Isn't anybody tired of hearing the same old

teabelly

In 2000 I earned 15k, house was 48k I borrowed 43k which is just under 2.9 I think. Now house is worth about 120k, I earn 32k so that's 100%+ wage inflation I guess. New borrowings would be 108k which is 3.37x assuming 90% LTV. 12k to save up so less than 6 months gross salary.

Is that maths totally wrong? HPI has lead to 2.5x increase in house value so that would be 250%. I never was very good at going between multiples and percentages

I think to maintain multiples you'd need 2/3rds HPI percentage for wage inflation on 3x salary and 3/4% for 4x not 1/3 and 1/4 as I said. Is that correct reasoning?

tomstickland

To retain multiples you'd need equal percentage increase in house prices and earnings.

eg: if the price of basic house doubles then earnings would also have to double over the same time period.

fc123

EdInvestor wrote: »

Actually I expect it to drift sideways for quite some time, certainly until the credit crunch sorts itself out. Most people will just wait, since there's not much point in trying to sell if buyers won't make reasonable offers and can't get mortgages, it's a total waste of time.

There may be some forced sellers, but that is likely to have only a local effect ( eg new build inner city flats). If people desperately need to move, they can always just rent out their PPR and use the income to rent another place for themselves in the new area.Things are much more flexible these days than they were in the early 90s.

We have done the above.
It's made life a little more complicated and I'm not crazy on living in rented but in the early nineties, finding a tenant for ones family home and, then, finding a decent rental in a new location wasn't easy at all.
A lot of sellers will sit tight if the maket grinds to a halt (as I believe it has now) and bide their time.

PS; buying our 1st home was a massive struggle (1990) and we scrimped for years. It has never been easy for some of us.
I didn't have the choice to be a full time mum...but it was the choice we made to buy a house (and it was in one of the cheapest 'not so nice' areas of London too, when I would have preffered a nicer area).
Others I have known, inherited £££ and then bought so didn't need to save.

EdInvestor

Nenen wrote: »

Fast forward to 2008 and our ds and his gf... both recent grads (with better degrees than dh and I and in slightly better paid jobs than newly qualified teachers/social workers too!). They earn a joint salary of £44,000 (approximately 5.2 times our salary in 1983). Our first house in London is currently valued at £250,000 (conservative estimate going on others in the area at the moment, is probably nearer to 300K and this is ten times what it was worth in 1983). They would need a mortgage (if they could get one) of 5.7 times their joint salaries to buy the same house! :eek: ...and we thought we were hard up!

But you've forgotten about what's happened to interest rates.In the early 80s interest rates were double digit - in the early 90s they went up as high as 15%. Now they are in the 4-7% range.

The average mortgage is 150k. If they had an interest only loan @ 6% now, it would cost 750 pounds a month,around 20% of their joint salary. The equivalent when you were starting out @12% is 1,500 pounds a month, which is a horrific 41% of your joint salary.

No wonder you could afford nothing else in those days.And that's before we even look at the collapse in prices of consumer goods, clothes, travel, food etc compared with the 70s and 80s..

Young people these days don't know they're born. :mad:

trudiha

EdInvestor wrote: »

.

The average mortgage is 150k. If they had an interest only loan @ 6% now, it would cost 750 pounds a month,around 20% of their joint salary. The equivalent when you were starting out @12% is 1,500 pounds a month, which is a horrific 41% of your joint salary.

Talking of not knowing you've been born, can you work out what the double MIRAS (Mortgage Interest Relief At Source) would have been at that rate? I think that it was around 25% but I seem to remember that both members of a couple could claim it, is that right? If that is right it would mean that a couple would only be paying half that interest, so not 41% at all.

When you've done that I'll pop back and we can discuss student loans.

Scudlink

teabelly wrote: »

In 2000 I earned 15k, house was 48k I borrowed 43k which is just under 2.9 I think. Now house is worth about 120k, I earn 32k so that's 100%+ wage inflation I guess. New borrowings would be 105k which is 3.3x assuming 90% LTV. 15k to save up so 6 months gross salary.

I don't know what part of the UK you live, but I would say the price rise in your property has been relatively small compared to the average UK price rises.

I purchased my first property at the end of 1996 here in Devon for £25,000. A reasonable sized 2 bed flat in a nice area. I was single at the time and that's all I could afford on my wage. I was a typical FTB who wanted to get on the property ladder. I sold the flat in 2004 and moved elsewhere. Last year I noted this property has now changed hands for 200k.

My wage has doubled since 1996 and even if you include my wife's wage as well there is no way we could afford to buy my original first time flat at 200k today. It was hard enough as a FTB affording to buy back in 1996, it must be impossible for FTB buying in our area now.

Even though I am a lucky enough to have a small mortgage in our new home, I still geniunely feel sorry for the people starting out.

ManAtHome

EdInvestor wrote: »

But you've forgotten about what's happened to interest rates.In the early 80s interest rates were double digit - in the early 90s they went up as high as 15%. Now they are in the 4-7% range.

And more people are going bankrupt than when rates were much higher - maybe there's more to life (or not) than interest rates..?

Nenen

EdInvestor wrote: »

But you've forgotten about what's happened to interest rates.In the early 80s interest rates were double digit - in the early 90s they went up as high as 15%. Now they are in the 4-7% range.

The average mortgage is 150k. If they had an interest only loan @ 6% now, it would cost 750 pounds a month,around 20% of their joint salary. The equivalent when you were starting out @12% is 1,500 pounds a month, which is a horrific 41% of your joint salary.

Not sure if I'm understanding you correctly but I don't think you're comparing like with like... i.e. you are saying the 'average mortgage nowadays is £150,000' but in my original example to be able to buy the same property we could at their age they would need a £250,000 mortgage.

Again, to compare like with like, our mortgage was repayment, not interest only. According to BBC mortgage calculator 250K repayment mortgage at 6% is £1629.72 per month which works out at 45% of their gross monthly income. Conversely, our monthly payments on £25500 mortgage at 12% would have been about £270 per month or 38% of our gross monthly income. As a pp has already said, we were able to claim a massive amount of MIRAS tax relief. From what I remember it reduced our mortgage by just under a quarter, maybe to the equivalent of around £210 per month, which means we were paying about 30% of our gross monthly salaries on our mortgage compared to the 45% our ds would have to pay to buy the same house today.

I know that white goods and clothes are considerably cheaper now in comparison to 1983 but other things (I'm guessing here but possibly travel costs, utilities, rates, house insurance, alcohol) are a lot more expensive. We also had much lower rates of VAT and no ***** student loans to pay back!

It's also true that there are a lot of things that are considered 'normal' (and even necessary) to have today (computers, internet, mobile telephones etc) that weren't even on the horizon in our youth. Whilst I realise that one can live without a mobile phone etc, I think they are so much part of everyday life now that it would be comparable to saying my dh and I could have lived without electricity and just had candles like our grandparents!

IveSeenTheLight

boinging wrote: »

This is now becoming humerous. So maybe this thread is another wind up, I don't know, especially with the pastel colours coming in.

Can all the people contesting house price falls tell me one thing, how would you not have saved money buying today instead of August 07?

Interesting that you specifically want from August 07.
I presume because the UK average house price has reduced for 5 months.

If I can deviate just a little slightly.
I bought a property in January 07 (only 7 months difference).
The rent received is 200 pounds per month more than the mortgage.
Therefore if my tenants had bought the property then they would have saved approxiamately 3200 pounds (ok ok dont jump in with things like what about insurance etc, this is just very basic)

Now ok, you could say, yes you have saved 3200 pounds (or 1800 since August) but what has happened to the house price in this time? You have lost money as property prices have declined.
Well the area I have bought this property increased 25% in 2007 (including the last two months price reduction. This means on paper, the property is still valued at much more than I paid for it, even taking into account three months of price drops (-.01%, -.05% & -.06%) this year.
In fact the property would have to devalue by 23.5% in order for it to return to the price I paid for it in Jan 2007.

Will this happen, maybe, maybe not, who knows, not me for sure but in this instance it needs to drop 23.5% before it breaks even and even then, the tenants would have saved the 200 pounds per month buying as opposed to renting.

I hope this shows and example of how depending on area, you can still save buying as opposed renting.

P.S. I am not abdicating house prices will not fall but puting a little reality into the effect of waiting and waiting (some for more than 6 years from reading their posts) to buy a home.
The paper value of this property has devalued by just over 2,000 pounds in the last three months, but this is still a small percentage of the value since purchased 15 months ago.

At the end of the day, everyone needs to evaluate for themselves the market they are interested in and be aware each area differs in how it is affected. They then need to calculate their affordability and costs and weigh up the options for them.

You cannot deny that pound for pound, buying is better than renting, just simply for the fact that after the mortgage is paid off, you dont have to pay any more. With renting, you just keep on paying until you take on a mortgage and pay for the amortization period. Effectively Buying = 25 years payments, renting = 25 Years payments + Rent years paid (Assuming mortgage period taken over 25 years)

IveSeenTheLight

trudiha wrote: »

Super, would you be willing to underwrite any downturn in the value of my property in exchange for me agreeing to give you any gains over, say, the next 5 years?

I would be interested in this but maybe just a little change to the terms.
How about over the next 15 or 25 years?