House price increases. Is everyone absolutely loaded?

MovingForwards

Lavendyr said:

MovingForwards said:

...Gone are the days of a FTB buying a starter home, moving up as time goes on and wages increase. A lot seem to want that 3 bed house straight off now...

I think a lot of that is down to the age at which FTBs are now, compared to previous decades. Many FTBs are now in their 30s, either with or starting a family and therefore in need of something more than a 1 or even 2 bed. It's just a sign of the times. 

Perhaps buying a home should be done before starting the family, having kids share rooms and all the other things worked to enable people to buy.

I was a FTB in my 40's, I'm not the only one on this forum and there's others in their 50's.

It's all about priorities.

Gycraig

MobileSaver said:

Gycraig said:

The year I was born my dad walked into a bank and took a 100 percent loan out on his own wages

Do you think it's a good thing or a bad thing that 100% mortgages and similar "liar loan" mortgages are no longer available to today's house buyers?

Gycraig said:

people who bought a house in the 90s probably couldn’t buy that same house doing the same job in 2021.

That's not comparing like with like though is it. Even ignoring all the other aspects of life and house buying that have changed since the 1990s, if your dad's experience was anything like mine then my first house simply doesn't exist any more.

My first house had no central heating, no double glazing and no kitchen to speak of, all of those things have now been addressed and all those improvements came at a not-insignificant cost. Of course, those costs are somewhat less than the increase in the house price but even so it highlights that you cannot just compare house prices thirty years apart and come to a legitimate conclusion.

I do think it’s a bad thing 100% loans aren’t available anymore. Before you come back with “that’s what caused the crash” it was a tiny factor in the crash along with banks not even trying to check affordability / pay slips /employment. 

It’s actually crazy that people are paying landlords mortgages because they can’t get a mortgage, because they can’t save 10 percent deposits alongside paying the high rent and all the bills, My mortgage is 2/3rds the cost of how much it would be to rent. 

If that house was still available as a carbon copy it would still be massively out of reach for a mechanic with a wife and a kid with the wife not working. 

getmore4less

lisyloo said:

Bank of Mum & Dad is not a new concept, so is 34% an increase or is it just the "norm" these days?

 Between 2017-18 and 2019-20, the proportion of first time buyers using savings to purchase their first home increased (from 76% to 85%), whereas the proportion receiving a gift or loan from family or friends decreased from 39% to 28% over the same period,

Looking at the graph it peaked 2017-18 

Gycraig

MobileSaver said:

Grumpy_chap said:

Well, isn't this the problem - the supply of money facilitating an increase in house price to salary ratio?

If the financial services industry simply applied a maximum salary multiple of 3x salary, the result would be a sharp step-correction in the housing market

The supply of money is a factor in HPI but it's clearly not the only or even the main factor as you have to remember that a third of all properties are bought with cash, so nothing at all to do with the financial services industry.

Fundamentally, house prices are dictated by supply and demand; there are not enough homes that people want being built for the ever-increasing number of people that want and can afford them.

In particular, one of the often-forgotten issues is an important lifestyle change; more people than ever are living alone and the numbers keep increasing. So even if the population generally wasn't increasing (when obviously it is) you would still need extra homes built because more and more John and Janes now need two homes to live in rather than just one.

Grumpy_chap said:

This would, of course, mean that those with property experience a drop in the fictional paper worth of their asset but that is probably a cost that can be tolerated in the interest of the wider financial good. 

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Do you think the cash buyers would pay as much if they knew there competition could only pay up to 3x there income ?. 

Me and my partner earn 60k a year between us meaning at 4.5 we can borrow 270k, at 3x we could borrow 180. Do you really think the 270k house would stay being worth anywhere near that if the average family couldn’t get a mortgage on it ?. Heck some mortgages are allowing x6 as a multiplier. 1500 a month ish mortgage on a 60k income is insanity. 

getmore4less

zagfles said:

getmore4less said:

lisyloo said:

We had an early inheritance during 2020 due to COVID.
In our case we did not spend it on housing, but could this be one part of the explanation of an injection of cash to some individuals?

from the report(2019-2020) linked to earlier not that many.

Contrary to what many think most people are just getting on and buying with their own savings.

Most first time buyers (85%) funded the purchase of their first home with savings,
28% reported receiving help from family or friends while 6% used an inheritance as a source of deposit.
Between 2017-18 and 2019-20, the proportion of first time buyers using savings to purchase their first home increased (from 76% to 85%), whereas the proportion receiving a gift or loan from family or friends decreased from 39% to 28% over the same period,

So 34% used someone else's saving (ie family/friend/inheritance), so still pretty significant.

also the reports has this gem on the benefits of buying over renting.

When HRP and partner income is used, mortgagors spent, on average, 19% of their income on mortgage payments, whereas rent payments were 29% of income for social renters and 38% of joint income for private renters. Excluding Housing Benefit, the average proportion of income spent on rent was 38% for social renters and 44% for private renters.

Stating the obvious there.

1) People renting are more likely to be on a lower income, so hardly surprising they spend a greater % of income on housing.

2) Rent is nearly always going to be more expensive than a mortgage, it includes stuff a mortgage doesn't for instance maintenance, buildings insurance etc, usually estimated at about £2-3k a year. Plus of course landlord's profits.

3) As above most people use savings (whether their own or others') to at least partially fund the purchase, so the mortgage is only partially funding the property. 

The premise by some here is people should be able to buy house but can't because houses are too expensive,  

Don't forget that 3m of those renting households are on housing benefit so not paying some or all their rent  and probably the CT as well.

They will never be able to bridge the gap to paying their way in a owner occupied property.

Once you remove them, the want/need to be mobile(mainly the younger people not ready to settle) and those early in their income profile  the numbers struggling to bridge the gap are a lot lower than many would have you believe.

the stats show that after the decline since around 2000, the ternd hase reversed and people can affords to get into home ownership

MobileSaver

zagfles said:

MobileSaver said:

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Well I would. But I do agree that the majority are too stupid to understand that houses are a cost of living as well as an asset,

Fair enough but I'm sure you accept you are very much in the minority.

Of course there is nothing to stop you and others who think the same from selling your house with a 30% or more discount and only selling to a FTB... do you think it would catch on?

lisyloo

MobileSaver said:

zagfles said:

MobileSaver said:

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Well I would. But I do agree that the majority are too stupid to understand that houses are a cost of living as well as an asset,

Fair enough but I'm sure you accept you are very much in the minority.

Of course there is nothing to stop you and others who think the same from selling your house with a 30% or more discount and only selling to a FTB... do you think it would catch on?

And do you honestly think that by doing so said FTB would honourably pass on the discount to the next? Or just pocket your generosity?
If you want to know what the majority would do you just need to look at the actual market (which is get as much as they can).

getmore4less

Gycraig said:

MobileSaver said:

Grumpy_chap said:

Well, isn't this the problem - the supply of money facilitating an increase in house price to salary ratio?

If the financial services industry simply applied a maximum salary multiple of 3x salary, the result would be a sharp step-correction in the housing market

The supply of money is a factor in HPI but it's clearly not the only or even the main factor as you have to remember that a third of all properties are bought with cash, so nothing at all to do with the financial services industry.

Fundamentally, house prices are dictated by supply and demand; there are not enough homes that people want being built for the ever-increasing number of people that want and can afford them.

In particular, one of the often-forgotten issues is an important lifestyle change; more people than ever are living alone and the numbers keep increasing. So even if the population generally wasn't increasing (when obviously it is) you would still need extra homes built because more and more John and Janes now need two homes to live in rather than just one.

Grumpy_chap said:

This would, of course, mean that those with property experience a drop in the fictional paper worth of their asset but that is probably a cost that can be tolerated in the interest of the wider financial good. 

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Do you think the cash buyers would pay as much if they knew there competition could only pay up to 3x there income ?. 

Me and my partner earn 60k a year between us meaning at 4.5 we can borrow 270k, at 3x we could borrow 180. Do you really think the 270k house would stay being worth anywhere near that if the average family couldn’t get a mortgage on it ?. Heck some mortgages are allowing x6 as a multiplier. 1500 a month ish mortgage on a 60k income is insanity. 

£60k is between  £3.6k-£4k  take home depending on split.

6x on high LTV 4% rate. 35years £1600pm   less than 1/2 the income and plenty left to live on

For a job with income growth that won't be a problem in a few years throwing any pay rises at the mortgage before increasing lifestyle costs.  eg. 2x£30k going to 2x£40k adds £1kpm net   

Throw that at the mortgage for 5 years

amount	rate	payment	owing
£360,000.00	4.00%	£2,600.00	£267,181.43

Now 75% LTV(before HPI)  where rates around 1.5% are available

Drop the term to 16 years similar payment releasing the £1kpm for lifestyle/pension) and in another 5 years

amount	rate	payment	owing
£267,000.00	1.50%	£1,565.03	£190,331.76

<60% LTV with best rates available.

a few years pain better bigger house to avoid the house moving costs and sitting pretty for the rest of your lives.


With a bit of HPI that 75% LTV could come even sooner.

zagfles

MobileSaver said:

zagfles said:

MobileSaver said:

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Well I would. But I do agree that the majority are too stupid to understand that houses are a cost of living as well as an asset,

Fair enough but I'm sure you accept you are very much in the minority.

Of course there is nothing to stop you and others who think the same from selling your house with a 30% or more discount and only selling to a FTB... do you think it would catch on?

Err...I'm using my house! You know, to live in! So I'm not going to sell it.

That's the whole point. I need my house, so its value is irrelavent to me. If I were to sell it, I'd need to buy another similar one, I'm not going to live in a shoebox on the M6. So general HPI hasn't helped me at all. In fact it would making moving more expensive as stuff like stamp duty and agents fees tend to be based on % value.

OTOH HPI is really bad for my kids who've not bought yet. So if prices dropped 20% it would be great for them, and neutral for me. Bring it on!

There's so much warped thinking when it comes to house prices. I bought my first house in the early 90's and sold it in the late 90's to buy a bigger house which was over twice the price. In that time house prices had gone down round here so I sold my first house for about £5K less than I bought it. I actually had people commiserating with me that I'd made a loss on my first house, who knew I'd moved upmarket! Didn't even occur to them that falling prices meant my £5k loss on the first house would made up for over twice over by a £12k or so saving on the new house which had also fallen in price!

Of course issues like negative equity would affect those with high LTV mortgages, but as above they seem to be a minority.

zagfles

getmore4less said:

Gycraig said:

MobileSaver said:

Grumpy_chap said:

Well, isn't this the problem - the supply of money facilitating an increase in house price to salary ratio?

If the financial services industry simply applied a maximum salary multiple of 3x salary, the result would be a sharp step-correction in the housing market

The supply of money is a factor in HPI but it's clearly not the only or even the main factor as you have to remember that a third of all properties are bought with cash, so nothing at all to do with the financial services industry.

Fundamentally, house prices are dictated by supply and demand; there are not enough homes that people want being built for the ever-increasing number of people that want and can afford them.

In particular, one of the often-forgotten issues is an important lifestyle change; more people than ever are living alone and the numbers keep increasing. So even if the population generally wasn't increasing (when obviously it is) you would still need extra homes built because more and more John and Janes now need two homes to live in rather than just one.

Grumpy_chap said:

This would, of course, mean that those with property experience a drop in the fictional paper worth of their asset but that is probably a cost that can be tolerated in the interest of the wider financial good. 

Do you really think over 20 million homeowners will tolerate a deliberate attempt to downvalue their main assets just so the younger generation can buy a cheap house?!?!

Do you think the cash buyers would pay as much if they knew there competition could only pay up to 3x there income ?. 

Me and my partner earn 60k a year between us meaning at 4.5 we can borrow 270k, at 3x we could borrow 180. Do you really think the 270k house would stay being worth anywhere near that if the average family couldn’t get a mortgage on it ?. Heck some mortgages are allowing x6 as a multiplier. 1500 a month ish mortgage on a 60k income is insanity. 

£60k is between  £3.6k-£4k  take home depending on split.

6x on high LTV 4% rate. 35years £1600pm   less than 1/2 the income and plenty left to live on

For a job with income growth that won't be a problem in a few years throwing any pay rises at the mortgage before increasing lifestyle costs.  eg. 2x£30k going to 2x£40k adds £1kpm net   

Throw that at the mortgage for 5 years

amount	rate	payment	owing
£360,000.00	4.00%	£2,600.00	£267,181.43

Now 75% LTV(before HPI)  where rates around 1.5% are available

Drop the term to 16 years similar payment releasing the £1kpm for lifestyle/pension) and in another 5 years

amount	rate	payment	owing
£267,000.00	1.50%	£1,565.03	£190,331.76

<60% LTV with best rates available.

a few years pain better bigger house to avoid the house moving costs and sitting pretty for the rest of your lives.


With a bit of HPI that 75% LTV could come even sooner.

Of course some couples want to have children, at which point they'll either lose a salary or be faced with the current ridiculously high childcare costs.