Neil B Posted June 22, 2009 Share Posted June 22, 2009 I realise we have dwindling deposits and lenders need to rebuild their books but why have lenders got so little to lend? They have ran out of credit - banks lend to each other and when the credit ran out they couldnt lend to each other anymore. This was started by mortgage lending to people that could not afford to pay it back and defaulted. The pot is empty.... Quote Link to comment Share on other sites More sharing options...
tim123 Posted June 22, 2009 Share Posted June 22, 2009 In a simple answer: NoAt a 30% drop from peak the average home would be £140k. As the average wage is £25k You can say this as many times as you like but it isn't true. The average wage is in excess of 30K and has been for some time. Just because "your bit of the world" doesn't see this as the average wage doen't make it untrue. There is skew in the "average" figures for houses as well. tim Quote Link to comment Share on other sites More sharing options...
Neil B Posted June 22, 2009 Share Posted June 22, 2009 You can say this as many times as you like but it isn't true.The average wage is in excess of 30K and has been for some time. Just because "your bit of the world" doesn't see this as the average wage doen't make it untrue. There is skew in the "average" figures for houses as well. tim Can you post your figures to substantiate this Tim? From Telegraph: 29-Apr-2009 Weekly wages fell at the fastest rate in 60 years in February as City bonuses were slashed and workers agreed to reduced hours in the wake of recession, the latest official figures show. By Angela Monaghan and Edmund Conway Downtrodden: weekly wages fell in the UK have fallen at the fastest rate in 60 years Photo: Reuters The Office for National Statistics said average weekly earnings fell 5.8pc compared with the same month last year, to £459.10. The private sector took the full force of the fall in weekly earnings, down sharply by 7.7pc at £463.50, while average weekly earnings in the public sector actually rose by 3.2pc to £442.90. What do you believe is 'My bit of the world' and how do you have evidence for this? Quote Link to comment Share on other sites More sharing options...
MinceBalls Posted June 22, 2009 Share Posted June 22, 2009 You can say this as many times as you like but it isn't true.The average wage is in excess of 30K and has been for some time. Just because "your bit of the world" doesn't see this as the average wage doen't make it untrue. There is skew in the "average" figures for houses as well. tim Nice to see a bit of unnecessary rudeness. These statistics are collected nationally and usually done by mean not average. FYI, this was £479 per week for full-time employees in 2008 = £24,908 pa. http://www.statistics.gov.uk/pdfdir/ashe1108.pdf Quote Link to comment Share on other sites More sharing options...
Neil B Posted June 22, 2009 Share Posted June 22, 2009 Nice to see a bit of unnecessary rudeness. These statistics are collected nationally and usually done by mean not average. FYI, this was £479 per week for full-time employees in 2008 = £24,908 pa.http://www.statistics.gov.uk/pdfdir/ashe1108.pdf Thanks for the intelligent support minceballs. In truth I'm a little bit bored of some posts on here these days - it's gainsay without any substance behind a debate. Though the gainsay does seems to only come from bulls... I'm expecting next 'Yeah but it takes one to know one' replies from them..... Quote Link to comment Share on other sites More sharing options...
Sybil13 Posted June 22, 2009 Author Share Posted June 22, 2009 They have ran out of credit - banks lend to each other and when the credit ran out they couldnt lend to each other anymore. This was started by mortgage lending to people that could not afford to pay it back and defaulted. The pot is empty.... OK lets get back to basics, how did old style mortgage lending work , that is pre rmbs , 2001? Can someone put this in simple language. Having posted earlier about the RMBS market down 50% by the looks of it, but lenders now not having to find so much money for remortgages I thought that probably a LOT of money is now needed for capital to cover high loan to value mortgages . Ray Boulger, of mortgage broker John Charcol, said the increase in price had been driven by a lack of competition and by new rules under which lenders have to set aside more capital to cover high loan-to-value mortgages. "The cost to the lender of making one 90% LTV loan available can be four or five times the cost of offering a mortgage at 60% LTV," he said. "We're in a situation where the more lending a lender does at 90% the less lending they are able to do overall." Someone asked a few weeks ago, does anyone know HOW MUCH lenders have to set aside ? As Ray Boulger said above the more 90% loans they do the fewer mortgages they can do overall. Quote Link to comment Share on other sites More sharing options...
Neil B Posted June 22, 2009 Share Posted June 22, 2009 (edited) OK lets get back to basics, how did old style mortgage lending work , that is pre rmbs , 2001? Can someone put this in simple language. Having posted earlier about the RMBS market down 50% by the looks of it, but lenders now not having to find so much money for remortgages I thought that probably a LOT of money is now needed for capital to cover high loan to value mortgages . Someone asked a few weeks ago, does anyone know HOW MUCH lenders have to set aside ? As Ray Boulger said above the more 90% loans they do the fewer mortgages they can do overall. Sybil, pre 'stupid lending' ( not so long ago...) it was based upon points - the more points you had the more you could borrow. It worked out to around 4 x salary (joint salary or dual), however, all exisiting loans and debts were also taken into consideration as well as credit score so this usually reduced the amount to around 3 x salary for the average application. LTV values where typicaly 80 - 95% with a sliding scale of interest rates - the bigger deposit you put down, the smaller the interest rate. In 2001 when the average house was around 60k, even an 80% mortgage would only require a deposit of £12k - which was and is the same now - a lot of money, but much more achievable than 30k; which, lets be frank - 30k could buy you a flat 10 years ago! Edited June 22, 2009 by Neil B Quote Link to comment Share on other sites More sharing options...
andykn Posted June 22, 2009 Share Posted June 22, 2009 As banks are now back to lending at 4 x salary, then the average maximum mortgage obtainable will be 4 x the average wage. It is this value that depicts what the average house price should be. No it isn't. The average wage represents the average of the 90% of employable people who earn. The average house price represents the average paid by the 70% who own a house. The two just aren't the same thing. The average wage of house buyers is more important but it is not the same as the average wage of all employed people. The 25k wage you quote is the median wage, the mean (average) wage of all wage earners is higher. And what is the "average" deposit that goes with these "average" house prices? Quote Link to comment Share on other sites More sharing options...
andykn Posted June 22, 2009 Share Posted June 22, 2009 Thanks for the intelligent support minceballs.In truth I'm a little bit bored of some posts on here these days - it's gainsay without any substance behind a debate. Though the gainsay does seems to only come from bulls... I'm expecting next 'Yeah but it takes one to know one' replies from them..... Yes, thanks for that. It says: "In April 2008 median gross weekly earnings were £479" "The headline statistics for ASHE are based on the median rather than the mean. The median is the value below which 50 per cent of employees fall. It is preferred over the mean for earnings data as it is influenced less by extreme values and because of the skewed distribution of earnings data." The table on hourly rates suggests the mean (average) is about 25% higher. "Average" house prices are skewed by a few multi million pound properties, "average" wages are skewed by a few city bankers. Quote Link to comment Share on other sites More sharing options...
andykn Posted June 22, 2009 Share Posted June 22, 2009 Nice to see a bit of unnecessary rudeness. These statistics are collected nationally and usually done by mean not average. FYI, this was £479 per week for full-time employees in 2008 = £24,908 pa.http://www.statistics.gov.uk/pdfdir/ashe1108.pdf I've seen that the table at the bottom of page 8 suggests that average (mean) pay is around 30k. And don't forget that "average" equity is 50%. Quote Link to comment Share on other sites More sharing options...
Neil B Posted June 22, 2009 Share Posted June 22, 2009 No it isn't. The average wage represents the average of the 90% of employable people who earn. The average house price represents the average paid by the 70% who own a house. The two just aren't the same thing.The average wage of house buyers is more important but it is not the same as the average wage of all employed people. The 25k wage you quote is the median wage, the mean (average) wage of all wage earners is higher. And what is the "average" deposit that goes with these "average" house prices? How can an average be based on a percentage less than 100%? The average wage is nothing to do with if they own a house or not. The average wage is not median - if this were so then the median wage figure would be around 30 million as people like Richard Branson would set the top limit. This is very mixed up... just more gainsay...please lets have some real substantiated figures Quote Link to comment Share on other sites More sharing options...
Neil B Posted June 22, 2009 Share Posted June 22, 2009 "Average" house prices are skewed by a few multi million pound properties, "average" wages are skewed by a few city bankers. Median figures skew more than mean - median is the mid point, so for example: A house sells for 50k in Glasgow, a house sells for 16 million in W11, median = 8 million Someone works at Tescos, wage = 7k, George Michael earns 4 million, Median = 2 million You can argue all you wish - the average UK wage is 25k - fact Quote Link to comment Share on other sites More sharing options...
andykn Posted June 22, 2009 Share Posted June 22, 2009 How can an average be based on a percentage less than 100%?The average wage is nothing to do with if they own a house or not. The average wage is not median - if this were so then the median wage figure would be around 30 million as people like Richard Branson would set the top limit. This is very mixed up... just more gainsay...please lets have some real substantiated figures The "average" wage is based on all the people who work. In the UK we have over 90% employment, the unemployment rate is less then 10%. So the "average" wage is based on the overr 90% who work, and doesn't include the less than 10% who don't. For the difference in the "average" (median) wage you quoted and the "average" (mean) figure, see my posts above and the ASHE report linked to by MinceBalls for real substantiated figures. The ASHE figures only include PAYE figures, not Branson's dividend income. But the "average" house prices will include his house. That's why you can't directly compare the two. Quote Link to comment Share on other sites More sharing options...
libspero Posted June 22, 2009 Share Posted June 22, 2009 (edited) We have over 90% employment and only 70% home ownership. In the interests of keeping things factual: Employment (working age): 73.3% Employment (of total population): ~50% Full Time Employment (of total population): ~30% Linky Edited June 22, 2009 by libspero Quote Link to comment Share on other sites More sharing options...
Neil B Posted June 22, 2009 Share Posted June 22, 2009 The "average" wage is based on all the people who work. In the UK we have over 90% employment, the unemployment rate is less then 10%. So the "average" wage is based on the overr 90% who work, and doesn't include the less than 10% who don't. For the difference in the "average" (median) wage you quoted and the "average" (mean) figure, see my posts above and the ASHE report linked to by MinceBalls for real substantiated figures. The ASHE figures only include PAYE figures, not Branson's dividend income. But the "average" house prices will include his house. That's why you can't directly compare the two. This is becoming a little tiring: Benefits are not wages. Quote Link to comment Share on other sites More sharing options...
andykn Posted June 22, 2009 Share Posted June 22, 2009 Median figures skew more than mean - median is the mid point, so for example:A house sells for 50k in Glasgow, a house sells for 16 million in W11, median = 8 million Someone works at Tescos, wage = 7k, George Michael earns 4 million, Median = 2 million You can argue all you wish - the average UK wage is 25k - fact The median wage in the UK is 25k, the mean is 30k. Which ever way round, the person earning the "average" wage" does not live in an "average" house because only 70% of people own their own houses, generally the 70% who are higer earners. Quote Link to comment Share on other sites More sharing options...
tim123 Posted June 22, 2009 Share Posted June 22, 2009 How can an average be based on a percentage less than 100%? He means that it's based upon the percentage of the population that have a job. The "wages" of the unemployed are not included in the calculation. tim Quote Link to comment Share on other sites More sharing options...
andykn Posted June 22, 2009 Share Posted June 22, 2009 This is becoming a little tiring: Benefits are not wages. ? You asked why the wages were based on the 90% in employment. Quote Link to comment Share on other sites More sharing options...
andykn Posted June 22, 2009 Share Posted June 22, 2009 In the interests of keeping things factual:Employment (working age): 73.3% Employment (of total population): ~50% Full Time Employment (of total population): ~30% Linky Yes, there's lots of differnet ways of cutting the cake. I'm just trying to make the point that the average wage earner is not the same thing as someone living in the average house and so the two can't be directly related in a simplistic X times average earnings plus deposit equals average house price. Especially using median earnings and mean prices. Quote Link to comment Share on other sites More sharing options...
catman74 Posted June 22, 2009 Share Posted June 22, 2009 Yes, there's lots of differnet ways of cutting the cake. I'm just trying to make the point that the average wage earner is not the same thing as someone living in the average house and so the two can't be directly related in a simplistic X times average earnings plus deposit equals average house price.Especially using median earnings and mean prices. Whether those distributions are valid or not doesn't change the house price to earnings figure. That's a constant over the course of time. I.e. in times of prosperity or austerity it's a constant method of calculation. It's a very general figure but it is always valid as a guide of where we are today compared to the past. The distribution of home owners to wage earners may well be 70% and 90% but if that was the same in, say, 1988, and the house price/wage ratio was 3 then, the skewed distribution now isn't a valid argument. Hopefully someone more eloquent than I can get the jist of this and explain it more coherently. Quote Link to comment Share on other sites More sharing options...
libspero Posted June 22, 2009 Share Posted June 22, 2009 I'm just trying to make the point that the average wage earner is not the same thing as someone living in the average house and so the two can't be directly related in a simplistic X times average earnings plus deposit equals average house price. There is certainly no hard fast rule. 1973 = 4.7x 1976 = 3.4x 1989 = 5.0x 1995 = 2.9x 2007 = 6.5x 2012 = Quote Link to comment Share on other sites More sharing options...
endofcrash2 Posted June 22, 2009 Share Posted June 22, 2009 In a simple answer: NoAt a 30% drop from peak the average home would be £140k. As the average wage is £25k and banks are only lending upto around 4 x salary, the average home has to come down to £100k (= 50% drop) in order for the market to become sustainable. WRONG. The average salary is £36k if not higher . This gives an average house price of roughly £144k ( on your * 4) so £140k is an over correction. Recon it is nearer 5* so that would give £180k which means we have well over corrected. Quote Link to comment Share on other sites More sharing options...
pie-eater Posted June 22, 2009 Share Posted June 22, 2009 WRONG. The average salary is £36k if not higher . This gives an average house price of roughly £144k ( on your * 4) so £140k is an over correction. Recon it is nearer 5* so that would give £180k which means we have well over corrected. Quote Link to comment Share on other sites More sharing options...
libspero Posted June 22, 2009 Share Posted June 22, 2009 (edited) WRONG. The average salary is £36k if not higher . This gives an average house price of roughly £144k ( on your * 4) so £140k is an over correction. Recon it is nearer 5* so that would give £180k which means we have well over corrected. An average is a single value that is meant to typify a list of values.The most common method is the arithmetic mean but there are many other types of averages, such as median (which is used most often when the distribution of the values is skewed with some small numbers of very high values, as seen with house prices or incomes). Linky Average in the sense of earnings (at least the one preferred by the ONS) is median. In this sense the average wage of someone in full time employment (notice this excludes all those working part time - which the employment figures don't coincidentally) was £25k in 2008 Linky Edited June 22, 2009 by libspero Quote Link to comment Share on other sites More sharing options...
Kazuya Posted June 23, 2009 Share Posted June 23, 2009 WRONG. The average salary is £36k if not higher . This gives an average house price of roughly £144k ( on your * 4) so £140k is an over correction. Recon it is nearer 5* so that would give £180k which means we have well over corrected. Quote Link to comment Share on other sites More sharing options...
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