Mortgage / House Price Question

MoneyTreeMe

Hi,
I'm new to mortgages and house prices and have a question...

If house prices continue to increase i.e. average house price becomes £300k, will this make mortgages impossible because the price of house cannot be covered by earnings as they have risen so much and are out of line with earnings which havent increased - meaning lenders will not lend ... because people will need more than 95% mortgages to cover cost of 300k average house? like an elastic band stretching to snapping point

Do you get what I mean.. i.e. there must be a limit to house prices to make mortgages work and lenders happy which is where we are now with prices like a sweet spot. but if they keep going up, it will mean most people can't get a mortgage to cover the full cost of a house based on average earnings... unless it means only a few high earners being able to afford a 300k average house?

Thrugelmir

Affordability is one factor that drives house prices. If people are unable to buy at a certain price threshold and there's a surplus of stock on the market in the locality. Then the market will adjust accordingly. 

davidmcn

House price and earnings inflation rates may differ from time to time, but that doesn't mean one will always outstrip the other (e.g. when was the last earnings "crash"?). As above, property prices will always have to be "affordable" to a certain proportion of people, otherwise they'd never get sold.