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The key date missing was Thatcher's freeing of capital controls in 1979.

This meant that mortgage lending was no longer constrained by domestic deposits and trade surpluses could be recycled back into target deficit countries like the UK without needing to balance trade.

The 1986 Building Societies' Act extended access to 'capital markets' to building socieities, with the carrot that if they turned into banks, they could have totally unconstrained access making it inevitable eventually.

One could make a decent argument that rates have simply followed debts down in the long run - i.e. the bigger the debts, the lower the Bank Rate needed to transmit monetary policy into the economy.

Either way, the people who have benefited most are the large land/property owners of the UK who had no debts.

Now, who exactly would those people be ?

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Either way, the people who have benefited most are the large land/property owners of the UK who had no debts.

Now, who exactly would those people be ?

Good question who would those people be?

It seems Pre 1970 buyers were in for a lottery. Don't know how high IRs affected them?

Edited by Fairyland

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The key date missing was Thatcher's freeing of capital controls in 1979.

This meant that mortgage lending was no longer constrained by domestic deposits and trade surpluses could be recycled back into target deficit countries like the UK without needing to balance trade.

The 1986 Building Societies' Act extended access to 'capital markets' to building socieities, with the carrot that if they turned into banks, they could have totally unconstrained access making it inevitable eventually.

One could make a decent argument that rates have simply followed debts down in the long run - i.e. the bigger the debts, the lower the Bank Rate needed to transmit monetary policy into the economy.

CpZ4_-WWAAAw0aM.jpg

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Brritain's entry to the eu in 1973 and the Brexit vote in 2016 seem to have some significance in the chart - although they weren't financial events in themselves.

Also the US coming off the gold standard in 1971.

I'm not suggesting they should be added as it might be too many messages but they do have significance. So far as the eu is concerned apart from anything else the eu increased the amount of financial coordination possible by the central banks.

I suppose the chart represents what British politicians call affordable housing :rolleyes: .

Edited by billybong

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The graph would probably better reflect the society we live in nowdays, if it switched to joint income at some point in the 80s,

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The graph would probably better reflect the society we live in nowdays, if it switched to joint income at some point in the 80s,

Representing a big drop in quality of life and standard of living.

Then onto joint income plus BOMAD etc.

Edited by billybong

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The graph would probably better reflect the society we live in nowdays, if it switched to joint income at some point in the 80s,

So who steps into pay the mortgage when they have a kid and the child needs looking after?

What about the growing number of single parent families and people living on their own, putting 2 incomes in doesn;t represent them.

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I'd like to see a London graph. We need the left-hand scale going up to £676,000 to cover the average house price (the figure according to Theresa May).

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The chart doesn't adjust for how increasingly tiny the homes are as time goes on.

Britain having the tiniest homes in europe if not the world.

Edited by billybong

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So who steps into pay the mortgage when they have a kid and the child needs looking after?

What about the growing number of single parent families and people living on their own, putting 2 incomes in doesn;t represent them.

Every household is different so of course, the average joint income will be lower than 2x average wage.

But doesn't change the fact, that single income mortgages are increasingly less common over the course of the graph, so the graph is misleading in excluding this data, just imo.

Edited by mubes

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On single occupancy


http://visual.ons.gov.uk/uk-perspectives-2016-housing-and-home-ownership-in-the-uk/

There were 27 million households in the UK in 2015. Of these, 29% consisted of only one person; in 1981, 20% of the 20.2 million households were single occupancy

although many of those are renters.

It also assumes that the ONS figures are correct.

Edited by billybong

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On single occupancy

although many of those are renters.

It also assumes that the ONS figures are correct.

Yeah definitely significant that single occupiers more likely to rent than buy.

Edited by mubes

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Yeah definitely significant that single occupiers more likely to rent than buy.

Indeed - in 2013 apparently for England and Wales it was 38% v 26%

Edited by billybong

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Every household is different so of course, the average joint income will be lower than 2x average wage.

But doesn't change the fact, that single income mortgages are increasingly less common over the course of the graph, so the graph is misleading in excluding this data, just imo.

You're right of course, but if we use our imagination for a second, and double the values of the blue line in our head it still looks completely ridiculous.

I hate to use the word in replying to you because I know it's a touchy subject, but we have one thing that's going exponential, and the other linear (at best)

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You're right of course, but if we use our imagination for a second, and double the values of the blue line in our head it still looks completely ridiculous.

I hate to use the word in replying to you because I know it's a touchy subject, but we have one thing that's going exponential, and the other linear (at best)

But if our standard of lining is so much better than 30 years ago as Big Brother tells us, using say 1.5 x salary contradicts this.

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You're right of course, but if we use our imagination for a second, and double the values of the blue line in our head it still looks completely ridiculous.

I hate to use the word in replying to you because I know it's a touchy subject, but we have one thing that's going exponential, and the other linear (at best)

Haha, yeah it's a delicate subject. Just to add my normal contarian 5c. (I still havn't drawn my own line in the sand btw, just adding some counter points)

I've started thinking debt to household income ratio might be a useful bubble indicator. It is high of course. However, we are not back at 2007 yet in these terms.

Household-debt-to-income-ration-16.12.15

http://www.hl.co.uk/news/2015/12/16/average-uk-mortgage-debt-rises-to-85000

Looks even worse if considering household income. Couldn't find a graph. But average mortgage debt is about 90k, average household gross income about 40k, so just over 2x multiple. Not sure how this has changed over time. Would be interesting to know.

re exponential growth ... sure wage grwoth has been linear / stagnent, but wage growth is just one component of house prices. So dangerous to single it out in the OP's graph as the whole story. There may be other components of house purchase price that are rising exponentially (if not sustainably). EG BOMAD's equity.

I'm NOT arguing against a HPC. Just trying to prod the OP's graph a bit.

Edited by mubes

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Also... if you exclude renters from earnings figures, wage growth is slightly exponential....

Obviously a disaster from a social justice POV, but just saying....

medium-income-mortgage-borrowers.png

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Also... if you exclude renters from earnings figures, wage growth is slightly exponential....

Obviously a disaster from a social justice POV, but just saying....

medium-income-mortgage-borrowers.png

Is this data taken from actual payslips, or does it include self-certified bolleaux 'wages'?

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The key date missing was Thatcher's freeing of capital controls in 1979.

NO.

The key date missing from that chart is Nixon's closure of the gold window in 1971. Coincides almost exactly to the rise in asset/house prices.

Check out the 1971 gold window date with a whole host of other charts. The correlation is very interesting.

Since 1971 we have been operating under a total, unrestricted paper money system. It's all an experiment. Doomed to fail, of course.

Edited by Errol

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Is this data taken from actual payslips, or does it include self-certified bolleaux 'wages'?

Absolutely no idea. Could very well be nonsense! But not hard to believe that high earners enjoy better wage growth

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This article has a decent go at addressing the single wage issue:

https://fullfact.org/economy/would-average-earners-have-see-their-wages-more-double-afford-their-first-home/

Though it does concede the unsustainability of the growing wage gap, in chorus with the OP's graph, at least this approach has a go at filtering the data for relevance to the average FTB looking at affordability stats.

Borrowers%20incomes%20and%20mortgage%20a

Edited by mubes

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