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Median Mortgage For Ftbs Is 3.1 Times Income

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David Smith's economic outlook suggests that our much-discussed mountain of debt is more like a mole hill:

Times Online

It is not the case, despite the headlines, that most or indeed many households are struggling with debt. It is not the case, either, that we are all stretching ourselves with mortgages of five or six times income. The median mortgage for first-time buyers is 3.1 times income, for home-movers, 2.9 times.

The only "house" I could get for 3.1 times my income is a mobile home.

How depressing.

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more damn lies and statistics

I assume that this is the figure you get when you look at all outstanding mortgages and classify them as FTB, FOO and so on.

So someone who bought for the first time at a multiple of 3 in 1995 would be counted in these stats.

As FTB's have now dropped to an all time low, the proportion of recent FTB's buying at higher multiples, would become smaller in the stats.

As this is a median measure, of course, the older more established FTB's would account for the bias towards a historic earnings/price ratio.

Hence the disconnect between the statistic and reality.

David Smith is clearly being very selective in the stats he seeks to highlight. Many, many property statistics are based on the mean... but the median would tend here to prove the argument that FTB affordability is fine.

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David Smith's economic outlook suggests that our much-discussed mountain of debt is more like a mole hill:

Times Online

The only "house" I could get for 3.1 times my income is a mobile home.

How depressing.

Nothing wrong with mobile homes, but I wouldn't mortgage one.

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Also, there are likely to be many more FTBs buying houses in places where houses are relatively cheaper than those buying in places where the average house is 10x average income. This is in addition to the point made above that with the number of FTBs dropping dramatically, and presumably mostly the richer FTBs buying houses, so that the stats are likely to be even more biased.

Also, are BTL'ers classified as FTBs? I thought that in some statistics they were as they weren't selling a house. If so, and a BTL landlord has bought 10 properties, does each one count as a new mortgage each being less than 3x salary?

Billy Shears

Edited by BillyShears

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:angry: WTF!

I have had gutsful of VI's spouting and preaching to me. Just remember pilgrims of HPC we are on a journey to the forgotten land of normailty. Remember that normality and quote it to those who tempt you into the woes of homeownership debt. So be iT!

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David Smith's economic outlook suggests that our much-discussed mountain of debt is more like a mole hill:

Times Online

The only "house" I could get for 3.1 times my income is a mobile home.

How depressing.

According to Nationwide the ratio of average price to average earnings is about 5.8. Of course, average FTBs buy cheaper than average priced houses but, even so, 3.1 multiple mortgage still leaves one hell of a deposit, or gift from parents.

My son's looking to buy (he's 25). He's looking at a graduate motgage of x4 salary, but still needs a £20k deposit to buy a decent place (about £190k). I will need to gift him £50k to afford somewhere nicer e.g. a 3 bed semi for about 240k. That's how it works these days, I'm afraid.

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It is not the case, despite the headlines, that most or indeed many households are struggling with debt. It is not the case, either, that we are all stretching ourselves with mortgages of five or six times income. The median mortgage for first-time buyers is 3.1 times income, for home-movers, 2.9 times.

Fine - well I'm sure a few Interest Rate rises are not going to hurt then ! Bring it on ! :rolleyes:

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Also, there are likely to be many more FTBs buying houses in places where houses are relatively cheaper than those buying in places where the average house is 10x average income. This is in addition to the point made above that with the number of FTBs dropping dramatically, and presumably mostly the richer FTBs buying houses, so that the stats are likely to be even more biased.

Also, are BTL'ers classified as FTBs? I thought that in some statistics they were as they weren't selling a house. If so, and a BTL landlord has bought 10 properties, does each one count as a new mortgage each being less than 3x salary?

Billy Shears

Yep I agree - the last FTBers are buying are those in the cheaper parts of the UK. The last places to increase much in value. Probably very few can afford to buy anything in the south. What they might be able to afford is a small flat - what will happen when they wnat to move up and need to find another £60k or so for a small 2-bed house??

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The only "house" I could get for 3.1 times my income is a mobile home.

How depressing.

I can't even afford a mobile home. They're selling for about 165k in my area :blink::blink:

165k for a MOBILE HOME, people. :ph34r:

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I can't even afford a mobile home. They're selling for about 165k in my area :blink::blink:

165k for a MOBILE HOME, people. :ph34r:

You missed the boat on this one

http://cgi.ebay.co.uk/Park-Home-FOR-SALE_W...6QQcmdZViewItem

The auction has finished with no bids...

I wonder what the reserve was?

For the children there is the Loopy Club to keep them occupied with fun and games, plus an amusement area!!!!!

HAPPY BIDDING, THIS TRULY IS PARADISE

:lol:

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What is the point of the mobile home? And anyway, you can't live in them until you are 50-65 anyway. The people who need homes now are not older people. They are people without sprogs. Its just a way of turning a paddock on the outskirts of a town into a money spinner.

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Well, the published CML statistics say that for 2005/Q4 the median income multiple for “all loans for house purchase” was 2.98 and with median interest repayments at 15% of income. Clearly consistent with the figures given in the article and presumably not just blatant VI-nonsense designed to confuse and mislead the gullible. In contrast, the corresponding figures for the last peak in1989/Q4 show a median multiple of 2.28 and interest repayments at 26% of income, i.e. less lending relative earnings but at much higher interest rates and greater monthly burden. But we already know this - interest rates are lower this time round and they *do* change the numbers in comparison with last time. But obviously these are "lumped" figures and reflect the general debt burden as a whole (point of Times article) but say relatively little about the plight of particular groups within that whole.

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What area? How much are terraced houses?

Cambridgeshire. Victorian terraced 2-beds are 240k plus in the city, about 200 in the surrounding villages. Newbuild 2-bed houses in Cambourne 180k-plus. Most flats below that price are retirement flats - or nasty one-beds you wouldn't want for the price.

Mobile homes -

http://www.rightmove.co.uk/viewdetails-788...pa_n=5&tr_t=buy - there are several of these on at 165k in Fulbourne

However, *this* charming "Park Home" is only 125k - bargain! :blink:

http://www.rightmove.co.uk/viewdetails-585...pa_n=1&tr_t=buy

Edited to say: I've just had another look though and some (unmodernised) terraced 2-beds in the city are now coming on at about 210, so hopefully they're on a downward slope :)

Edited by Zaranna

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It's obvious to anyone with a brain that this figure is bogus. The numbers just don't add up.

How have house prices managed to outpace wages for so long? Were FTBs borrowing 1x salary at the end of the 90s?

Funny how of all the FTBs I know, the lowest borrowed 4.5x, and one even 8x.

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According to Nationwide the ratio of average price to average earnings is about 5.8. Of course, average FTBs buy cheaper than average priced houses but, even so, 3.1 multiple mortgage still leaves one hell of a deposit, or gift from parents.

My son's looking to buy (he's 25). He's looking at a graduate motgage of x4 salary, but still needs a £20k deposit to buy a decent place (about £190k). I will need to gift him £50k to afford somewhere nicer e.g. a 3 bed semi for about 240k. That's how it works these days, I'm afraid.

Historically, FTBs may have bought cheaper than average priced homes, but they also tended to be younger people with lower than average incomes too (unlike the 34-year-old on circa £35k who is often cited as being the average FTB these days! :P )

If my maths is correct, it seems that your son earns around £42k?! :o I probably don't need to tell you this, but that is an exceptionally good salary for a recent graduate in his mid-20s. If even high earners such as your son are reliant upon gifts from parents to buy modest properties, the situation is even madder than I first thought...

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But obviously these are "lumped" figures and reflect the general debt burden as a whole (point of Times article) but say relatively little about the plight of particular groups within that whole.

The Times article is knocking down a straw man. No-one (well no-one I've read) has argued that all households are deep in debt. Clearly the debt is unevenly spread, probably very unevenly spread, and the ones most vulnerable to credit tightening will be the ones hit first and hardest.

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Historically, FTBs may have bought cheaper than average priced homes, but they also tended to be younger people with lower than average incomes too (unlike the 34-year-old on circa £35k who is often cited as being the average FTB these days! :P )

If my maths is correct, it seems that your son earns around £42k?! :o I probably don't need to tell you this, but that is an exceptionally good salary for a recent graduate in his mid-20s. If even high earners such as your son are reliant upon gifts from parents to buy modest properties, the situation is even madder than I first thought...

Yes, he's on about 42.5k in IT.

I agree about the situation being mad. If my son needs assistance, what are less well-paid kids buying? But enough people ARE buying them, otherwise prices would have collapsed by now.

I genuinely don't understand why it hasn't.

PS I spoke to my niece and her husband yesterday - they are having to downsize considerably, having stretched themselves on a fixed rate mortgage 2 and a half years ago, now about to expire. Mid 30's with 2 small children. Quite well paid by all accounts, she a WPC him a self employed carpenter on about 35k

Edited by Casual Observer

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The only "house" I could get for 3.1 times my income is a mobile home.

If all these FTBs were transported back in time to 2000 and took on the same monthly repayments and multiples, even adjusting after for wage inflation over the period, I wonder what they could have bought instead....

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If all these FTBs were transported back in time to 2000 and took on the same monthly repayments and multiples, even adjusting after for wage inflation over the period, I wonder what they could have bought instead....

But will they be saying the same in 5 years time?

Plenty of people were bemoaning high HPs in 2000

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If all these FTBs were transported back in time to 2000 and took on the same monthly repayments and multiples, even adjusting after for wage inflation over the period, I wonder what they could have bought instead....

Well, in 98 I looked at the prices of the cheaper houses where my parents live in the north - not nice areas, but I could still have bought a terraced house in their city for 16k. Seriously. Those houses are now 75k on average, sometimes more!

In Cambridgeshire - 2-bed terraces houses that were approx. 70-100k in 98-2000 (ie. affordable FTB houses) are now 210-240 plus (unaffordable for most FTBs - those of my friends who have bought recently have done so because they have been bought them by parents for cash).

I kept an eye on the prices of some nice 3-bed terraces near where I lived in Cambridge between 1999 and 2004. During that period they increased from, on average, 240k to 460k. Now you'd need an income of about 150k+ to buy one comfortably. (This is in a road where Ted Hughes and Sylvia Plath were able to buy a house in the fifties when they were students, they were so cheap then!)

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Just as a matter of interest, the CML stats show that for FTBs in 2005 the median advance was £94,037 with a median 90% loan value, essentially giving a median purchase price of c.£105,000.

My impression (but I may be wrong) is that during 2005, £105,000 would have bought you little more than a very small flat.

In the good ol' days (when I wer' a lad etc) it was always a struggle to buy your first house, but you did indeed buy a *house*, usually with a garden and 2/3 bedrooms.

Am I indulging in the myopia of nostalgia, or does 'affordable' these days mean living in a smaller and smaller box?

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These are the historical figures from the CML - so an overall rising trend, presumably reflecting changing attitudes to borrowing, but definitely quite a distinct stretch on multiples since 2002. Interesting that on these figures the difference between the FTB group and "All Loans" is broadly as expected but relatively small.

Median Income multiples, FTB and All-buyers

r94jlv.jpg

Edit: fixed problem with picture hosting

Edited by spline

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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