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FTBagain

Affordability Likely To Be At 1991 Levels By Year End

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From the Blog;

http://www.ananova.com/business/story/sm_1...l?menu=business

Housing affordability is apparently like to plunge to its worst level for 15 years by the end of 2006 if interest rates go up.

Someone on average earnings buying an averaged priced property with a 20% deposit can expect to spend nearly half of their take-home pay on mortgage interest repayments if the cost of borrowing rises.

Two points spring to mind here;

1) Who can afford a 20% deposit these days?

2) And, that word AVERAGE again. I wonder how many are on below average pay and struggling.....

Edited by FTBagain

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An IR hike of .25% will do more psychological damage than the numbers would ordinarily suggest. Gordon's cut of the same amount last year gave a huge boost to HPI-MEW as we saw in the months that ensued. That is why he can't really raise the rates without damaging his miracle econopmy which relies heavily on the debt machine moving ever forward. If it stops the house of cards collapses.

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Imagine putting £30K of your savings into a house now! I really don't think anyone buying now would have a £30K deposit. Actually having to part with that much of your own hard earned savings would make you think long and hard about risking it at an apparently peaking market.

The only people I know buying houses at the moment having negligible deposits and higher than average earnings.

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Imagine putting £30K of your savings into a house now! I really don't think anyone buying now would have a £30K deposit. Actually having to part with that much of your own hard earned savings would make you think long and hard about risking it at an apparently peaking market.

The only people I know buying houses at the moment having negligible deposits and higher than average earnings.

I think most people now would have 30k savings, the average amount people ftbers have saved on this forum is 20->60k in a poll done last year..

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Yes I agree, you dont give enough credit to savers on these boards. 20k deposit isnt a massive amount these days. A few years work while living at home with the parents or renting in a shared house could achieve this.

You also have to remember most people will buy a house with a partner, so any deposit will usually be doubled.

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This is fallacious, I'm afraid, grateful though I am to read something that contradicts the usual Daily Express positive spin. The average person won't be paying the full price of their home, they will be paying the tiny fraction of mortgage they have on the face value of the home that is worth ten times that much. It is only when the current first time buyers start to move up that the average person will be paying the real cost of an average house.

At the moment I think the average mortgage is about 100k compared to the average price of about 200k. It will take years for the 200k price to filter down.

Still, since the market is all about sentiment and very little to do with affordability at the moment, headline figures like this might wake the professional investors up?

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This is fallacious, I'm afraid, grateful though I am to read something that contradicts the usual Daily Express positive spin. The average person won't be paying the full price of their home, they will be paying the tiny fraction of mortgage they have on the face value of the home that is worth ten times that much. It is only when the current first time buyers start to move up that the average person will be paying the real cost of an average house.

At the moment I think the average mortgage is about 100k compared to the average price of about 200k. It will take years for the 200k price to filter down.

Still, since the market is all about sentiment and very little to do with affordability at the moment, headline figures like this might wake the professional investors up?

The original artical stated 'Average Mortgage', which is the £100k you speak of. You are right to highlight that it is a latest people to buy in at the top of the market who will be in trouble, that was the point of m,y questions.

If the Average Mortgage is close to 50% of the average income, then those at the up extremes must be in real trouble.....

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From the Blog;

http://business.guardian.co.uk/story/0,,1823641,00.html

Two points spring to mind here;

1) Who can afford a 20% deposit these days?

2) And, that word AVERAGE again. I wonder how many are on below average pay and struggling.....

Couldn't find the refence to housing affordability on the link. Do you know what the interest rates were 15 years ago? Also, are they saying that a 1/4% rise is enough to reduce affordability to those earlier levels?

Edited by dog

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Couldn't find the refence to housing affordability on the link. Do you know what the interest rates were 15 years ago? Also, are they saying that a 1/4% rise is enough to reduce affordability to those earlier levels?

Sorry, just up dated the link. ;)

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So a 1/4% rise in interest rates will bring us back to the dark days of 1991.

The interest rates in 1991 were:

Feb 13.00

Mar 12.50

Apr 12.00

May 11.50

Jul 11.00

Sep 10.50

This amply illustrates the catastrophic position we are in!

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I think most people now would have 30k savings, the average amount people ftbers have saved on this forum is 20->60k in a poll done last year..

We are a minority though. I bet 80% of wannabe FTBers don't have more than 25K saved (and no debt).

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I think most people now would have 30k savings, the average amount people ftbers have saved on this forum is 20->60k in a poll done last year..

"I think most people now would have 30k savings"

You must be joking......

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20-60k deposit for FTB is too much a blanket figure, its comparative to wage and reflective to cost of living...im on a very good income as a paramedic 30k pa...my local area mean average wage 14.2k(retail and care work are the main employment fields) average 2bed terrace is 70k....bargain bucket maybe....but for this town some are very nice.......but this is still over 5x salary...i know a realistic deposit here is 4k...and a struggle to most to aquire.

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1) Who can afford a 20% deposit these days?

classic ongoing anecdotal agrees:

my mates mum who couldnt sell her ex council (45k 1997) house for £140k for 16 months, so her son (my mate) has decided HE'S going to buy it and hes moved in on a temp rental in order for his mum and dad to move out to the retirement mobile park home. the home is full of their old tat as well.

makes me laugh as he has no job. he has a lot of ccjs and bad debts. at the moment he survives as his young girlfriend works 50 hrs a week with a carer agency on £5 ph. he hasnt thought anything through. hes at the moment enjoying the garden. when i talk to him about and the situation he quips things like. "you can get a 10 year fixed rate mortgage" - he thinks' and when i ask him about the large cash deposit and money for surveys, lawyers ect he'll need i get "you can get a no deposit mortgage these days".

anyway. the plan is to rent for 3 months while he finds work and then buy it.

-watch this space....

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"I think most people now would have 30k savings"

You must be joking......

If only he was. 30k might take a long time to save, but it does not buy much housing.

Have a look at http://www.nsandi.com/pdf/savings_survey_winter06.pdf . Average savings excluding pensions per person in the UK are 17k. Now consider that some 10% of the population have essentially no money and 22% have less than UKP1000 saved. Also note that anyone with a mortgage is unlikely to have non-trivial savings because it is better to pay debts before saving. It seems to me that 30k is probably a reasonable guess for the amount an average FTB has saved up before buying, and certainly nowhere near far off to be described as a joke.

BTW, according to http://www.hbosplc.com/economy/includes/Ho...ndexJan2006.pdf the average FTB earns 31.5k and has a 24k deposit. Obviously, these are people who can actually afford to buy. I am do not know if these figures are skewed by self-cert, joint purchases, STRs returning to the market, etc. The amounts might seem high, however someone on 31.5k with a 24k deposit would only just be able to afford a 1-bed flat in the SE, especially if she only wants to borrow 3.5 times salary.

Just thought I'd cheer you up a bit :D

Edited by MongerOfDoom

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This says it all. Imagine a 2% rise. Or imagine a real inflationary splurge needing hard medicine to supress it.

And the inflationary splurge is looking more likely with each passing day. This month the interest rates have come in higher than expected. The MPC have have played a very dangerous game of keeping interest rates static whilst other countries are taking early action.

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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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