Government repressing house prices.

Turnbull2000

The earnings ratio is obsolete. Some people just can't see it.

30 years ago you’d perhaps borrow 3.5x single income at 8% mortgage rate. So £75,000 purchasing power.

Today, banks offer up to 4.5x duel income at 5% or less. So £225,000 purchasing power.

We now also have more established owners or Noughties borrowers on fixed or tracker mortgages enjoying mortgage rates of 1-3%, massively boosting purchasing power of those already within the market.

Fact is, there's little to no reason for UK house prices to fall. But there's plenty reason for them to march upwards again within a year or two.

shortchanged_2

Turnbull2000 wrote: »

The earnings ratio is obsolete. Some people just can't see it.

30 years ago you’d perhaps borrow 3.5x single income at 8% mortgage rate. So £75,000 purchasing power.

Today, banks offer up to 4.5x duel income at 5% or less. So £225,000 purchasing power.

We now also have more established owners or Noughties borrowers on fixed or tracker mortgages enjoying mortgage rates of 1-3%, massively boosting purchasing power of those already within the market.

Fact is, there's little to no reason for UK house prices to fall. But there's plenty reason for them to march upwards again within a year or two.

So what happens when these people see interest rates go up to say even 6-7%

That Turnbull is a worrying thought.

shortchanged_2

Harry_Boyle wrote: »

Again, I've seen this expressed previously but I have never understood where the reference point was. If you are wealthy then a 2 bed house in Hull might be less than 1 year's salary, whereas a 2 bed penthouse apartment in Knightsbridge might be 7 times salary. Is the penthouse apartment overpriced or is the wealthy person just not wealthy enough to buy in that exclusive area?

Similarly, someone who earns £8k a year might struggle to find any property they could afford to buy, does this mean that his/her earnings are too small or that house prices are overpriced in relation to his/her earnings?

I've also seen a reference point of average salary against average house price, but again this doesn't follow because it's unlikely that a first time buyer would buy an average house and so you have to factor in any equity already amassed in previous properties, which would be impossible to calculate.

I must admit I'm still struggling to understand where the reference point with this to enable anyone to say that house prices are definitively overpriced. Surely it all just boils down to personal opinion?

Well you would think that Renoman.

grizzly1911

Turnbull2000 wrote: »

The earnings ratio is obsolete. Some people just can't see it.

30 years ago you’d perhaps borrow 3.5x single income at 8% mortgage rate. So £75,000 purchasing power.

Today, banks offer up to 4.5x duel income at 5% or less. So £225,000 purchasing power.

.

The earning ratio isn't obsolete it is still very relevant.

The fact that is chosen to be ignored doesn't make any less significant.

The fact that lenders are prepared to offer bigger multipliers is simply to fit the equation. The boorrowers disposable income doesn't just inflate because a bigger multiplier is used.

HMT's signature is apt when people over commit too and lenders allow them to .:-

“Just think of how stupid the average person is, and then realize half of them are even stupider!”

Thrugelmir

Turnbull2000 wrote: »

Today, banks offer up to 4.5x duel income at 5% or less. So £225,000 purchasing power.

Banks are still only lending at an average multiple of 3.25 times.

So for every higher multiple there's a corresponding lower one or more.

Turnbull2000

shortchanged wrote: »

So what happens when these people see interest rates go up to say even 6-7%

That Turnbull is a worrying thought.

It's not a worrying thought because it won't be allowed to happen.

shortchanged_2

Turnbull2000 wrote: »

It's not a worrying thought because it won't be allowed to happen.

So if the economy starts to do very well in the next few years we'll still have interest rates at 0.5% will we?

Turnbull2000

shortchanged wrote: »

So if the economy starts to do very well in the next few years we'll still have interest rates at 0.5% will we?

I don't think the economy will do particularly well for quite a while. Our imbalances and failures are deeply ingrained, and the political will to tackle them barely exists. However, the political will to support and boost asset prices remains as strong as ever.

Rates might creep up a bit, but not much. At most, 1% by 2015 and 2% at the end of the decade IMO.

homelessskilledworker

shortchanged wrote: »

So if the economy starts to do very well in the next few years we'll still have interest rates at 0.5% will we?

Of course!!

Have you not heard "the Government won't allow it":rotfl:

It seems like so many of the posters on here have no experience or even understanding of the concept of events taking control as opposed the government.

Graham_Devon

Turnbull2000 wrote: »

It's not a worrying thought because it won't be allowed to happen.

It will have to happen if the world economy dictates it.