The correction has been, gone, and is over

HENRY78

10 years ago I bought a 3 bed end of terrace house for £205,000. The same property was sold last year for £430,000.


This is the same throughout the home counties.


That's more than a 50% increase. Wages have not doubled in that time have they?

chucknorris

HENRY78 wrote: »

10 years ago I bought a 3 bed end of terrace house for £205,000. The same property was sold last year for £430,000.


This is the same throughout the home counties.


That's more than a 50% increase. Wages have not doubled in that time have they?

It is almost a 110% increase!

ukcarper

HENRY78 wrote: »

10 years ago I bought a 3 bed end of terrace house for £205,000. The same property was sold last year for £430,000.


This is the same throughout the home counties.


That's more than a 50% increase. Wages have not doubled in that time have they?

They haven't increased that much in my part of Surrey and all of Surrey according to Land Regigisty but they have gone about 50%.

chucknorris

ukcarper wrote: »

They haven't increased that much in my part of Surrey and all of Surrey according to Land Regigisty but they have gone about 50%.

We also bought in Surrey just over 10 years ago (august 2005), our house has gone up by about 65%.

cells

mwpt wrote: »

Please cite you stat sources so I can make an informed reply.

ONS has historical wages for the regions.

Land Registry has historic prices for everywhere

A mortgage calculator can be used for monthly mortgage payments

A mortgage comparison website can be used to find out the rate of a 20% down mortgage

If you do all that you find in real terms vs wages monthly mortgage payments are down about 40% in parts of the country where prices are the same as a decade ago. And half the country is the same or cheaper than a decade ago

dktreesea

cells wrote: »

what about people who can only buy currently via self cert, i know one such family who have about £60k in savings and would only need a mortgage of ~£50k to buy in their area. The mortgage interest would cost only about £1k a year but instead you force them to pay £7.2k a year in rent and get £600 interest on their £60k sitting in the bank. They are £5.6k a year worse off thanks to mortgage rationing and they are a prime example of why renting has increased even in the cheap parts of the country


Can you at least admit that the removal of self cert will mean at least some people who could buy can no longer buy? You can then argue if it impacts just 1 household, 1000 households or 1 million households

I think that's too simplistic. Banks these days are not swayed by what you declare as income. Take someone who declares too high an income to the tax authorities, with a view to using that income (they are self employed) to prove how much they earn. The bank will also look at what's going through their accounts. If it doesn't reflect the income they are declaring, they may still only approve a mortgage based on what they can see going through the account.


It can work the other way. If they see £50k a year net going through the business account and you apply for a mortgage that is £90k, they may approve it, regardless of what you declare as your income. Some people could buy a house out of their overdraft funds, because the overdraft reflects the flow through of funds through their business as opposed to their profits.

cells

dktreesea wrote: »

I think that's too simplistic. Banks these days are not swayed by what you declare as income. Take someone who declares too high an income to the tax authorities, with a view to using that income (they are self employed) to prove how much they earn. The bank will also look at what's going through their accounts. If it doesn't reflect the income they are declaring, they may still only approve a mortgage based on what they can see going through the account.


It can work the other way. If they see £50k a year net going through the business account and you apply for a mortgage that is £90k, they may approve it, regardless of what you declare as your income. Some people could buy a house out of their overdraft funds, because the overdraft reflects the flow through of funds through their business as opposed to their profits.

In his case I think they don't allow a mortgage as his business is just months old so the first two annual accounts have yet to be filed as the business isn't that old

Without two year of accounts he won't get a mortgage. Whereas in the past a person in the same situation could possibility just self cert

Maybe one could argue he only needs to wait 2-3 years but that is some £10-15k more in rent payments than mortgage payments and likely some slightly higher house prices too. The real cost of over regulation

westernpromise

HENRY78 wrote: »

10 years ago I bought a 3 bed end of terrace house for £205,000. The same property was sold last year for £430,000.

This is the same throughout the home counties.

That's more than a 50% increase. Wages have not doubled in that time have they?

10 years ago base rates were 4.5% and mortgages typically 6%. The corresponding figures today are 0.5% and 2%. Assuming a 10% deposit in either case, the monthly cost of buying the house in 2005 was £1,189, and the total cost, had those rates persisted, would have been £357k. Today it's £1,640 a month and the total cost of owning would be £492k.

So the cost of that mortgage has gone up by 38% on a monthly basis, as has the total cost of buying it over 25 years. The headline price rise of 210% is in fact a cost increase of 38%.

Cells has suggested that wages are up 21% over the same period. So the 38% nominal increase equates to a net 17% - which is quite a lot less scary than 210%.

This is, though, a good counterintuitive example of why buying as soon as you can (i.e. as soon as you know with some confidence you won’t need to sell soon) makes sense. The economics of 10 years ago are clearly preferable for an FTB. He’d have paid the 2006 price, but would now be paying it back on 2016 interest rate levels, after pay rises totalling 21%. If his mortgage rate has averaged say 2.8% over the term so far, he has paid out £131k in mortgage payments, and he’s going to pay out about another £200k to own it.

Then consider the FTB of 10 years ago who could have bought then, but who instead speculated against ownership by not doing so, expecting a lucrative house price crash. Someone who did that, and who has since rented the example property Henry78 gave at say 3.5% of its value, would have spent about £75k on rent living there for 10 years.
So he’s saved £56k versus owning, and let’s say he has that stashed away for use as a deposit.
To end up better off than the 2006 FTB when the latter’s mortgage is paid off in 15 years’ time, the 2016 FTB would thus need to spend less than a total of £256k and must own it outright by the same date. That is, it must cost no more than whatever the FTB has left to pay on his mortgage, plus his own £56k stash, which is my £256k figure.
Assuming he buys by putting £56k down as a deposit and borrowing the rest over 15 years, he’d need to be borrowing about £165k. Over 15 years, he will spend just over £200k paying that loan off.
So after 15 years, he and the 2006 FTB would own the same house for the same outlay.
This means the FTB has to be able to buy that house today for £165k plus £56k which is £220k, i.e. the sum of the mortgage and his deposit. This requires the house’s price to fallfrom £430k to £220k, which is a drop of 49% from its value today.

Needing a Breakeven Crash Requirement of 49% simply to obtain the same result as buying 10 years ago is not a great position to be in, IMHO. If the 49% crash it doesn’t happen you’re stuffed, and if it does, you may very well be stuffed even worse - there’s no certainty one would still be able to get mortgage finance, and indeed any correction of that magnitude would probably happen exactly because you can’t.

Conrad

So I owned a regulated mortgage brokerage until recently, and wanted to mention that post 2008 mortgage regulation did indeed lead to a mass rejection of hitherto perfectly capable applicants.


I could give endless examples. In summary a lot of capable perfectly low risk people do not fit into neat boxes and thus get rejected in the age of 'responsible lending' and 'mis-selling'.
Had a case only this week. Childless capable couple with plenty income and a £200k deposit. He is 52 and she is 44 but his age drives the application. They cannot prove adequate pensions, but they aren't the sort who will retire and if they were ill they would downsize / sell-up.


Due to his age affordability tests are failed, and yet their rent is no more than the mortgage (they've returned from abroad).


In the days of common sense an experienced Building Society manager would have felt this had enough upside to wave through. But in the age of compensation and regulation, Human brains count for little.


Before someone tries to assert it's a good thing these millions of people have been excluded, do keep in mind well above 99% of all mortgagees never get repossessed.

dktreesea

Conrad wrote: »

So I owned a regulated mortgage brokerage until recently, and wanted to mention that post 2008 mortgage regulation did indeed lead to a mass rejection of hitherto perfectly capable applicants.


I could give endless examples. In summary a lot of capable perfectly low risk people do not fit into neat boxes and thus get rejected in the age of 'responsible lending' and 'mis-selling'.
Had a case only this week. Childless capable couple with plenty income and a £200k deposit. He is 52 and she is 44 but his age drives the application. They cannot prove adequate pensions, but they aren't the sort who will retire and if they were ill they would downsize / sell-up.


Due to his age affordability tests are failed, and yet their rent is no more than the mortgage (they've returned from abroad).


In the days of common sense an experienced Building Society manager would have felt this had enough upside to wave through. But in the age of compensation and regulation, Human brains count for little.


Before someone tries to assert it's a good thing these millions of people have been excluded, do keep in mind well above 99% of all mortgagees never get repossessed.

Yes, aging does have an enormous effect on what one can borrow. Could the said couple take out a mortgage just for 13 years instead of the normal term?


I have a number of friends wanting to move back to the UK in a similar situation. Jobs to come to, a good deposit, but no working experience in the UK for at least ten years and ranging in age from 48 to 60. Some of the mortgages people are looking for are quite modest, in the region of £200k or so. With equity of 60%. And yet they are seen as too risky to lend to. It is as if the mortgage taps for the over 45s who are returning to live here have been turned off.