Payfinder

[innocent]

Oh my, there aren't many professions left in the UK where home ownership is affordable (i.e. within 3.5 multiples of income)...

http://www.payfinder.com/payfinder/index.asp

[dogbox]

Oh my, there aren't many professions left in the UK where home ownership is affordable (i.e. within 3.5 multiples of income)... 

6x income is a more relevant figure. 3.5 came about in times when average rates were expected at around 8.5% on a CAPITAL & interest mortgage.

Also, a couple could earn average of say £43000 x3 = not bad.

Plenty pay rents of £800 - 900 per month in my area - which represents an interest only loan of c£200000. Rightly or wrongly this is how many buyers will reach decisions.

[weezer]

Can someone tell me whats good about IO mortgages. I just get the feeling they are a seriously bad idea.

[Gtr London FTB]

Can someone tell me whats good about IO mortgages. I just get the feeling they are a seriously bad idea.

<{POST_SNAPBACK}>

The only way they can make any kind of financial sense is in a steeply rising property market, which no longer exists so any kind of rational person should not ever consider one!

[Ignorant Steve]

Can someone tell me whats good about IO mortgages. I just get the feeling they are a seriously bad idea.

<{POST_SNAPBACK}>

They ARE a seriously bad and stupid idea - unless you've got a decent finance vehicle running to clear the capital debt at the end of term.

[right_freds_dead]

dogbox.

i bet rents in your area struggle for the £900 pcm your quoting.

got any links ?

[Ignorant Steve]

The only way they can make any kind of financial sense is in a steeply rising property market, which no longer exists so any kind of rational person should not ever consider one!

<{POST_SNAPBACK}>

No that's rubbish as well because if you have to sell to pay off the original loan what are youi going to be able to buy with the remainder?

When these IO mortgages were first touted there was loads of articles about how they would be mis-understood. Your answer unfortunately bears this out.

[Gtr London FTB]

No that's rubbish as well because if you have to sell to pay off the original loan what are youi going to be able to buy with the remainder?

<{POST_SNAPBACK}>

I wasn't even considering IO for OOs, simply for BTL, in which case when sold in the future you would guess that the profits wouldn't be going back into property!

IO for OO is just lunacy, plain and simple. Yet the HSBC even has the HomeStart mortagage specifically targeting FTBs who can't afford repayment mortgages for the first 3 years!

[Ignorant Steve]

I wasn't even considering IO for OOs, simply for BTL, in which case when sold in the future you would guess that the profits wouldn't be going back into property!

IO for OO is just lunacy, plain and simple.  Yet the HSBC even has the HomeStart mortagage specifically targeting FTBs who can't afford repayment mortgages for the first 3 years!

<{POST_SNAPBACK}>

OK - nowhere in the thread was BTL mentioned so I assumed we were only talking OO.

Actually there's nothing wrong with IO for a OO so long as the "endowment" clears the original debt. If you use a Tracker ISA you could argue that over a 25yr period your returns should better the repayment method. The problem as I'm sure everyone knows is that you can't guarantee the final pay-off.

No-one will be surprised that I have an IO mortgage.

[FernandoMorientes]

6x income is a more relevant figure. 3.5 came about in times when average rates were expected at around 8.5% on a CAPITAL & interest mortgage.

Also, a couple could earn average of say £43000 x3 = not bad.

Plenty pay rents of £800 - 900 per month in my area - which represents an interest only loan of c£200000. Rightly or wrongly this is how many buyers will reach decisions.

<{POST_SNAPBACK}>

Which = 130k! x3

In London the average house is now what (I am guessing here) 220k?

So whats not bad about that.....well quite a lot really Mr and Mrs average are going to have to go x5 at least and for what?

F*ck all..... anyone with any sense is not going to go there its over hyped rubbish.

[dogbox]

dogbox.

i bet rents in your area struggle for the £900 pcm your quoting.

got any links ?

Its not uncommon to hear such rents being paid. Freind just let her tatty 3 bed ex local semi for £850 pcm in Puckerige, Herts.

[Timmy Manson]

Simple average figures are totally meaningless, especially in London.

What is far more representative is the modal ( most common ) salary band, which I can assure you is NOT £22k, a small minority of high earners distort the figures upwards, especially in London.

...claiming that the general London population earn 40% more than elsewhere is rollox, London has more deprived areas and higher umemplyment than almost any other UK area. This is distorted by the mega salaries of 50,000 bankers.

[Cassandra]

One of the costs mortgages based on 3*dual income is that it is very difficult for FTBs to afford a house AND have a family. In years gone by this wasn't as bad as (a) max mortgage was calculated as ca 3*partner1+ 1xpartner2, ( higher inflation meant that real mortgage costs dropped substantially within 2 or 3 years so then it was less necessary for both husband and wife to work full time.

Consequence is that the birth rate will drop even further leading to an even more greying population, with an even higher proportion of immigrants and chavs.

This has happened in Japan (except for the immigrants + chavs who almost don't exist there). Birth rate has dropped below 1 child per female. The Japanese are now worried that they might become extinct.

[rockdoctor]

Timmy, you beat me to it. It would be interesting to see the histogram of salaries in 5K bands. Presumably there is a large number in the 0-5K band (unemployed, state pension etc), then a smaller number in 5-10K, rising to a peak at the mode (?20-25K).

You then get a falling trend of ever-decreasing numbers with ever larger salaries, right out to the distant tail of the distribution with the highest paid person in the UK.

The average (arithmetic mean) of this distribution will be skewed towards the expensive tail.

As Timmy says, the mode (most commonly earned salary band in this case) gives a better idea of the kinds of salaries available to buy an ordinary house.

The median value (equal number of people earn salaries higher and lower than this) might also be useful, but mode would be preferred.

[Timmy Manson]

The average (arithmetic mean) of this distribution will be skewed towards the expensive tail.

<{POST_SNAPBACK}>

What would be really interesting would be a frequency histogram of banded salaries overlain with a histogram of the UK housing market banded by property price. I bet you a doller to a dime that the income chart is left skewed towards the lower end and the hp chart is skewed to the centre and right.

Guess it would just confirm what everybody knows, that HP are way way to high, but that the current use of stats has been masking. Which I guess is why VI media have NEVER and probably will NEVER publish such as set of charts.

[CrashedOutAndBurned]

Yeah, the salary averages make a sick joke. 22k is a senior wage in many jobs. Most graduate friends could not get beyond 18k several years after graduation.

Walk down the street. What do you see? Offices where many staff will be 13-15k customer service types, shops where most staff are on £5 an hour and even the manager doesn't earn 22k.

Perversely in 1999, just before BTL mania, I did know 12k shop assistants that bought flats with sensible little deposits for in the 40ks, which are now 130k.

Seems the 90s saw property prices largely constrained by real-world earnings.

As it should be.

[No6]

"The average salary for the UK is £22,411, yet Londoners, with an average wage of £30,984 earn nearly 40% more. "

Where then do the VI's get the average salary of about £24,500 from then? £22,411 is closer to reality, and the vast majority are below this, but I've seen various figures up to about £25,500 as the average salary and I do wonder where they dream it up from.

[1 Billion Yen]

Regardless of what the average salary is in the UK, everyone has to live somewhere. I can never understand these people who quote the "average" wage of 22k (24-26-28k take your pick) then argue about affordability.

I would like someone to tell me how Tesco's shelf fillers are supposed to live in London? Seriously, how can someone earning 11-12k per annum afford to even rent a place?

I know all the bull about "market forces" will come to the surface, but if they all refused to do the jobs (and they would be better off on JSA) then how would London residents get their groceries? Eventually Tesco's et al would have to raise their wages to recruit staff, and prices would balloon.

Guess we'll all have to get used to paying £1.00 for our tins of beans instead of 15p.

[George]

30k a year, well done, buy your modest flat.

[gone west]

30k a year, well done, buy your modest flat.

<{POST_SNAPBACK}>

I have noticed a tendency recently to use average wages when talking about FTBs and affordability. Your average FTB is probably not, or at least never used to be, on the average salary. It is then stretched even further buy using the "two people can afford twice as much" argument, even though households are tending toward the other extreme (i.e. living alone). A really feel sorry for the single parent on average wages (or, more likely, far less) who can't even afford a squalid studio in the roughest of neighbourhoods. Makes me cry...

[George]

emmigrate I am.

[gone west]

emmigrate I am.

<{POST_SNAPBACK}>

I did.

I live here.

I am biding my time and will snap up a small flat in a nice area of London I can use as a holiday let/home.

[Marina]

6x income is a more relevant figure. 3.5 came about in times when average rates were expected at around 8.5% on a CAPITAL & interest mortgage.

Also, a couple could earn average of say £43000 x3 = not bad.

Plenty pay rents of £800 - 900 per month in my area - which represents an interest only loan of c£200000. Rightly or wrongly this is how many buyers will reach decisions.

<{POST_SNAPBACK}>

The rental market is like the housing market - silly money is still being asked for but not achieved. You mention later someone renting out a tatty 3 bed ex-council semi for £850 a month. Wonder why the people don't rent here in Berkshire. I pay £1000 a month for a 4 bed, 3 bath, detached on the best estate in the area. It rented for £1700 a month 3 years ago and, having been empty for 3 months before I moved in, the landlord was happy to accept my offer.

[Gtr London FTB]

Yeah, the salary averages make a sick joke. 22k is a senior wage in many jobs. Most graduate friends could not get beyond 18k several years after graduation.

Walk down the street. What do you see? Offices where many staff will be 13-15k customer service types, shops where most staff are on £5 an hour and even the manager doesn't earn 22k.

Perversely in 1999, just before BTL mania, I did know 12k shop assistants that bought flats with sensible little deposits for in the 40ks, which are now 130k.

Seems the 90s saw property prices largely constrained by real-world earnings.

As it should be.

<{POST_SNAPBACK}>

Instead of walking down Watford High Street, why don't you try walking down some streets in London City and make the same observation!

Seriously, how many senior jobs earn only £22k?? And frankly I don't classify a McDonalds store manager or call centre team leaders as senior.

[Bear Goggles]

Regardless of what the average salary is in the UK, everyone has to live somewhere.  I can never understand these people who quote the "average" wage of 22k (24-26-28k take your pick) then argue about affordability.

I would like someone to tell me how Tesco's shelf fillers are supposed to live in London? Seriously, how can someone earning 11-12k per annum afford to even rent a place?

I know all the bull about "market forces" will come to the surface, but if they all refused to do the jobs (and they would be better off on JSA) then how would London residents get their groceries?  Eventually Tesco's et al would have to raise their wages to recruit staff, and prices would balloon.

Guess we'll all have to get used to paying £1.00 for our tins of beans instead of 15p.

<{POST_SNAPBACK}>

The way it works is that we "top up" their wages with benefits. (housing benefit, council tax benefit, family tax credit etc.)

So in effect we do pay more for our beans through taxes. It's one of the paradoxes of social responsibility. We don't allow people to starve so therefore we have to offer some kinds of benefits. However, this allows companies to pay below a "living wage" and everyone else tops it up with tax.

So, Tesco gets lots of cheap labour and their board of directors can get paid more that all of the non-managerial staff put together, they can still charge 15p for a tin of beans and nobody dies hungry on the streets.

Everyones a winner!

(unless you happen to work for 12k a year, or for that matter anyone who shops or isn't on the board of directors)