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Debate House Prices
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Tumbling mortgage demand
Comments
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shortchanged wrote: »Do you see the problem here. There is a £24,000 shortfall.
Now that can be resolved 3 ways.
1) An additional £24,000 towards a deposit
2) An increase in the amount that is lent by the bank
3) A reduction in the house price to £132,000.
4) A realisation that people don't buy the average house as their first purchase, so they're going into it with equity from a starter home.
5) A realisation that the average income of all people is always going to be lower than the average income of housebuyers, as the poorest 30% of households have never been able to afford a house.
What's the average income of the top earning 70% of households?
What's the average price of an FTB house?
Answer those two questions correctly, and you'll understand why house prices are not overvalued at all.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
shortchanged wrote: »Hamish.
Average UK house price £160,000.
Average UK household income £40,000
Let's just say for arguments sake we look at a 10% deposit of £16,000.
That leaves a mortgage of £144,000
3 times a joint income of £40,000 = £120,000.
Do you see the problem here. There is a £24,000 shortfall.
Now that can be resolved 3 ways.
1) An additional £24,000 towards a deposit
2) An increase in the amount that is lent by the bank
3) A reduction in the house price to £132,000.
The problem then becomes if people ever want to buy a more expensive home & work up the chain.0 -
Itismehonest wrote: »The problem then becomes if people ever want to buy a more expensive home & work up the chain.
How about saving or waiting for a wage increase?"The problem with quotes on the internet is that you never know whether they are genuine or not" -
Albert Einstein0 -
shortchanged wrote: »Hamish.
Average UK house price £160,000.
Average UK household income £40,000
Let's just say for arguments sake we look at a 10% deposit of £16,000.
That leaves a mortgage of £144,000
3 times a joint income of £40,000 = £120,000.
Do you see the problem here. There is a £24,000 shortfall.
Now that can be resolved 3 ways.
1) An additional £24,000 towards a deposit
2) An increase in the amount that is lent by the bank
3) A reduction in the house price to £132,000.
Let's say the bank just lend the £144,000. The buyer will be paying about £800/ month in mortgage if they can get a 4.5% mortgage on a repayment basis. Would work out about 30% of income.
Doesn't seem the worst deal in the world especially when you consider that the alternative is rent of about the same amount.
Where's the problem?0 -
Itismehonest wrote: »The lenders seem to have been targeting particular sections of the market at the expense of the rest. FTB (before the end of the SD holiday - not sure if this is still the case - & BTL). While there is sense in trying to get people on to the bottom of the property ladder it becomes pointless if those wanting to move upward are unable to do so.
A friend recently sold their top of the chain property by having to buy the property at the bottom of the chain (a 2nd rung type of property) just to allow the whole chain to move.
We'd happily downsize &, when we were briefly on the market last year, had several instances of people who would be cash buyers from the SE unable to sell their own properties because the chain just stops at properties 1 or 2 transactions below theirs due to mortgage issues.
If the top rung can't downsize then it becomes as much as a problem for the overall market as those unable to get on the bottom rung. It just doesn't get the news coverage like the FTB problem.
Even building new starter homes won't solve the chain problem.
Something is needed to help unblock the whole chain.
This is exactly the point. The housing market is a chain with all rungs dependent on the other. While some like julieq will argue that you don't need FTB's for the chain to function in reality if you remove a rung then it doesn't function.
One of the main problems as you state Itismehonest is that the current owing FTB'ers are unable to climb the ladder because the next rung of the ladder is to far away. So basically prices need to drop higher up the chain for this to happen.0 -
Why does the mortgage *have* to be 3 times joint income?
Indeed.
Just because 3 times income used to be the average in the days of 15% interest rates, doesn't mean it should be in the future when any objective analysis of risk and probability would conclude it's virtually impossible that rates could rise that high again in the lifetime of any mortgage taken out today.
Assuming people should protect themselves against 15% rates is like assuming people should have to build bunkers in their house to protect against nuclear war.....
In fact, I'd say the chances of a nuke being detonated in a western country at some point in the next 25 years are greater than the chances of the UK seeing double digit base rates.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Let's say the bank just lend the £144,000. The buyer will be paying about £800/ month in mortgage if they can get a 4.5% mortgage on a repayment basis. Would work out about 30% of income.
Doesn't seem the worst deal in the world especially when you consider that the alternative is rent of about the same amount.
Where's the problem?
For starters a mortgage of 4.5% would be historically very low and chances are rates are only going one way from here.0 -
shortchanged wrote: »For starters a mortgage of 4.5% would be historically very low and chances are rates are only going one way from here.
You keep referring to historical events as if the same pattern is going to be duplicated in the future. There's no guarantee that's the case.0 -
shortchanged wrote: »the current owing FTB'ers are unable to climb the ladder because the next rung of the ladder is to far away.
Only because the price of current FTB houses fell by far more than the price of 2TB houses in the crash.
So falling prices made the gap between rungs wider.So basically prices need to drop higher up the chain for this to happen.
No, the price of FTB houses needs to rise back up to where they were before the crash. Then the gap will revert to historic norms.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
shortchanged wrote: »The housing market is a chain with all rungs dependent on the other. .
Hang on, just 5 minutes ago you tried to argue that FTB's should be buying the average house with no equity behind them.
Do make up your mind.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0
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