Jump to content
House Price Crash Forum
subspace

House Prices In Terms Of Monthly Mortgage Repayments

Recommended Posts

I haven't seen this chart posted before but when UK average house prices are expressed in terms of monthly mortgage repayments of a typical variable rate mortgage required to purchase 100% of the house, houses are as cheap now as they were in 1997 :o

house_prices.jpg

Inflation adjusted house prices taken from here:

http://www.housepricecrash.co.uk/indices-nationwide-national-inflation.php

Mortgage rates assumed to be the base rate + 2% as per here:

http://www.housepricecrash.co.uk/graphs-base-rate-uk.php

Edited by subspace

Share this post


Link to post
Share on other sites

The average wage in 1980 was around £6000. I bought my house at the average price of £23000.

Today, the average wage is £25K...same houses are asking currently £180000

see the difference?

Share this post


Link to post
Share on other sites

The overall price of the house might matter to cash buyers but to buyers with a mortgage it is the monthy repayment that matters.

and when is the asset price the highest?

Share this post


Link to post
Share on other sites

The average wage in 1980 was around £6000. I bought my house at the average price of £23000.

Today, the average wage is £25K...same houses are asking currently £180000

see the difference?

Average house price in 1980 was £23,000 (nominal).

Base rate in 1980 was around 16%.

To borrow £23,000 at 18% (base rate + 2%) over 25 years costs £351 P/M.

Average house price in Dec 2014 was £189,002

To borrow £189,002 at 2.5% (base rate + 2%) over 25 years costs £855 P/M.

Divide that amount by 4 to take into account wage inflation of 6k to 25k and in 1980 money it costs £213 P/M.

Edited by subspace

Share this post


Link to post
Share on other sites

Average house price in 1980 was £23,000 (nominal).

Base rate in 1980 was around 16%.

To borrow £23,000 at 18% (base rate + 2%) over 25 years costs £351 P/M.

Average house price in Dec 2014 was £189,002

To borrow £189,002 at 2.5% (base rate + 2%) over 25 years costs £855 P/M.

Divide that amount by 4 to take into account wage inflation of 6k to 25k and in 1980 money it costs £213 P/M.

article-2595298-1CC4D6FA00000578-479_634

Share this post


Link to post
Share on other sites

I am not saying that is a sensible approach to take, I am saying that is what matters to your average UK house buyer.

In the short term only

Share this post


Link to post
Share on other sites

Thanks for linking to a article behind a paywall :rolleyes:

Google the headline "affordability backwards" you get around the paywall

Ah it alfa not times so free if you register

Edited by long time lurking

Share this post


Link to post
Share on other sites

Average house price in 1980 was £23,000 (nominal).

Base rate in 1980 was around 16%.

To borrow £23,000 at 18% (base rate + 2%) over 25 years costs £351 P/M.

Average house price in Dec 2014 was £189,002

To borrow £189,002 at 2.5% (base rate + 2%) over 25 years costs £855 P/M.

Divide that amount by 4 to take into account wage inflation of 6k to 25k and in 1980 money it costs £213 P/M.

Nah, our mortgage was £180 per month in 1980, give or take a couple of quid.

Base rate wasnt 15% in 1980. you are think about half a day in 1990-1992

The limit on borrowing in those days was a salary multiple.

Share this post


Link to post
Share on other sites

Why is the line on the graph so flat for the last five years is the question one should be asking especially when house prices are so high

According to the Nationwide figures the inflation adjusted house prices in Q4 2009 were £192,499 and in Q4 2014 were £189,002.

Share this post


Link to post
Share on other sites

I am not saying that is a sensible approach to take, I am saying that is what matters to your average UK house buyer.

in that respect, the monthly costs, or as the trade calls it, affordability criteria, you are correct.

Share this post


Link to post
Share on other sites

Nah, our mortgage was £180 per month in 1980, give or take a couple of quid.

Base rate wasnt 15% in 1980. you are think about half a day in 1990-1992

The limit on borrowing in those days was a salary multiple.

Were you on a fixed rate mortgage?

From the BoE website rate decisions:

http://www.bankofengland.co.uk/monetarypolicy/Pages/decisions.aspx

1979

8 Feb 14.0000

1 Mar 13.0000

5 Apr 12.0000

13 Jun 14.0000

15 Nov 17.0000

1980

3 Jul 16.0000

25 Nov 14.0000

1981

11 Mar 12.0000

So the base rate was between 14% and 17% in 1980.

Edited by subspace

Share this post


Link to post
Share on other sites

wow, I had totally forgotten what the rate was. around 10% and a bit more for mortgages in the early 1980s.

No, My mortgage was a 25 year repayment and IIRC was for £19500.

The rule was 3 times main earner plus 1 times the second.

The issue with affordability criteria rather than a salary multiple is that the former is totally at the whim of the lenders...and buying when rates are at their lowest is clearly risky as a small rise in rates will destroy the ability of people to borrow to pay the price you did, hence your deposit is much more at risk as that is the quickest element to disappear in falling price situation

Share this post


Link to post
Share on other sites

According to the Nationwide figures the inflation adjusted house prices in Q4 2009 were £192,499 and in Q4 2014 were £189,002.

Wage inflation adjusted ? as thats the one that makes mortgage payments more affordable in the long run, the line is so flat because interest rates have fallen we have had 0.5% rate since 2009 mortgage rates are still dropping ...reason no one wants to borrow ..sure sign the purchase is over valued even the UK`s new northern rock thinks so

Edit did not format http://themortgagemeter.com/#/best_buys just look at 90% vs 60% 10 year fixes this will give you very good idea what the bakns think about house prices in the future
Edited by long time lurking

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   215 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.