What makes you think housing is going to become ''easily'' affordable?

dubsey

IveSeenTheLight wrote: »

did she upgrade, if so she would have saved on the larger property.
How much is that one bedroomed house now?
How much would a 50% drop make it?

No, sadly she had to sell to go and live with her parents with her hubby because she was pregnant. They were struggling like mad with the mortgage repayments (interest rates were obviously high at that time) and once the baby was born it would have been impossible.

http://www.rightmove.co.uk/viewdetails-17415226.rsp?pa_n=15&tr_t=buy

This is the type she had, so if someone bought that today at that price and had 85% LTV and then prices dropped 50% they would struggle if they needed to sell.

WestonDave

Affordability and headline prices are two different animals.

Headline prices are falling but that perversely may not improve affordability. If you were just out of reach on last summers prices with a 100% mortgage on 5x salary in mind, it won't matter if prices fall 50% because now you can only get a 90% mortgage and you had no deposit!

The falls we are seeing are not because the fundamental shortage of housing has changed (which is what ensures some people are always priced out) but because lending practices have withdrawn a proportion of peoples budgets. If a house was worth 100k when people could borrow 5x salary (assuming they had 10% deposit), then it will only be worth 82k if they can only borrow 4x salary and the same £10k deposit. For those who have no deposit (i.e. less than 10%) then affordability has actually got worse - since you need a deposit now to buy its not just unaffordable you simply can't do it at any price until you save up that deposit.

It will take a while for these lending changes to fully work through but in the example above the limited change from 5 to 4 times lending wipes 18% off prices. Start factoring in the loss of 100% LTV mortgages and a 20% fall is the minimum we can expect - possibly cushioned by demand from those who found their saving was outstripped by prices but who now find their stash brings them in range in the new conditions.

mitchaa

kristianwilliams wrote: »

The problem with this assumption is that the credit will be available for ftb to get that mortgage.

The joint income of my girlfriend and I (im never sure if its "and I " or "me and" ) is £25,000 pa. South wales.

Using basic knowledge, a 5x mortgage would = £125,000 correct? thats if we go for an all we can get top end one mortgage. "Whats the most we can borrow?? lets go for that one"

£25k is a low joint income. (Average of £12500 each which is not a lot more than minimum wage)

Surely you wouldn't expect to be able to buy an average 3 bed semi detached home with this income, rather a 1/2bed flat as related to your income? Otherwise a joint average earning couple ie 2x £25,000 incomes would be able to opt for 4/5bed houses

Does anyone know what lending criteria was used back in the 80's/90's for working out mortgages?

kristianwilliams

Its not so much due to less housing. If that was the case, people would've had problems purchasing 2 or 3 houses. We'd have people cramming into small houses, trying to stay off the street.

What happend was that people were allowed to borrow more money then they can afford to pay back. "you earn 20,000? here, have a mortgage for £170,000". "wow I can get a house worth £170,000 and not that house for £100,000".

People then relaise they can sell there £100,000 house for £170,000 because people can afford it now. Because of cheep credit.

There is no way anyone can convince me that the population in this country has increased so rapidly over the last 10 years that house prices have increased by this amount.

House prices are set at what people can afford. People can/could afford more because the banks were willing to lend them more. Banks and people now realize "wow, I cant afford these repayments" and the cash flow hasnt so much as "slowed" as the flood is receding.

THSHARIF

you have to make sure you have nothing on your credit file. even in my case i had a mortgage refused on this house becuase of an unpaid phone bill £90

this was refused on a joint application. with a 25% deposit.
i am going ahead with the mortgae on my partners name only with another lender

kristianwilliams

mitchaa wrote: »

£25k is a low joint income. (Average of £12500 each which is not a lot more than minimum wage)

Surely you wouldn't expect to be able to buy an average 3 bed semi detached home with this income, rather a 1/2bed flat as related to your income? Otherwise a joint average earning couple ie 2x £25,000 incomes would be able to opt for 4/5bed houses

Does anyone know what lending criteria was used back in the 80's/90's for working out mortgages?

Im not sure where everyone here works?

I earn 15,000 a year (roughly.) my GF is on min wage. I look at family and friends and other jobs around in southwales. No way is the average (and by average i mean the majority of people) here are on 25,000 a year. Maybe in london, or some of the larger city's yes. But not here.

So lets take a look at house prices where they stand at the moment BEFORE this crises hits properly

http://www.rightmove.co.uk/viewdetails-16284145.rsp?pa_n=1&tr_t=buy
http://www.rightmove.co.uk/viewdetails-17311138.rsp?pa_n=2&tr_t=buy
http://www.rightmove.co.uk/viewdetails-17001310.rsp?pa_n=10&tr_t=buy
:T

so yes, I do think I can get a house at that price :rotfl:

kristianwilliams

Also I LOVE this one

http://www.rightmove.co.uk/viewdetails-17448148.rsp?pa_n=11&tr_t=buy

"REALISTICALLY PRICED FOR A QUICK SALE."

£105,000 3 bedroom terraced


Tada

And all this before "the HPC"

dubsey

THSHARIF, that's what we had to do on our first house in 1994, take a mortgage on one income because of my credit history.

They must at some high point in the 80's have lent a high income multiple, because the girl with the 70k mortgage only earnt the same as I did (8k per year, full time work ) and her husband worked for the same company, so I'd be surprised if he got much more.

They were very strict by mid 90's with us on income multiples, deposit etc though.

PasturesNew

Houses are valued at the maximum people can borrow. And afford to borrow.

If the cost of living goes up by 10% and you can only borrow half next year that you could last year, then property would be valued at half what it is now.

If they then insist that you have to have a 10% deposit again, and no debts, it would seem harder to get a house, but once you've got it it's more affordable. So win:win.

e.g.

House now: £200k
Can borrow: 5x joint salary
Allowed: 100%
Need: £40k joint salary to buy

House in 2 years: £120k
Can borrow: 3x joint salary
Allowed: 90%
Need: £40k joint salary and £12k down

Same people buying, just different rules

Reducing the prices is a direct result of how much people can borrow. The price drops are being driven by the borrowing end as lenders are reducing the multiples, checking the application forms, turning down people with big debts, insisting on a deposit.

PasturesNew

kristianwilliams wrote: »

Im not sure where everyone here works?

I earn 15,000 a year (roughly.) my GF is on min wage. I look at family and friends and other jobs around in southwales. No way is the average (and by average i mean the majority of people) here are on 25,000 a year. Maybe in london, or some of the larger city's yes. But not here.

So lets take a look at house prices where they stand at the moment BEFORE this crises hits properly

http://www.rightmove.co.uk/viewdetails-16284145.rsp?pa_n=1&tr_t=buy
http://www.rightmove.co.uk/viewdetails-17311138.rsp?pa_n=2&tr_t=buy
http://www.rightmove.co.uk/viewdetails-17001310.rsp?pa_n=10&tr_t=buy


so yes, I do think I can get a house at that price

Not if your gf leaves you for a bloke with a bigger ... wallet.

As a single person you couldn't buy those.