MSE News: Interest-only mortgages could be 'thing of the past'

gingeralan

RenovationMan wrote: »

Do you think it's rational to assume that every region of the UK rises and falls at the same time and same rate? If so, then I suggest you look at graphs showing regional variances in the HPC falls over the last 3 years to see how wildly they can vary. You will also see, amazingly, that some areas actually increase while others decline.



Your lack of knowledge doesn't seem to stop you expressing yourself.

Rest assured that I have put as much research into the renovations as I did with my finances before I bought the house. I am using traditional lime based products that allow the walls to breathe.



You seem to know a lot about my 'gamble' for someone who hasn't been a forum member for long and who does not frequent the same boards as me. However, you made statements that indicated you thought I was in a precarious position financially. I was merely interested in how you came by that decision based on so little information. Never mind, if it's like any of your other posts, I won't get that info because you didn't base your statement on anything - much like your other statements in this thread.

How can I be the troll, you're the one who personalised all this by making claims that I was in a precarious financial position, etc. I'm merely defending myself. I haven't said anything about your own finances, have I?

I also havn't claimed that there was no HPI between 98 and now. Another strawman argument you seem to be building.

but you did claim there was none between 95 and 98, the only evidence we have to work from shows that there was, simples.

Show me some stats for Manchester and we might be able to talk about your assertion. If I was not in a position to observe prices when I went to see my gran and notice the large increase then I fail to see how you are qualified to do this without some official stats to back it up.

I don't see why my not being a member for long prevents me from having Assn opinion on i/o mortgages in general. As I say you keep coming back with pointless arguments. You are not going to convince me as I have said, I accept it's your decision and it's your life. I am sure people agree with you and others disagree.

I am not getting personal, I am just unable to see why you feel the need to justify yourself with your straw man arguments. If you are happy great I wish you all the best. Hope it works for you, as long as you are happy with the risks which there are I don't care what you or anyone else say.

I don't really see where this conversation is going to go.

jamesd

gingeralan wrote: »

They could buy somewhere smaller/cheaper. If you learn an area there are usually pockets in areas perceived as bad that are actually quite pleasant, yet the overall impression helps you get the place for a reasonable price.

That and needing renovation is why my own LTV is around 1. But what about that person with a standard repayment mortgage that is only half paid off after fifteen years. Do you really want to ban them from buying a place unless they can pay cash?

And what about that FSA requirement to assess affordability on repayment basis for interest only?

You really shouldn't use 4% as the typical long term mortgage interest rate for this country. It's more like 5-6%.

To find places where there has been a difference in house price inflation try taking a look at the regional house price indexes. The index varies from a high of 659 in London to a low of 406 in Scotland. Which is sort of amusing because it shows deflation in house prices compared to GDP per person in some regions and inflation in others:

London region house price index: 659
Scotland region house price index: 406
Value of £100 in 1983 (HPI 100 value year) compared to:
RPI: 263 (so house prices grew faster than RPI)
GDP: 248 (so house prices grew faster than GDP)
Average earnings: 386 (so house prices grew faster than average earnings)
Per capita GDP: 430 (so in Scotland prices grew less than each person's share of GDP)
Share of GDP: 475 (and even more less than the percentage of GDP needed to buy a house)

While the GDP figures are interesting it's perhaps more useful to note that Scottish house prices only grew by 5% more than the increase in national average earnings. That's not a lot of change.

Here are the regional house price indexes for the West Midlands region:

240.7 1989
238.0 1990
240.4 1991
229.4 1992
219.1 1993
218.3 1994
215.6 1995
224.6 1996
237.3 1997
250.0 1998
254.7 1999

There was a significant period of price declines and stability in that period in this region and by 1998 prices had only just exceeded their 1989 level.

The house price index page also has a spreadsheet comparing prices to earnings, the income multiple of prices compared to earnings. It's pretty low right now compared to some periods, just 4.3 national average. It was 5.86 in Q2 2007 nationally. The average over the whole period from 1983 to 2011 is 4.07 so prices in general are only a little above the average at the moment.

The HPI chart is nice and pretty but not adjusted for earnings or any other inflation so it's a very poor tool to look at the real change in house prices.

There's data out there. Sometimes you have to actually look for it if you want it.

Thrugelmir

[QUOTE=jamesd;51133201
The house price index page also has a spreadsheet comparing prices to earnings, the income multiple of prices compared to earnings. It's pretty low right now compared to some periods, just 4.3 national average. It was 5.86 in Q2 2007 nationally. The average over the whole period from 1983 to 2011 is 4.07 so prices in general are only a little above the average at the moment.

[/QUOTE]

Probably not for the average wage earner. Executive and management pay has increased significantly. The distribution of wealth has become more and more uneven.

jamesd

Not sure about that. There would also have been a change in the distribution of house prices to match the income changes that are one of their ultimate drivers in most of the country.

gingeralan

jamesd wrote: »

Not sure about that. There would also have been a change in the distribution of house prices to match the income changes that are one of their ultimate drivers in most of the country.

What planet are you on? If the average house price as you yourself admit has increased faster than average wages then this distribution you are referring to cannot exist.

jamesd

Are you disagreeing with Thrugelmir's accurate statement that the difference between average and higher wage earners has increased over the period? Or suggesting that house prices in some areas have increased more than in others?

A mean average tells you nothing about the distribution of values that make up the average. You can have an average of 5 with wages of 4, 4 and 7 or 3, 3 and 9.

jaysb

http://www.bbc.co.uk/news/business-17075264

looks like days are IO are fairly numbered, save for the few that have them now, and then only those that meet the increasingly stricter criteria when they need to remortgage

I'm aiming to clear (by overpayments) my IO mortgage before I need to remortgage

gingeralan

jaysb wrote: »

http://www.bbc.co.uk/news/business-17075264

looks like days are IO are fairly numbered, save for the few that have them now, and the only those that meet the increasingly stricter criteria when they need to remortgage

I'm aiming to clear (by overpayments) my IO mortgage before I need to remortgage

Excellent!