Is inflation starting to hit the housing market?

shortchanged_2

Basically as long as inflation outstrips wage inflation everyones living expenses and that includes mortgage debt becomes more difficult to afford without making changes, and you can only make so many changes e.g buy cheaper food products, cancel sky etc. So therefore inflation without subsequent wage growth will eventually have an adverse affect on the housing market as people will have less money available to be able to maintain a reasonable standard of living.

The situation we have at the moment can only really contribute to a fall in living standards for many.

wotsthat

Graham_Devon wrote: »

You are in agreement with myself then. It's wotsthat who stated that inflation makes the mortgage easier to pay. I stated what you have, in a nutshell..

*long sigh*

Harry_Boyle

Graham_Devon wrote: »

You are in agreement with myself then. It's wotsthat who stated that inflation makes the mortgage easier to pay. I stated what you have, in a nutshell.

Better change you're mind

I was actually going to use you as an example earlier in the thread, after telling us you combat inflation by bringing your purchase for season tickets forward.

Sorry Graham, I must have misunderstood. I thought you were arguing that inflation makes a mortgage harder to pay. If you are in agreement with me, then you clearly don't believe this.

I didn't bring my season ticket forward to save money. I just bought my first annual one on the 30th Dec to avoid January's rises. Previous to this I just had monthly tickets, which wasn't as cost effective as buying an annual one, but I wanted to get as close to Jan as I could before I took the plunge and bought an annual ticket. I now buy my annual tickets every year on or around the 30th Dec.

The result is that I paid 2012 prices for 2013 travel and in April I will receive my cost of living pay rise and enjoy 10 months of increased income untouched by train travel inflation.

grizzly1911

wotsthat wrote: »

Why assume everything stays like for like. My mortgage has just become easier to pay. I've not had a pay-rise nor has it reduced in price - I've cancelled Sky.

The key is to spend time trying to a) reduce personal inflation rates and b) to minimise the proportion of income that is spent. So, yes, the well-off will be at an advantage but I find that most well-off people don't arrive there by accident.

It's not for ever - something will give - in the meantime there's a choice of doing nothing (and getting poorer) or doing something that allows standard of living to be maintained or even improved for less money.

You are right that if you have surplus income, which you must have had at some point to have SKY or other unecessary items then you cna adjust and maintain your position because you have choice.

As you point out not wasting money and always endeavouring to save something allows you choice.

In giving up SKY, or something similar, some would feel it is degrading their quality of life to maintain the basics.

As in NIAKs example at some point you could run out of options and choices. Some either don't have those choices, or are closer to the point of no choices.

Graham_Devon

Harry_Boyle wrote: »

Sorry Graham, I must have misunderstood.

Thought you'd have a quick change of heart when you realised you were agreeing with me and not others

grizzly1911

Harry_Boyle wrote: »

The result is that I paid 2012 prices for 2013 travel and in April I will receive my cost of living pay rise and enjoy 10 months of increased income untouched by train travel inflation.

Until you come to renew. You are merely out of step with it. Your first annual purchase was the one that saved you money over the monthly tickets. If you buy the tickets for 20 years you will only have side stepped one set of inflation.

Same with utilities the big saving is going for DDR and online management.. Fixing for x months/years just helps you budget. When you next renew the step is just bigger than if you had trailed the variable rates. Like being on adjacent stairs, if you fix you just have bigger steps rather than smaller steps. At some point you will still reach the top of the flight.

grizzly1911

IveSeenTheLight wrote: »

LOL,
We are aware, arguably more aware than some "anti house price people" who struggle to understand that by securing the costs of housing, it lowers the risk to disposable income going forward

Let's take a simple example.

Year 1
Wages £25,000


Year 5
Wages £28,137 (3% per year)


Year 10
Wages £28,137 (3% per year)

Year 10 wages not increased?

grizzly1911

N1AK wrote: »

You're absolutely right on this and it is frustrating that some people don't seem to get it.

If someone got a £120 pay rise they'd be £6.8 a month (32% lost to tax and NI) higher paid. However if they were currently spending £500 a month on petrol, food and other products affected by inflation then a 2.5% rate of inflation would increase that cost by £12.50. So they'd have ~£6 less per month after food etc to pay the mortgage etc.

Now you might think a £120 pay rise is unrealistically small but that's 1% for someone earning £12k so it genuinely is representative for the kind of people who would be struggling in the first place.

I appreciate the inflation figure used was by way of example.

The chances are their personal rate of inflation will be much higher as bigger part of their budget will be on necessities which are rising ahead of inflation. Energy 5 times for instance.

Thrugelmir

IveSeenTheLight wrote: »

Wages £28,137 (3% per year)

Rent = £1,103 (Only 2.5% inflation)

Please let us know where we can get jobs with guaranteed 3% annual compound rises.

Or an investment that pays an index linked increase of 2.5% income after tax every year.

grizzly1911

Harry_Boyle wrote: »

I don't see the point of the discussion TBH. You could use this logic with any item that you buy. Our council tax has been the same for the last 3 years, but our other costs have gone up. With your logic I can state that inflation is making it more difficult to pay my council tax.

The reality is that the council tax is the same price as it ever was, inflation is making our petrol, food and utilities more difficult to pay.

It's like saying that inflation on a tin of beans is making my piano lessons more expensive. It's the ridiculously flawed logic, that's termed as 'junk science'.



p.s. the mortgage doesn't 'only' get easier to pay if you have wage inflation. It also gets easier if you get a better interest rate and if you make overpayments. People keep making this point but you keep ignoring it because it completely undermines your argument.

Inflation on food, energy etc (if you can't actually bring them down). doesn't make your piano lesson any more expensive but it will make it less easy to afford. You can of course give up your piano lesson if choose to continue eating and keeping warm.

You are right if you have the luxury of surplus income, you can make the choice to overpay. If you don't have surplus income and your interest rate is already on the floor of course you do not have that choice.

Whilst we have choice lot's of things are possible. Some simply don't have real choice, appreciates there will be lot's of marginal debates about limited personal choice that doesn't really add up to a row of beans.