Moneyweek: Why this housing crash could be worse than the 1990s

fc123

treliac wrote: »

Is 60k an average joint salary for a young couple? I would think it's a fair bit lower.

Also, when Mr t and I married and bought our first house, only 1 x my salary was taken into account. Translate that into your suggested figures and the couple might only qualify for a loan of say 120k.

The risk attached to the female's salary was that she was likely to start a family and want time out of the workplace / to reduce to part-time working. I'm very glad we had that leeway or we maybe wouldn't have survived.

In London it is....well mostly.;)

We had joint income assessed (sp? How many sssss's?) @ X 2.5 back then. Singles X 3.

Nowadays, through equality bla de bla....I figure they take 2 salaries into account and view that having kids is the problem of the borrower.
And then there's tax credits to top up income too.

A couple working in London at the level we were at then, could afford the house now, that we bought, after the drops of 20 odd % in the area. They may not be able to afford to turn the heating on or have hols..but then, we couldn't either.

At the time, we could have bought a castle for the same price, 70 miles outside Glasgow..I remember the ad in the Sunday papers.

The internet has changed prices in areas though......you can live in the middle of nowhere and work from home nowadays. Couldn't do that in 1990. No faxes even....

fc123

treliac wrote: »

Is 60k an average joint salary for a young couple? I would think it's a fair bit lower.

.

Actually.....I need to eat now as am passing out from low blood sugar..well, heavy swimming session then a big glass of wine.......but I will come back to reply to that. What's missing now is affordable housing (council places) as lower salary levels couldn't buy back then either but weren't on the streets....cos they could rent @ £40 pwk.

My brain has just gone squiffy.

Thrugelmir

HAMISH_MCTAVISH wrote: »

The important thing to look at is the percentage of net income being spent on mortgage payments, as this is what causes mass defaults (and perpetuates the crash) if it goes too high.

The average today is just 30%. At peak in 2007, with the base rate ten times higher than it is today, that figure was only around 40%. In the early 90's. the figure was more like 70%.

The difference is that the housing market acted in a far more logical way in the early 90's. As new mortgage applications dived in mid 1988 onwards when rates had already hit 12%. Rates rose from 8.5% to 12% in 1988 in a short space of time.

Also we now have high levels of unsecured debt and student loans to be repaid friom disposable income for many not just the mortgage.

doire_2

fc123 wrote: »

I just had a look at a few places people I knew and ourselves bought years back and compared to salary at that time.

Our first house costs about 200k nowadays...so guessing deposit 20k and salary needed of 60k? Sounds about right for a couple on 30k each.
If you wanted better area, then you would need to pay 250k now and earn more...same dilemma as back then.
Sisters place costs approx 115k now and her job then now pays about 35k now...perhaps more nowadays as was City based.

I hate to say it, and I agree HP are insane in some places (but then they always were..I could never work out who could afford a 3 bed town house in Fulham even 25 years ago) but low IR and the lower prices for stuff are feeding higher house prices.

30k each? I reckon the percentage of couples on that is very low

fc123

doire wrote: »

30k each? I reckon the percentage of couples on that is very low

I am going to disagree here..sorry. I know the area in London and cleaners charge £9 phr cash in hand for a start.

I also reckon that the average official salaries for the area for local work come in lower, but those that commute earn more. Also, massive black economy in London..massive. ...and I am not being rascist here...is there a modern term for cash in hand?

treliac

fc123 wrote: »

I am going to disagree here..sorry. I know the area in London and cleaners charge £9 phr cash in hand for a start.

I also reckon that the average official salaries for the area for local work come in lower, but those that commute earn more. Also, massive black economy in London..massive. ...and I am not being rascist here...is there a modern term for cash in hand?

As a sometimes commuter myself, the cost of travelling in/out of London is very high and brings down net pay considerably.

Cash in hand is illegal and wouldn't count as certified salary.

Ch4rlieB

!!!!!!? wrote: »

That means anyone who bought in the last two or three years could find their monthly payments almost doubling. :eek:

What a load of Tosh!!!!!

We bought 1 year 11 months ago.. Our fix rate has just ended. Payments before on the fixed rate were £842... payment now £508... not really double now is it.

HAMISH_MCTAVISH

doire wrote: »

30k each? I reckon the percentage of couples on that is very low

When you remove the lowest earning 30% of the population, ie, the ones that live in council houses, etc.... And that realistically are not going to be house owners, as ownership is not practical for everyone.....

Then the average household income of the top 70% of earners (likely house buyers) is most likely right around 60K.

60K households are not uncommon at all.

That's a lorry driver and a senior secretary, !!!!!!.....

Or a pair of 35 year old teachers, not exactly renowned for being highly paid....

And lets not forget, in most of the parts of the country where incomes are lower, houses are too.

You can buy a 2 or 3 bed terrace for less than 120K within a 45 minute drive of major cities in at least 65% of the UK, and a lot less in some areas.

That would only require a joint income of 40K to stay WELL WITHIN conservative lending standards......

fc123

treliac wrote: »

As a sometimes commuter myself, the cost of travelling in/out of London is very high and brings down net pay considerably.

Cash in hand is illegal and wouldn't count as certified salary.

I know what you mean..but all the self cert stuff....the CIH is a much bigger part of the economy than the Govt know about. It does feed through though.

Gutting this whole HPI stuff as our kids are going to have to have a bit of bank of M + D one day to get a place and I was hoping for a little splurge in my old age.:D You know.....have all those hols we never had due to paying down the mortgage.


Dam...

fc123

OMG I am reading Hamish and nodding in agreement.
OMG.

I only had 2 glasses of wine too....must be the endorphin rush...;-)