Monday, Apr 23, 2007
Hilarious VI spin on high house prices
CityWire: Spiralling mortgages remain affordable says CML
'Interest rates paid on mortgages have fallen from an average of 10% in the 1980s to around 9% in the 1990s to just over 5% today,’ says Nick Gardner of brokers Chase de Vere.
‘If people were routinely safely borrowing between three and four times income in the early 90s, they should be able to borrow more than eight times income today.’
Posted by little professor @ 08:18 AM (200 views) Add Comment
13 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Ts200010 said...
"He added that ahead of the housing crash of the early 1990s, some people were facing mortgage payments of between 70 and 80% of their income – well ahead of the current upper median of between 20 and 30%."
In comparing the upper (lower?) percentiles with a median, the author is grossly mis-representing the facts.
2. Sohiab said...
This is very true percentages were much lower on debts of only 40k. 6-7% on 250k is a lot worse!
3. inbreda said...
What total BS
"He added that ahead of the housing crash of the early 1990s, some people were facing mortgage payments of between 70 and 80% of their income – well ahead of the current upper median of between 20 and 30%."
How is that comparable? I'm sure there are people now who are paying 70 and 80% of their income.
And can someone tell me what an upper median is please.
4. Taffee said...
I wondered if this was some sort of joke....is this guy for real......8x is okay????
cloud cuckoo land and almost dilusional
5. taffee said...
is this a joke article or something?
8x income is okay and houses are affordable?.....bizaare and dilusional if you ask me
they said all this in late 80's
6. dugmug said...
Someone borrowing 6 times their income will be forking over about 45% - 60% of their net pay each month, depending on whether they're interest only or repayment and depending on what interest rate their mortgage is currently charging (that's presuming they are paying a fairly competitive rate; the figures are higher still if they have stupidly let their mortgage "revert" to the standard rate of 7% or such). That's the maths, there's no room for "interpretation" any more than there is with 2 + 2 = 4.
However, a relatively small proportion of people will have taken out a 6x mortgage compared the the total number of mortgages out there. Many existing mortgages will be held by people who have been homeowners for many years already, who maybe bought their house for £60k about 15 years ago for instance, so the proportion of their income going on mortgage payments (presuming they haven't recently MEWed) is likely to be tiny - 10% maybe? Average it out for ALL mortgage holders and you can quote a figure of 20 - 30% - neat huh? Of course this average figure doesn't help those who've borrowed recently at high income multiples; they're still going to be in the doo-doo as rates keep rising.
But do keep on playing these tricks with how you report the figures CML - it only brings the crash nearer as you fool more idiots into over-extending themselevs; keep up the good work.
7. inbreda said...
Dugmug is right.
The additional point is that it only takes a small part of the market to default to bring prices crashing to earth (on account of the fact that only a small part of the market is actually 'in' the market i.e. buying ro selling, at any given time)
And I still don't know what an upper median is.
8. Richc said...
Before the 90's crash, average household disposable income was growing at around 10%, meaning that any mortgage payment would be reduced to nearly nothing over time by inflation. Average household disposable income is now growing around 2% a year (it was slightly negative in the last quarter) which makes any large mortgage a ball and chain weighing down the borrower for the next 20 years.
If you compare to the average cost of a mortgage over the life of a 20 year loan (using current prices and interest rates) to the forecast average household disposable income over the same 20 year period (based on the current growth rate in income), the ratio is now about 70%. Right before the last crash, the ratio peaked at about 45%, and it has averaged about 30% for the last 25 years.
9. confused76 said...
Comparing upper end of the range with averages is what also "reputable" media like The Times do very ofter. This is a gross misrepresentation of the facts and I do not understand why the FSA is not introducing rules re market information. Houses are used as an investment vehicle and the market should be regulated, at the end of the day so many people in the UK have (stupidly) decided to rely 100% on their house for their pensions. Estate agents are acting as financial advisors, but who is controlling them??
10. autopilotengage said...
I wonder if "Nick Gardner of brokers Chase de Vere" would feel comfortable taking out an 8x mortgage at present. Probably doesn't need to, but i'll wager he wouldn't.
11. Sevensins said...
Well ask Nick Gardner what mortgage he's got ? has he borrowed 8 times earnings ? I doubt it.
Is Nick Gardner prepared to guarantee IR will not rise, is he offereing a 25year fixed IR of 5% ? If not he should shut up, if he is please let me know and I'll take it!
The World knows IRs are on the up and I suggest he's been wheeled out to make a statement to keep business coming in, simple as that.
What a lovelly man.
12. Rockg said...
Nick Gardner was talking sense...I should know. Now stop your ignorant blabbering and get real - do the maths you idiots. People who take big mortgages and stretch to get on the ladder will be laughing in a few years time when property prices have risen out of everybody's reach....
You lot can sit feeling righteous but you'll miss out unless you act...and yes, 8 x income isn't ideal but it isn't as mad as you might think, particularly if you are a young professional/graduate who's earnings will increase markedly over the next few years.
Honestly, can't believe I'm flattering you idiots with a response....
13. Rockg said...
And you...Sevensisns?? What ARE you talking about? Retard!!!!
And feel free - tie yourself into a 25 year fix that you can't escape from and see who's laughing when you want to sell up!! Hahaahah...look at the small print of 25 year fixes you idiot!!