A generation are being priced in order to keep the value up of their parents assets.

Graham_Devon

ukcarper wrote: »

It is possible to buy a brand new 2-bed house in Manchester for £100k according to ONS median full time salary in Manchester is £20k, which rises to £25.7k for a male, female part time is £8.4k. A couple consisting of a male earning median full time earnings and woman earning part time median would earn £34k so with a 10% deposit would require a 2.65x earnings mortgage.

Were back to value for money.

Percy1983

ukcarper wrote: »

I’m not sure that’s the case so long as you have a repayment mortgage over say 25 years after 5 or 6 years you would have paid off quite a large chunk of capital. With say a £100k mortgage at 5% you would owe £86k at the end of the 6th year.

Remember if prices have stagnated or fallen slightly the bigger house and therefore the extra required will be less than if prices had boomed.

I agree but you see how the sums don't help you but the ladder like hpi did. Going with the bigger house being £150k

IE, as you say above after 6 years you have £14k equity, now you sell and you have £14k in the bank yet you need £15k to get a 90% mortgage for your next house+ moving costs

Now lets add HPI at 20%:

So your house is worth £120k so you have £34k equity, the house you want has gone upto £180k, to which you have and 18.88% deposit form your 34k.(or 15% + moving costs covered)

As I say in booming times it made sense just to jump in, now its makes sense to choose carefully.

This isn't a complaint, if I want a bigger house now I expect to work hard and save for it, I don't expect hpi to do it for me.

Graham_Devon

wotsthat wrote: »

Why not just increase the volume of loans that are issued to people who meet 90% lending criteria?

Banks have limited funds for lending so what's happening is that they are cherry picking the best risks and actively competing to attract them (look at some of the great fixed rate deals around at the moment). I suspect what they are trying to put themselves in a position where they can say "look at us - we're lending into the economy" which is important politically and are willing to reduce margins to be able to do this at lowest risk.

You don't need to buy into the full mortgage rationing theory to see that banks will choose a 60% LTV over a 90% LTV when funds are limited. This isn't about loosening the criteria for 90% LTV customers but just about finding more funds to lend to them. The 90% LTV hasn't suddenly become a bigger risk - the banks are just choosing not to take on that risk as much.

I honestly don't think you need to lose anymore sleep about a return to 2007 lending criteria - it's not being suggested.

OK, but looking at this, I'm left with one question. I've got my own answer too.

Why expect the builders to lower their profits and higher their risk, when the builders aren't expected to do so?

Not saying you have suggested this yourself, but certainly the "builders can't reduce prices and why should they" line has come up time and time again.

Why should banks increase their risk when other sectors shouldn't?

The resounding answer is....builders increasing their risk and lowering profits reduces house prices.

Banks reducing their risk increases house prices.

Therefore banks should reduce their risk, but builders shouldn't. If I'm wrong, correct me. But I'm positive that if I started a new thread stating builders should reduce prices, you'd ask why they should.

the_flying_pig

Percy1983 wrote: »

I agree but you see how the sums don't help you but the ladder like hpi did. Going with the bigger house being £150k

IE, as you say above after 6 years you have £14k equity, now you sell and you have £14k in the bank yet you need £15k to get a 90% mortgage for your next house+ moving costs

Now lets add HPI at 20%:

So your house is worth £120k so you have £34k equity, the house you want has gone upto £180k, to which you have and 18.88% deposit form your 34k.(or 15% + moving costs covered)

As I say in booming times it made sense just to jump in, now its makes sense to choose carefully.

This isn't a complaint, if I want a bigger house now I expect to work hard and save for it, I don't expect hpi to do it for me.

bit simplistic, P.

basically, for a trader-upper thinking about moving from house A to house B, HPI will mean that he:

(1) has bigger deposit; but
(2) will need to borrow a higher multiple of his salary.

generally most people seem to agree that HPI makes it harder to trade up, i'm certainly one of them.

Percy1983

the_flying_pig wrote: »

bit simplistic, P.

basically, for a trader-upper thinking about moving from house A to house B, HPI will mean that he:

(1) has bigger deposit; but
(2) will need to borrow a higher multiple of his salary.

generally most people seem to agree that HPI makes it harder to trade up, i'm certainly one of them.

But apprantly its the deposits whch are a big part of the current problem.

Graham_Devon

ukcarper wrote: »

I’m not sure that’s the case so long as you have a repayment mortgage over say 25 years after 5 or 6 years you would have paid off quite a large chunk of capital. With say a £100k mortgage at 5% you would owe £86k at the end of the 6th year.

While that's correct, the 14k you have paid off won't go that far when it comes to buying / selling fees, legal fees and stamp duty.

It's a cost of house buying, so it's got to be taken into consideration.

System

It doesn't make it harder at all, it makes it slightly more expensive but a lot of that cost will be absorbed in the lower LTV you'll end up with.

ukcarper

Percy1983 wrote: »

I agree but you see how the sums don't help you but the ladder like hpi did. Going with the bigger house being £150k

IE, as you say above after 6 years you have £14k equity, now you sell and you have £14k in the bank yet you need £15k to get a 90% mortgage for your next house+ moving costs

Now lets add HPI at 20%:

So your house is worth £120k so you have £34k equity, the house you want has gone upto £180k, to which you have and 18.88% deposit form your 34k.(or 15% + moving costs covered)

As I say in booming times it made sense just to jump in, now its makes sense to choose carefully.

This isn't a complaint, if I want a bigger house now I expect to work hard and save for it, I don't expect hpi to do it for me.

Take my example the person if prices stagnate now has £24k worth of equity enough for a deposit on that £150k house and he would need £126k mortgage.

Take 20% HPI his original £110k would be worth £132k so he would have £46k worth of equity the £150k house would be worth £180k meaning he would require a £134k mortgage.

ukcarper

Graham_Devon wrote: »

While that's correct, the 14k you have paid off won't go that far when it comes to buying / selling fees, legal fees and stamp duty.

It's a cost of house buying, so it's got to be taken into consideration.

I disagree if you allow half for that you will still have £17k to put down on your next house.

Graham_Devon

ukcarper wrote: »

I disagree if you allow half for that you will still have £17k to put down on your next house.

Sorry, not sure how if you halve 14, you end up with 17?

Even adding 10k as a deposit to your 100k mortgage scernario, it still does end up with 17k as a deposit.

Unless you are assuming rapid growth or something? Wouldn't surprise me