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Debate House Prices
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There could be a high price for creating a price boom
Comments
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HAMISH_MCTAVISH wrote: »
The average income multiple of actual FTB mortgages issued never crossed 3.5 times income even at peak in 2007.
Yes, but to get an AVERAGE of 3.5x wages, over half of those FTB's had to be taking out loans worth 5,6,7x their income.
Otherwise the average can't be acheived, therefore it's not a lie to suggest this was the case.
The problem comes when we introduce the fact that these loans were often on interest only too, so in many cases the high LTV's don't even cover the capital aspect.
And then we have self cert mortgages and the, lets say, creative accounting that happened there to inflate incomes, making the stats look a little better.
Theres something amiss, as it's a little odd to have house price vs wages increasing to nearly 6x, but mortgage vs wages never going past 3.5x .....especially when you consider the introduction of 125% mortgages.
All I'd ask is what's the average in say 2001?
The figire 3.5x doesn't really mean much without the context of knowing where it was before.0 -
shortchanged wrote: »And even if you go by the figures on this article from 2007 which supports your theory with ftb multiples less than 3.5 it still highlighted the fact that FTB'ers were getting dangerously stretched in 2007 trying to keep up with the market.
Those figures show that FTB-s were borrowing 3.3 times income, and that the proportion of their income used to pay mortgage interest rose to a record of just 17.8%.
Under no circumstances could that be described as "reckless".“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 -
Graham_Devon wrote: »Yes, but to get an AVERAGE of 3.5x wages, over half of those FTB's had to be taking out loans worth 5,6,7x their income.
Otherwise the average can't be acheived,.
Absolute Fantasyland stuff from you Graham, yet again.
You could have 100 loans at 2.9, 100 loans at 3, and 100 loans at 3.1, and the average would be 3.
Nowhere does any recorded data, or indeed basic maths, suggest that half of them had to be taking out 7 times income loans.:rotfl:“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 -
HAMISH_MCTAVISH wrote: »Nowhere does any recorded data, or indeed basic maths, suggest that half of them had to be taking out 7 times income loans.:rotfl:
Well it's a good thing that's not what I said then.
Come on Hamish, you can't ignore this. The average is the average. 50% were paying OVER 3.5x their income.
You'd need those taking out 5,6,7x their income to offset those taking 0.5,1,2x their income to arrive at such an average.0 -
Graham_Devon wrote: »Theres something amiss, as it's a little odd to have house price vs wages increasing to nearly 6x, but mortgage vs wages never going past 3.5x ......
It's not odd at all Graham.
As has been explained to you many, many times, the average income of all people is not the same as the average income of actual house buyers, and never has been.
And the average FTB house price is not the same as the average house price.“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 -
Can someone tell me when IO mortgages started?
I don't recall any such thing being available back in the 70s/80s. The only time most people were allowed to pay interest only was during times of hardship.
There seems to be a problem where many borrowers have taken out IO mortgages with no thought as to how they pay the mortgage off at the end of the term. Many just seemed to presume that house price inflation would solve the issue which was stupid.
Whether mortgage lending was completely mad or not it definitely encouraged some people to take on debts which they couldn't repay, IMO. I don't know how the banks/lenders thought it was sustainable really.0 -
HAMISH_MCTAVISH wrote: »It's not odd at all Graham.
As has been explained to you many, many times, the average income of all people is not the same as the average income of actual house buyers, and never has been.
And the average FTB house price is not the same as the average house price.
Yes, we know all this.
You are trying to ignore the point.
The point is, to get such an average, you have to have people paying over the average. Do you disagree? If not, why call people liars for suggesting this was the case?
The average is just that. ONE statistic. You have to look at more than that. That average won't care if the products changed and allowed more and more people to take IO loans, therefore keeping the average down, but at the expense of ignoring the capital aspect.0 -
Graham_Devon wrote: »The average is the average. 50% were paying OVER 3.5x their income.
Which could be 3.6.
On a more serious note, I'd be prepared to bet that the shape of the FTB lending bell curve clusters the vast majority very tightly around the median.
And that vanishingly small numbers were borrowing more than 4.5 times, or less than 2.0 times, income.
Which simply cannot be described as systemically reckless lending, by any stretch of the imagination.“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 -
Graham_Devon wrote: »
Theres something amiss, as it's a little odd to have house price vs wages increasing to nearly 6x, but mortgage vs wages never going past 3.5x .....especially when you consider the introduction of 125% mortgages.
This is one thing I find totally bizarre as well and makes me wonder how things really don't add up.
If house prices rose by 100%- 200% or more in the space of a couple of years, how come mortgage income multiples barely rose. Because there is no way that wages grew by anywhere near that amount. It really does not make any sense, particularly in the FTB market because I can at least see where existing homeowners used hpi to climb the ladder from the price gains.0 -
Graham_Devon wrote: »The point is, to get such an average, you have to have people paying over the average.
Of course. That's why it was called an "average".Do you disagree?
No.If not, why call people liars for suggesting this was the case?
I'm not.
I'm calling them liars if they try to claim things which are untrue.
Like "reckless lending" was widespread, or like claiming half of mortgages had to be "5/6/7 times income" (as you just did).“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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