Are houses unaffordable?

p00hsticks

andybenw wrote: »

I'd imagine the 80's were a much different proposition, probably relatively easy to get the deposit saved, but crippling mortgages if you did buy due to the high interest

You need to bear in mind though that in general as it was a period of high inflation salaries were also rising pretty quickly - I seem to recall getting 6 monthly pay rises of several percent, so a mortgage that started off a three times my salary turned into one for a much lower multiple after only a few years...

RedheadFred

I bought my first house last month - and my partner and I are very low earners. I'm on 16.5K, and he's on about £10K plus whatever overtime he fancies.
We bought because we were paying £700 in rent, and a mortgage would be under £400.
Mum lent us £3,000, and my partners sister lent us £2,000, a well timed tax refund paid most of the fees.
I'm pretty sure we shouldn't have been able to buy, but we did.

But then my mum bought in 1996 for £60K. My parents were both on benefits. That house is now worth about £180,000. They couldn't afford that now and they've both got jobs!

So, swings and roundabouts. Not sure what my point is. I think the answer is 'it depends'.

AlistairM

What was the average yearly earning in UK in the 1960s and what was the average house price?


Compare that with the average income now compared to average house price.


I think it was something like 4 times the income back then and 11-12 times average income right now.

JP08

Back in 1992 when I first bought, the two up two down terraced house in a town commutable to London was £45,000 (10% deposit) and my gross salary as a Grad Trainee with LUL was approx 15,000. So three time salary.

A graduate trainee with TfL now gets ~26k a year. The house is on Zoopla as being worth £130k. So now five times salary.

But the mortgage rate on that first house was 8.32% (that sticks in the mind !). And that was a discounted rate for the first year. The base rate peaked 3 months later (17.5% ?) as we crashed out of the ERM

My mortgage payments then were just over £300 a month. 3% mortgage on the current value is just over £600.

So as a proportion of gross salary, that house is as affordable today for todays TfL Grad trainee as it was in 1992 for this Grad Trainee. They just wouldn't get a mortgage due to the 5 times salary multiple. And would be totally shafted if the rates went up.

GoldenShadow

I think there is an element of people having higher expectations now, but I think society builds that in. I have friends who think they can't afford to buy so don't even try, they just spend everything they earn.

You don't get really basic starter houses that are two up one down anymore, certainly not many of them. Even the most basic little cottages with a tiny kitchen and lounge and 1 bedroom are £160K here. Me, personally, in the public sector (on a graduate scheme), I was earning 22K when we took out our mortgage, I never could have got anything for 5 x my income, which would be 110K, not without a 50K deposit which, at 23 years old, on 22K, wasn't going to happen.

With OH, together we clubbed together and bought a nice starter house for 210K, affordable (but stretching) between us. But as single people, there is no way either of us could have bought. The cheapest, cheapest flats where we are, which are above shops so as I understand not that easy to mortgage, are offers in excess of 130K, and that's already a 20 mile drive to work and living in a cheaper area.

We live in a home county, though where I used to live I could have got something on my own, but the jobs up there aren't very good so career wise I would be pretty restricted. I'm from an area where, if you made redundant, its genuinely not that easy to get another job, so it isn't somewhere I want to be!

Candyapple

RedheadFred wrote: »

I bought my first house last month - and my partner and I are very low earners. I'm on 16.5K, and he's on about £10K plus whatever overtime he fancies.
We bought because we were paying £700 in rent, and a mortgage would be under £400.
Mum lent us £3,000, and my partners sister lent us £2,000, a well timed tax refund paid most of the fees.
I'm pretty sure we shouldn't have been able to buy, but we did.

But then my mum bought in 1996 for £60K. My parents were both on benefits. That house is now worth about £180,000. They couldn't afford that now and they've both got jobs!

So, swings and roundabouts. Not sure what my point is. I think the answer is 'it depends'.

How much was the house value you bought? And in Bristol?

hanb

I think it definitely depends on area. I can't believe how expensive it is in Bristol for nothing fancy!


I earn almost 30k, OH earns 35k and we have a 70k deposit. Looking to find a decent, terraced 2/3 bed house in relatively central area (for work and lifestyle) and the prices are pretty nuts and although advertising prices don't seem all that bad, houses here are going for 20% more than asking price on average. So actually, we're not going to find it all that easy to find somewhere in a relatively strong position without mortgaging to the max which we don't want to do. I don't know how sole income or low deposit situations would manage in this area.

RedheadFred

Candyapple wrote: »

How much was the house value you bought? And in Bristol?

Nope, moved over the border, should really update my profile. £85K, two bed cottage. Lovely garden, shame about the extension roof.

Candyapple

RedheadFred wrote: »

Nope, moved over the border, should really update my profile. £85K, two bed cottage. Lovely garden, shame about the extension roof.

You and your partner's low salaries are relative in terms to the housing prices in Wales.


All my friends (ranging from mid 20s to early 30s) who own houses/flats only have them due to a) living rent free with their parents since 18 so being able to save large amounts, or b) they have been gifted with a large deposit from either or both sets of parents (couples). I don’t know anyone who has rented over the years and been able to buy a house/flat without the help of bank of mum and dad.

_CC_

They're affordable for many, across much of the UK.

Repayments as a % of income are well within historic norms, which is what is matters for most people, assuming they can get together a deposit.

Prices as a ratio of local incomes are high in most of the UK, and bubble like in the London.

As to "who had it better", which would you prefer?

a) Buying a house priced at 2.5 times your income but high initial interest rate

b) Buying a house priced at 7-8 times you income but initial interest rate lowest in history?

Personally, I'd always take A. There's little room for rates to get a whole lot lower, but plenty of room for then to go higher. Rates over the past 30 years have been on a downward path which made repayments more affordable for existing mortgage holders and inflated the price of their house. The opposite is true for buyers today.