Homes in the UK still very cheap/affordable

ukcarper

Windofchange wrote: »

Yup, you were right, drunk maths. I have amended my example.

The median does not mean that 50% of the N.E must be earning above average however. To take a silly example, if we had 5 people as below:

1) £3,000
2) £3,000
3) £3,000
4) £3,000
5) £1,000,000

The Average would be £202,400, but the median would be £3,000.

Only one person is earning above the median. You are assuming an even 50 / 50 split by saying that 50% must be earning above the average.

To take a more relevant and larger dataset have a look at the table for 2014/15 at the following link (opens as a pdf):

https://www.gov.uk/government/statistics/distribution-of-median-and-mean-income-and-tax-by-age-range-and-gender-2010-to-2011

Take 40 - 44 year olds.

The median income is £27,500
The mean (average) income is £39,600

Therefore there are high earners that skew the data to the right to boost the average. It won't be 50% of people earning under £27,500 and 50% of people earning above £27,500.

You are right to say that the median is the halfway point in a set of data, it is, it is the middle number. However the figure it gives will not be the average. Therefore if you have figures that are skewed to the left or the right you will get a very different result.

My problem with that table is that the median figure for earnings is more favourable than the average (as per my example of 40 - 44 year olds) which is why the author, who is presumably pursuing an affordability argument, has chosen to use the median rather than the mean.

No median means the mid point and mean average is the one skewed by high earners.

GreatApe

ukcarper wrote: »

You could be right but you also have to take into account interest rates, the likely hood of interest rates rising, is 2.5% achievable.

There are mortgage regulation problems that exist, but there is no affordability problem

10 year fixes are available at under 2.9% fixed if you are worried about rates moving up you could go for that although I do not see the value in that as i expect rates to stay this low for the rest of my lifetime.

I think your chart does show there is not a problem in some areas, but you have to take into account the world as it is and as it is 4x earnings is likely to be the biggest mortgage you will get.[/QUOTE]


My chart shows 8 of the regions in the UK are down right cheap with only London that is expensive but still affordable for a couple working full time. And this is the median couple, in London 24% of the stock is social so we should ignore the poorer quarter and look at the median of the remaining 3 quarters to get a better idea

Jack_Johnson_the_acorn

ukcarper wrote: »

No median means the mid point and mean average is the one skewed by high earners.

Hahaha. He just doesn't get it.... no millionaire parents oop North I'm afraid most came from council estates others from the avg working class family. None got a gifted deposit but they all made sacrifices like living at home longer or keeping an older car. Only we took out a 30 yr mortgage so we could get a better property, but we've overpaid by £400pcm. The term length at 30 was decided because if we fall on hard times our minimum payment is lower. It's not rocket science. Why anyone would take out a short term mortgage is beyond me.

ukcarper

GreatApe wrote: »

My chart shows 8 of the regions in the UK are down right cheap with only London that is expensive but still affordable for a couple working full time. And this is the median couple, in London 24% of the stock is social so we should ignore the poorer quarter and look at the median of the remaining 3 quarters to get a better idea

What LTV do you need to get 2.9% 10 year fixed.

I agree your chart does show property is affordable in large parts of the country and in most areas 2 full time median earners would be able to get big enough mortgage. It's just that although repayments are low that's no good if you can't borrow enough.

Did you look at his links it's quite interesting it shows the median for 30-34 years olds is higher than median for all.

GreatApe

Windofchange wrote: »

As I said, leave the finances and examples of friends, millionaire parents etc etc out of it. I am purely commenting on the data that has been used, and putting it to great ape that it has been skewed to present a more favourable argument for affordability by two variables - mortgage length and using median. If you are suggesting that more and more people have 30 year mortgages, doesn't that actually prove a point that people are too stretched with a traditional 25 year mortgage and therefore need an extra 5 years to make it affordable to them? In other words, you have basically said that housing is becoming less affordable within your social circle.

If I were to say let's re-run that table with a 20 year mortgage, would you pull me up on it and say hang on, you're inflating the repayments to suit your argument of un-affordability?

you can rerun it with 20 year mortgages, all that will do is show if it was affordable to pay down a house in 20 years, which in 8 of the uk regions it would be.

The 30 year mortgage shows its affordable to buy an average terrace house outright with a median couple working full time in every single uk region. Something you hate and try hard to dismiss

An important concept that you also miss is that the London buyer at the end of the 30 year term has bought a £500k house while the Northern buyer has bought a £100k house. So at the end of 30 years they are not in the same position the London buyer has effectively saved £500k of capital while the norther buyer has saved £100k. The actual cost of the house is the interest on the capital used to buy the house, so if the London house costs £500k and the capital costs 2.5% then the London house is costing our couple just £10k a year the rest of the mortgage can be seen as a savings account so the house is not just affordable it is actually very affordable for a couple on the full time median London wages.

GreatApe

ukcarper wrote: »

What LTV do you need to get 2.9% 10 year fixed.

MSE now has a mortgage comparision part go look it up its quite good. 80% LTV for a 10 year 2.9% fix. Or you could go for an 85% LTV 5 year fix for 1.7% which looks a lot better to me

I agree your chart does show property is affordable in large parts of the country and in most areas 2 full time median earners would be able to get big enough mortgage. It's just that although repayments are low that's no good if you can't borrow enough.

then the problem is with bank regulations
If a person can afford the rent they can afford the mortgage, but some regulator says no
Bring back self cert mortgages and bring back affordable 95% mortgages

Also reduce the London stamp duty make it set regionally. A 3 bedroom flat 5 years ago had a £2.5k stamp duty now it has a £30k stamp duty so there is also government taxation policy to blame for making buying homes expensive.

ukcarper

GreatApe wrote: »

MSE now has a mortgage comparision part go look it up its quite good. 80% LTV for a 10 year 2.9% fix. Or you could go for an 85% LTV 5 year fix for 1.7% which looks a lot better to me



then the problem is with bank regulations
If a person can afford the rent they can afford the mortgage, but some regulator says no
Bring back self cert mortgages

Still need to save £75 to £100k in London.

I don't think we should bring back self cert, but using salary multiples is a crude way of allocating mortgages, you would have thought they could work out a better way.

Windofchange

ukcarper wrote: »

No median means the mid point and mean average is the one skewed by high earners.

Ok, yup, I get you. You are right in saying that 50% must be above - I've had some beers after a long day.

Have a look at the following link for what I am on about - the skew of the dataset.

http://davidmlane.com/hyperstat/A92403.html

I suspect that UK (and regional) wages are negatively skewed i.e. the median value will give a higher number than the mean. This is my point in relation to the original table and it's data.

Windofchange

GreatApe wrote: »

you can rerun it with 20 year mortgages, all that will do is show if it was affordable to pay down a house in 20 years, which in 8 of the uk regions it would be.

The 30 year mortgage shows its affordable to buy an average terrace house outright with a median couple working full time in every single uk region. Something you hate and try hard to dismiss

An important concept that you also miss is that the London buyer at the end of the 30 year term has bought a £500k house while the Northern buyer has bought a £100k house. So at the end of 30 years they are not in the same position the London buyer has effectively saved £500k of capital while the norther buyer has saved £100k. The actual cost of the house is the interest on the capital used to buy the house, so if the London house costs £500k and the capital costs 2.5% then the London house is costing our couple just £10k a year the rest of the mortgage can be seen as a savings account so the house is not just affordable it is actually very affordable for a couple on the full time median London wages.

I've asked you three questions. As per usual you have gone off on a tangent. I'm not commenting on whether you are right or wrong, whether house prices will rise or fall, I have asked you to reply to three questions. Will you do so?

economic

does anyone think its a good idea to raise multiples one can borrow given that rates are so low and expected to stay low for a while? times have changed any maybe multiples should change too?