -1.8% YoY

IveSeenTheLight

DaddyBear wrote: »

We're getting significant YOY real term drops.

So you would be quite happy with stagnation, even small increases, as long as inflation is higher.

shortchanged_2

IveSeenTheLight wrote: »

So you would be quite happy with stagnation, even small increases, as long as inflation is higher.

For me personally no, because inflation isn't currently driven by wage inflation, so in theory in the current situation, unless house prices actually fall they are getting actually getting more unaffordable as peoples take home pay decreases and their outgoings increase.

Obviously the elephant in the room regarding this one is the very low interest rates and there is a certain proportion of people who are better off now than they were before if they are on the right deal as their mortgage costs have significantly decreased.

IveSeenTheLight

shortchanged wrote: »

there is a certain proportion of people who are better off now than they were before if they are on the right deal as their mortgage costs have significantly decreased.

Arguably, most people who were homeowner at peak will have had the opportunity to move on to lower SVR's at the least since that time.

For those that have bought since, they will be on lower rates than when base rates were 5.75%

shortchanged_2

IveSeenTheLight wrote: »

Arguably, most people who were homeowner at peak will have had the opportunity to move on to lower SVR's at the least since that time.

For those that have bought since, they will be on lower rates than when base rates were 5.75%

But this is part of the problem ISTL, in that some people may view houses as affordable now only because interest rates are so low. I think that is a potential time bomb for when interest rates do rise.

IveSeenTheLight

shortchanged wrote: »

But this is part of the problem ISTL, in that some people may view houses as affordable now only because interest rates are so low. I think that is a potential time bomb for when interest rates do rise.

To quantify the risk, I guess you need to consider the expected timeframe on the lower rates, consider the capital paid back in that time and consider wage increases in that time.

To take an extreme example.

If rates stayed low for 25 years, then the buyer would not have a mortgage.

If rates stayed low for 15 years, then the approx 50% of the capital will have been repaid.

If rates stayed low for 5 years, then 13% of a new mortgage will have been repaid. If you are already part way through the mortgage, the percentage paid increases.

If rates stay low for only 2 more years, then you have the opportunity to adapt to when rates rise and budget accordingly.

Even now, people have the opportunity to fix on long term relatively low rates, if you are risk averse.

It is very MSE sense to capatalise when rates are low and make as much investment as possible so that when rates rise you can pay off the capital and incurr less interest payments overall.

I really don't understand how it is perceived to be a substantial risk when rates rise.
Most people could afford when peak prices and higher rates were around, you just have to look at the reposession rates.

Sure some will be affected and of those, I'm confident, some will adapt.

can you quantify why the risk will be substantial enough to grossly affect the figures?

shortchanged_2

Because I think many people often take the short term view and think I can actually afford this now without thinking what a future rise in interest rates may do to their mortgage.

IveSeenTheLight

shortchanged wrote: »

Because I think many people often take the short term view and think I can actually afford this now without thinking what a future rise in interest rates may do to their mortgage.

thanks, but that does not quantify the risk.

IveSeenTheLight wrote:

can you quantify why the risk will be substantial enough to grossly affect the figures?

What percentage of mortgages do you think this will affect?

shortchanged_2

IveSeenTheLight wrote: »

T

I really don't understand how it is perceived to be a substantial risk when rates rise.
Most people could afford when peak prices and higher rates were around, you just have to look at the reposession rates.

But you're missing a couple of key points here ISTL.

1) Most household income now if you take out mortgages (so ignore the fact that some people are on really good mortgage rates at present) is less now than it was back in 2007.

2) People probably couldn't afford the prices back then or we wouldn't have such a serious debt problem in this country as we do now. i.e many people were living beyond their means and living a life on credit.

IveSeenTheLight

shortchanged wrote: »

But you're missing a couple of key points here ISTL.

Lets look at those then.

shortchanged wrote: »

1) Most household income now if you take out mortgages (so ignore the fact that some people are on really good mortgage rates at present) is less now than it was back in 2007.

Really. That's interesting and insightfull.
Do you have a link to these stats?

According to Annual Survey of Hours and Earnings , 2007 Results (see table 8.7a) the Median salary of all employees was £20,000 whilst the Mean average was £24,972

According to Annual Survey of Hours and Earning, 2011 (Provisional Results) (See table 8.7a) the Median salary of all employees was £21,326 whilst the Mean average was £26,871

There are further tabs on these spreadsheets which break down the data further by gender and full / part time

This would seem to suggest that average income has increased and not decreased in the last few years

shortchanged wrote: »

2) People probably couldn't afford the prices back then or we wouldn't have such a serious debt problem in this country as we do now. i.e many people were living beyond their means and living a life on credit.

"Probably couldn't" is not a definitive term, however.....

Recent reports suggest that unsecured debt is reducing
http://www.independent.co.uk/news/uk/home-news/unsecured-debt-falls-for-third-year-in-a-row-6635087.html

http://www.totallymoney.com/news/index.php/2012/02/british-families-owe-8000-in-unsecured-debt/

Of course this backs up your statement that essentially, they must have been living beyond their means in the past, but certainly it seems that people are paying down that debt, not only living within their means but paying back what they once owed, albeit it at a slow repayment levels.

In addition, it appears that homeowners are also paying down mortgage debt at record levels
http://www.independent.co.uk/news/business/news/homeowners-make-record-mortgage-repayments-2171712.html

Of course, it's hard to differentiate how much unsecured debt is held by homeowners and non homeowners

shortchanged_2

IveSeenTheLight wrote: »

Really. That's interesting and insightfull.
Do you have a link to these stats?

According to Annual Survey of Hours and Earnings , 2007 Results (see table 8.7a) the Median salary of all employees was £20,000 whilst the Mean average was £24,972

According to Annual Survey of Hours and Earning, 2011 (Provisional Results) (See table 8.7a) the Median salary of all employees was £21,326 whilst the Mean average was £26,871

There are further tabs on these spreadsheets which break down the data further by gender and full / part time

This would seem to suggest that average income has increased and not decreased in the last few years

Bit of a misquote there by me I'm afraid. I suppose I meant disposable income is declining. Yes wages may still be rising, but tax increases and inflation are meaning more people are feeling the squeeze on household income and expenditure.

http://www.independent.co.uk/news/uk/home-news/average-household-income-down-16-2248131.html