The correction has been, gone, and is over

ukcarper

mwpt wrote: »

How can they not be if multiples are higher?

http://www.standard.co.uk/news/london/almost-a-fifth-of-firsttime-london-buyers-pay-record-500000plus-for-homes-a3187906.html



Now I realise some of that is just throw away comment from an article. But if we look at the medium figures presented. I'm going to assume a repayment mortgage with 30 year term (quite normal now) at 2% rate. The rest of the figures are according to the article.

House price: £322k
Deposite: £80k
Mortgage: £242k
Interest rate: 2%
Term: 30 years
Repayment pm: £895
% of salary: 19.5%
So salary pa = (895/0.195)*12 = £55k
House price as multiple of salary: 5.85
Mortgage as multiple of salary: 4.4

So less than 4.5x is that significantly more than before crash.

mwpt

ukcarper wrote: »

So less than 4.5x is that significantly more than before crash.

I don't know that figure, I'm just working with what is known. So, try make those figures work with 6% mortgage rate and 25 year term, and tell me if the property would be the same price.

ukcarper

mwpt wrote: »

I don't know that figure, I'm just working with what is known. So, try make those figures work with 6% mortgage rate and 25 year term, and tell me if the property would be the same price.

You've used 2% as interest I don't now average interest rate for ftb but I would suspect it would be higher.

Unless it meant that you could borrow less than yes they would be the same. To prove your point you need to provide some figures on the amount people are borrowing in relation to thier earnings now and in the past.

5 years ago the nationwide FTB earnings to FTB house price was 6x compared to 10x now (this is average FTB house price divided by median full time earnings for that area), can people borrow almost twice as much as they could 5 years ago.

cells

Thrugelmir wrote: »

Yeah. The likes of Northern Rock , Bradford & Bingley, Chelsea Building Society , Southern Pacific Mortgages, Alliance & Leicester relaxed their lending criteria and offered interest only deals as a solution. History tells us what the outcome was and the unwinding that's still to be done.

interest only and those banks and building societies were around before 2003 so they are unlikely to explain why house prices boomed in 2003-2007 despite interest rates going up

What can explain house prices going up rapidly during that period is a booming economy and a booming population and a new build rate about half what it should have been.

mwpt

ukcarper wrote: »

You've used 2% as interest I don't now average interest rate for ftb but I would suspect it would be higher.

I'm on a 30 year term, 20% deposit and 2.39% rate. This was taken out nearly two years ago and they've dropped since then. At 25% deposit on 30 year term I actually expect it to be lower than 2%.

Now, since I've gone to the trouble of providing info, please could I just ask for a straight forward answer. No twisting and introducing new goalposts or anything, I beg you:

A person willing to pay £895 per month on the mortgage, since mortgage repayments track rents, what would that person be able to borrow to keep this the same if rates were 6% and term was 25 years?

Just an answer to that question.

mwpt

cells wrote: »

interest only and those banks and building societies were around before 2003 so they are unlikely to explain why house prices boomed in 2003-2007 despite interest rates going up

What can explain house prices going up rapidly during that period is a booming economy and a booming population and a new build rate about half what it should have been.

I think you know the answer. Self cert, 125% mortgages and the like became more prevalent. Can you provide the actual mortgage rates during that period to show if they went up or down?

mwpt

HAMISH_MCTAVISH wrote: »

Here you go....

http://www.bbc.co.uk/news/business-16425582

And from even earlier....

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/6200760/Mortgage-rationing-likely-to-continue.html

There is no evidence whatsoever that mortgage rationing has ended in any meaningful way.

So I'll repeat myself again, rationing compared to what. Rationing compared to 2000-2007 is not rationing in my opinion. We have a range of products right from 95% LTVs available at reasonable lending multiples, at ultra low rates.

In areas where people want to buy, they can take out larger mortgages because rates are cheap.

ukcarper

mwpt wrote: »

I'm on a 30 year term, 20% deposit and 2.39% rate. This was taken out nearly two years ago and they've dropped since then. At 25% deposit on 30 year term I actually expect it to be lower than 2%.

Now, since I've gone to the trouble of providing info, please could I just ask for a straight forward answer. No twisting and introducing new goalposts or anything, I beg you:

A person willing to pay £895 per month on the mortgage, since mortgage repayments track rents, what would that person be able to borrow to keep this the same if rates were 6% and term was 25 years?

Just an answer to that question.

Why 25 years my first mortgage in 1972 was 35 years. That payment would increase from £895 to £1465 over 30 years or 32% of earnings.

mwpt

ukcarper wrote: »

Why 25 years my first mortgage in 1972 was 35 years. That payment would increase from £895 to £1465 over 30 years or 32% of earnings.

As I understand it, 25 year terms were by far the norm prior to roughly 2010. That's why I chose it. So the payment increases. If we had to keep the payment the same we would need to borrow less, and the property price would be less.

ukcarper

mwpt wrote: »

As I understand it, 25 year terms were by far the norm prior to roughly 2010. That's why I chose it. So the payment increases. If we had to keep the payment the same we would need to borrow less, and the property price would be less.

You keep ignoring the fact that in relation to earnings the amount you can borrow has not increased significantly even though rates are lower, as I said earlier FTB house price to earning ratio has almost double since 2010 people can't borrow almost double.