First-time buyers opt for longer term mortgages

Graham_Devon

CLAPTON wrote: »

ok what has the general wage inflation been over the last 10 years?

and looking at individual people rather than general inflation, how much have individual 'career' peoples' salary increased (so a nurse has a salary scale, he/she may be promoted over a 10 year period)

Oh well if you are going to look at individuals and factor in multitudes of possibilities, that's something I cannot possibly argue with.

But you made a bold statement, one which wasn't correct and one which suggested wages will inflate around 30% in the next 10 years.

If your basis is some individual might increase their salary by 30% somewhere, then fine, but how can one possibly argue with that?

wotsthat

Graham_Devon wrote: »

Oh well if you are going to look at individuals and factor in multitudes of possibilities, that's something I cannot possibly argue with.

But you made a bold statement, one which wasn't correct and one which suggested wages will inflate around 30% in the next 10 years.

If your basis is some individual might increase their salary by 30% somewhere, then fine, but how can one possibly argue with that?

A 30% increase in pay over 10 years is only about 2.5% pa.

Loughton_Monkey

Graham_Devon wrote: »

How do you know this?

How much has inflation reduced debt over the past 10 years?

For inflation to reduce debt, you have to look at wage inflation, not general inflation.

Not really sure how you can say my point about nurses, general managers and IT jobs is rubbish. It's pretty clear to most these jobs are not commanding ever higher pay structures. I mean, seriously, one of those is on a pay freeze cap for the next 2 years and has been for the previous 3.

ONS puts last 10 year wage inflation (to July 2013) at 33.1%, made up from 32.7% in private sector, and 34.9% in the public sector. Rather predictably, the public sector fared much better over the last 5 years, trousering 11.4% while their private colleagues only got 6.8%

Given that wage freezes and caps surely cannot go on much longer, it seems inconceivable that the next 10 years would see less than 30% wage inflation. Probably nearer 35%.

Assuming average house price inflation of 5% [slightly below previous 25 years] you're looking at this type of scenario:

Earn £30,000 today. Get IO mortgage of £100K on a £110K house.

Then in 25 years, salary is £63,500. Mortgage is 1.57 times Salary. Mortgage interest cost would be <8% of salary at that time. Pure chicken feed. House is worth £372,500 or 5.9 times salary.

More realistically, this person would get one or two step promotion rises and be earning £80K+ Again, realistically, after 7/8 years or so, they would trade up. At that time, they'd take out a new 25 year mortgage. Equations would be a similar ratio as above, only bigger due to 8 years extra inflation etc.

Buying a house is a 25/40 year deal. And a damned good deal at that. But long term deals are for long term thinkers. Thank god there are short term thinkers out there who 'can't see it' and will always find an excuse not to buy. They allow the more clever people to buy cheaper than they otherwise would have done.

HAMISH_MCTAVISH

CLAPTON wrote: »

ok what has the general wage inflation been over the last 10 years?

And to add to LM's 10 year figures above, the ONS say the following about the 25 year figures......

In April 2011, the average full-time employee in the UK earned around £12.62 per hour excluding overtime, a cash increase of 226% since 1986 when the average wage was £3.87 per hour.

After adjusting for price increases over that time, full-time employees were on average 62% better off in 2011 than in 1986.

You'd expect the 10 year to be low, it's included a large recession, but as usual after recessions things will increase at some point.

I rather expect the next 25 years will look a lot like the last 25 in wage inflation terms.

and looking at individual people rather than general inflation, how much have individual 'career' peoples' salary increased (so a nurse has a salary scale, he/she may be promoted over a 10 year period)

Since 2007 both people in our household have seen significant pay rises, due to both annual wage increases and promotions.

Most of the people I know work in the private sector, and most of them have had pay rises and promotions more or less as normal over the last 5-7 years. The pay rises have been a bit less than the boom years, but it certainly hasn't been pay cuts or freezes.

A bit less job hopping just for promotions and pay rises, due to economic uncertainty, but not complete career stagnation either.

So yes, most people I know haven't done quite as well as they did in the boom years, but equally, they haven't done badly for themselves all things considered.

Now I accept that "the people I know" are no more representative of wider society than "the people you know", but I rather suspect the reality for most people is nowhere near as bad as you like to portray.

chucky

Graham_Devon wrote: »

But you made a bold statement, one which wasn't correct and one which suggested wages will inflate around 30% in the next 10 years.

If your basis is some individual might increase their salary by 30% somewhere, then fine, but how can one possibly argue with that?

Actually he's right and you are wrong (yet again).

Loughton_Monkey wrote: »

ONS puts last 10 year wage inflation (to July 2013) at 33.1%, made up from 32.7% in private sector, and 34.9% in the public sector. Rather predictably, the public sector fared much better over the last 5 years, trousering 11.4% while their private colleagues only got 6.8%.

There's a lot you can learn from us guys. You should try it.

chucknorris

Loughton_Monkey wrote: »

ONS puts last 10 year wage inflation (to July 2013) at 33.1%, made up from 32.7% in private sector, and 34.9% in the public sector. Rather predictably, the public sector fared much better over the last 5 years, trousering 11.4% while their private colleagues only got 6.8%

Given that wage freezes and caps surely cannot go on much longer, it seems inconceivable that the next 10 years would see less than 30% wage inflation. Probably nearer 35%.

Assuming average house price inflation of 5% [slightly below previous 25 years] you're looking at this type of scenario:

Earn £30,000 today. Get IO mortgage of £100K on a £110K house.

Then in 25 years, salary is £63,500. Mortgage is 1.57 times Salary. Mortgage interest cost would be <8% of salary at that time. Pure chicken feed. House is worth £372,500 or 5.9 times salary.

More realistically, this person would get one or two step promotion rises and be earning £80K+ Again, realistically, after 7/8 years or so, they would trade up. At that time, they'd take out a new 25 year mortgage. Equations would be a similar ratio as above, only bigger due to 8 years extra inflation etc.

Buying a house is a 25/40 year deal. And a damned good deal at that. But long term deals are for long term thinkers. Thank god there are short term thinkers out there who 'can't see it' and will always find an excuse not to buy. They allow the more clever people to buy cheaper than they otherwise would have done.

You explained that very well, but unfortunately some people still won't get it. But of course you also stated that in your last paragraph, so once again I am simply agreeing with you. It is sad, but at least we will never run out of people to empty our bins.

CLAPTON

Graham_Devon wrote: »

Oh well if you are going to look at individuals and factor in multitudes of possibilities, that's something I cannot possibly argue with.

But you made a bold statement, one which wasn't correct and one which suggested wages will inflate around 30% in the next 10 years.

If your basis is some individual might increase their salary by 30% somewhere, then fine, but how can one possibly argue with that?

No, you have chosen to misunderstand my post completely.


I am making the very very very simple point that many young FTB can look forward to salary scales with regular increments and promotion.

This is over and above general wage inflation which is an average for all people in employment and doesn't track the increase in income with age.

Now for the avoidance of doubt I am NOT saying that each and every one will be on a incremental salary scale or will get promoted but it's a general truth that the sort of person that is a young FTB can expect some advancement over the years.

General wage inflation is their friend too.

Graham_Devon

chucky wrote: »

Actually he's right and you are wrong (yet again).

There's a lot you can learn from us guys. You should try it.

Jesus that's poor. So much so you are not even trying to hide your twisting anymore.

Read what you have quoted.

Graham_Devon

CLAPTON wrote: »

No, you have chosen to misunderstand my post completely.


I am making the very very very simple point that many young FTB can look forward to salary scales with regular increments and promotion.

This is over and above general wage inflation which is an average for all people in employment and doesn't track the increase in income with age.

Now for the avoidance of doubt I am NOT saying that each and every one will be on a incremental salary scale or will get promoted but it's a general truth that the sort of person that is a young FTB can expect some advancement over the years.

General wage inflation is their friend too.

What I am hinting at here is that it's all well and good stating what will happen over the next 10 years.

But you would have said the same in 2007. And here we are with wages pretty much stagnant.

Would you agree or disagree, that what you are suggesting now has always been suggested and such advice would have been terrible over the last 5 years.

Considering the magnitude of problems this country has to face yet with the economic background, I'd be highly dubious of suggesting what you are.

What appears to be being suggested, underneath all the statistics is "take the gamble".

CLAPTON

Graham_Devon wrote: »

What I am hinting at here is that it's all well and good stating what will happen over the next 10 years.

But you would have said the same in 2007. And here we are with wages pretty much stagnant.

Would you agree or disagree, that what you are suggesting now has always been suggested and such advice would have been terrible over the last 5 years.

Considering the magnitude of problems this country has to face yet with the economic background, I'd be highly dubious of suggesting what you are.

What appears to be being suggested, underneath all the statistics is "take the gamble".

Yes, life is a bit of a risk. None of us know for a fact we will be alive tomorrow.

However, such advice would have held good even over the last 5 years.

- interest rates have dropped like a stone so even if one's income had stayed static, the mortgage payments would have dropped significantly as a proportion of income.

- and as I've tried to explain to you, even where pay rates stay static, a great many people have benefited from the effects of pay scales and promotions thus increasing their incomes.

-mortgage forbearance has eased the problems even for people whose financial circumstances worsen

-if those hadn't taken out mortgages back then they would have wasted lots of money on rent and be no nearer being property owners.


Given where we are, it makes excellent sense for young people with reasonable job prospects to buy rather than rent.