snowman Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
EmpiricalBear Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
Harry Sacks Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
BillyShears Posted March 12, 2006 Share Posted March 12, 2006 (edited) 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 March 12, 2006 by BillyShears Quote Link to comment Share on other sites More sharing options...
magictorch Posted March 12, 2006 Share Posted March 12, 2006 :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! Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
Warwickshire Lad Posted March 12, 2006 Share Posted March 12, 2006 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 ! Quote Link to comment Share on other sites More sharing options...
Shamus Posted March 12, 2006 Share Posted March 12, 2006 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?? Quote Link to comment Share on other sites More sharing options...
Zaranna Posted March 12, 2006 Share Posted March 12, 2006 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 165k for a MOBILE HOME, people. Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted March 12, 2006 Share Posted March 12, 2006 I can't even afford a mobile home. They're selling for about 165k in my area 165k for a MOBILE HOME, people. What area? How much are terraced houses? Quote Link to comment Share on other sites More sharing options...
Without_a_Paddle Posted March 12, 2006 Share Posted March 12, 2006 I can't even afford a mobile home. They're selling for about 165k in my area 165k for a MOBILE HOME, people. 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 Quote Link to comment Share on other sites More sharing options...
Elizabeth Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
spline Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
Zaranna Posted March 12, 2006 Share Posted March 12, 2006 (edited) 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! 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 March 12, 2006 by Zaranna Quote Link to comment Share on other sites More sharing options...
CrashBear Posted March 12, 2006 Share Posted March 12, 2006 Fine - well I'm sure a few Interest Rate rises are not going to hurt then ! Bring it on ! 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? absolute bargain! I know where my deposit is going! Quote Link to comment Share on other sites More sharing options...
El_Pirata Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
Ruffian Posted March 12, 2006 Share Posted March 12, 2006 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! ) If my maths is correct, it seems that your son earns around £42k?! 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... Quote Link to comment Share on other sites More sharing options...
New Bear Posted March 12, 2006 Share Posted March 12, 2006 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. Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted March 12, 2006 Share Posted March 12, 2006 (edited) 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! ) If my maths is correct, it seems that your son earns around £42k?! 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 March 12, 2006 by Casual Observer Quote Link to comment Share on other sites More sharing options...
Guest Posted March 12, 2006 Share Posted March 12, 2006 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.... Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted March 12, 2006 Share Posted March 12, 2006 The median mortgage for first-time buyers is 3.1 times income Sure it is. Some people really are stupid. Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted March 12, 2006 Share Posted March 12, 2006 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 Quote Link to comment Share on other sites More sharing options...
Zaranna Posted March 12, 2006 Share Posted March 12, 2006 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!) Quote Link to comment Share on other sites More sharing options...
FreeTrader Posted March 12, 2006 Share Posted March 12, 2006 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? Quote Link to comment Share on other sites More sharing options...
spline Posted March 12, 2006 Share Posted March 12, 2006 (edited) 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 Edit: fixed problem with picture hosting Edited March 12, 2006 by spline Quote Link to comment Share on other sites More sharing options...
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