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Nationwide July Index

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Guest The_Oldie

Nationwide July index is out today.

http://www.nationwide.co.uk/hpi/historical/July2006.pdf

July +0.8% (seasonally adjusted), but the final paragraph is interesting.

“Overall the housing market remains fairly buoyant. In spite of rising fixed rate mortgage costs,

affordability has not bitten as sharply as we had expected which suggests that buyers are still able to

overcome traditional lending constraints. This could be as a result of loosening credit criteria, but also

the ability for parents to release their own housing equity to help their children or act as guarantors.

Furthermore additional demand for homes has increased tenant demand and landlords’ incentives to

invest. Increased housing equity, more competition and more sophisticated risk assessment

techniques have helped both landlords and owner-occupiers overcome some of the traditional

affordability barriers. However, while affordability may not be biting so hard now, like a guard dog’s

bark, it cannot be ignored indefinitely.”

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However, while affordability may not be biting so hard now, like a guard dog’s

bark, it cannot be ignored indefinitely.

How true! Pretty amazing that the Nationwide should say this though. I get the distinct impression that they see storm clouds brewing.....

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I'm not normally nasty, but when I read that article I really start to hate the BTL boomers who are ruining our future. I want them to suffer, I want them to lose all they've invested and see them eating the scabs off their shoeless feet when they live in poverty in their old age. But since this isn't going to happen, I'm going to emigrate to a place where there are less people to hate.

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How true! Pretty amazing that the Nationwide should say this though. I get the distinct impression that they see storm clouds brewing.....

They'd predicted a slow down in HPI by now - they must be pretry amazed at how affordable prices still are.

It's got to stop increasing soon.

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I'm not normally nasty, but when I read that article I really start to hate the BTL boomers who are ruining our future. I want them to suffer, I want them to lose all they've invested and see them eating the scabs off their shoeless feet when they live in poverty in their old age. But since this isn't going to happen, I'm going to emigrate to a place where there are less people to hate.

Do you hate the young BTLers, too?

The only people I know who are into BTL are youngsters. All part of the money for nothing generation, I suppose.

Don't take out your frustration at still-increasing prices on anyone. Chill out. Don't forget these figures are lies. APOM tells me prices are crashing, so why the angst? :lol:

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Increased housing equity, more competition and more sophisticated risk assessment

techniques have helped both landlords and owner-occupiers overcome some of the traditional

affordability barriers. However, while affordability may not be biting so hard now, like a guard dog’s

bark, it cannot be ignored indefinitely.”

More sophisticated risk assessment techniques my foot!

270 people a day (100,000 people a year) are going bust and the number is accelerating!

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IF this market is relying on loose credit (irresponsible lending) and parents going into debt to bale their kids out there is no hope for those who believe a crash can be avoided. The US market has gone through the same sceanrio and it is crashing. My bet is we have less than 6 months before the market turns sharply--very sharply and the direction is not going to be up.

http://uk.biz.yahoo.com/060801/323/gicrc.html

Nationwide noted that July's annual gain is more than double that of the same time last year when prices were increasing at an annual rate of just 2.6 pct. However,
the strong rate of annual house price growth reflects the weak patch in prices this time last year, it said.
The average house price now stands at 167,733 stg, 9,385 stg more than at the same time last year. The three monthly rate of growth has 'picked up slightly' compared with last month, but 'remains on a fairly benign trend', Nationwide said.
Edited by Realistbear

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"COULD BE" Come on Fionnuala - it's your data. Surely you know if you're loosening your credit criteria or allowing parents to act as guarantors!

And if you're not, then you're pretty much admitting that a good deal of applicants deposit money is borrowed from lenders who may perhaps be lending a little too fast and loose for comfort.

I get the feeling that in the past Nationwide have had a bit of a 'see no evil, hear no evil' attititude towards where applicants 'equity' has come from, but now they are starting to question whether it is all 'real' money or not.

Couple of things, only the Northern Rock's together mortgage has proved to be successful as an exotic loan specifically for the FTB 'en mase' market, the rest of thse 'parent support' products have failed..to date. Secondly, big flaw with Fi's assumption on BTL and this is a crucial issue IMHO. BTL landlords currently have a huge problem in covering rent in what is a static market, therefore I question her theory on future market shifts and patterns of behavior for the FTB.

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No surprises here. There's been a significant "Spring Bounce" but it does appear to have "last gasp" written all over it. Interesting that the Nationwide (like recent Halifax reports) have again been a bit unenthusiastic about the latest rises.

As borrowing becomes more expensive, and lending criteria start to tighten, the drops will start to show up in the indexes and the process of correction will (eventually) get underway. Not to mention the inevitable end of the "live beyond your means" years and the economic impact of that (and it's ending). It's just a matter of time. It's even possible that when this activity peters out the recent upswing will lead to an initial drop that will be more pronounced than would otherwise have been.

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They'd predicted a slow down in HPI by now - they must be pretry amazed at how affordable prices still are.

:o

:lol::lol::lol:

Edited by Badlad1967

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Digging into the statistics.

The figure for affordability for FTB is now 112.9 for Q2 2006 this is the highest it has been since Q4 2004 but nowhere near as the 147.6 recorded in Q2 1989.

The gross house price to earnings ratio for FTB in Q2 2006 for the UK is 4.9 the highest value since the record starts in 1983.

In the west midlands affordabillity is 134.1 N. Ireland is 136.2. I would guess this means these are the areas where a house price crash will start. (a prediction?) Affordability in london is relatively low compared to 1985 so I am not sure how relevant this information is.

Going off the PE it would be london and the surrounds.

House prices in general across all areas and types have lept forwards (Northern ireland especially) comparitively the west midlands, south west and the north are weak.

If you ask me though, this has a fair bit to do with inflation. I think it is obvious from their comments they think that affordability is an issue and that we are really banging up against it again, something we last did in Q4 2004. I wonder how much they would expect their affordability index to change with a 0.25% rise in interest rates. I would guess it would click up to something like 116+. This affordability index is based around mortgage payments as percentage of take home pay compared to the base of those in 1985. Which frankly I think is confusing, I liked it better when they just presented the affordability figures in % and not just for first time buyers, either way these figures are made to confuse.

The numbers they are giving out aren't as useful as the ones I saw last time I looked at the site.

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The figure for affordability for FTB is now 112.9 for Q2 2006 this is the highest it has been since Q4 2004 but nowhere near as the 147.6 recorded in Q2 1989.

Do you have a graph of this?

I didn't realise how far away we were from the problems of 1989.

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Information is from http://www.nationwide.co.uk/hpi/historical.htm

then the FTB affordability index in the house price benchmark drop down list.

I am quite surprised by it to which makes me think the figures aren't as obvious to interprit as you think, especially when you see that london prices are meant to now be much more affordable than in 1985? Perhaps we would be better to calibrate it to something we feel was optimal affordability.

I think maybe you should go off the long term average for this index which is 83.2

I am sure though, that affordability has helped cause the HPI problem. What this doesn't show is the massive increase in the average age and the dramatic fall in FTB (which the old figures nationwide published showed), which really show that things have got unaffordable.

Either way it still isn't as unaffordable as it was in 1989 in london and surrounds and I think the old figures showed the same.

But I am not sure that means that it isn't unaffordable, I don't know what it was like in 1989 whether other costs that affect the amount of money you can spend on a mortgage for instance fuel and council tax, food etc. was the same or lower.

The figures are compiled as follows:

First Time Buyer Affordability Indices - Mortgage payments as a percentage of take home pay

These indices measure initial mortgage payments as a percentage of take home pay for each region

Affordability is measured relative to the average in 1985, higher index values indicate worsening affordability

Initial mortgage payments calculated using new lending interest rate (source: CML) for a loan 90% of the typical FTB house price

Mortgage payments are for a capital repayment mortgage and are adjusted for MIRAS (Mortgage Interest Relief at Source) where appropriate

Earnings data is from the ONS Annual Survey of Hours & Earnings, and pre-1998 the New Earnings Survey; NES data has been adjusted to create a consistent series

Mean earnings for a full time worker on adult rates are used

Quarterly earnings data calculated using straight line interpolation; points after last annual observation extrapolated using average growth rates and hence subject to revision

Take home pay calculated using prevailing Tax & National Insurance Rates

FTBAffordability.jpg

post-4768-1154449585_thumb.jpg

Edited by onrollover

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Information is from http://www.nationwide.co.uk/hpi/historical.htm

then the FTB affordability index in the house price benchmark drop down list.

I am quite surprised by it to which makes me think the figures aren't as obvious to interprit as you think, especially when you see that london prices are meant to now be much more affordable than in 1985?

I think maybe you should go off the long term average for this index which is 83.2

This is a seriously relevant post. I've been saying for some time that it's the affordability ratio that will determine the course the market follows, not the price to salary ratio.

We are nowhere near 1989's problems

My area, Outer Met, is more affordable for FTBs than it was in 1985!!

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This is a seriously relevant post. I've been saying for some time that it's the affordability ratio that will determine the course the market follows, not the price to salary ratio.

We are nowhere near 1989's problems

My area, Outer Met, is more affordable for FTBs than it was in 1985!!

Perhaps inflation has something to do with it. I guess if you were expecting your salary to go up 10% next year you would be happy to go over a little on the mortgage payments for a year, but I agree if house prices did go up further people might still be able to afford it. I don't think we are at the level of japanese prices before the crash (we can't yet claim that bits of london are worth more than california) yet either, though northern ireland seems to be going nuts.

I don't think anybody wants to see things go like that though, a crash from here would be bad enough.

I still think interest rates and inflation of household costs are the ones to watch. A couple of rises of interest rates would instantly pop the affordability up to close to 1989 levels and with other areas eating away at what can be spent on mortgages it doesn't have to and probably won't need to reach 1985 levels to go over the edge, causing a rapid shut down to demand. The government is also working (slowly) now to push up supply by building more and releasing empty properties onto the market, I think the discussions on this site seem to neglect the supply issue.

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Great find this...

A couple of questions though... Does this affordability index include the increases in indirect taxation, utilities etc....

Don't forget the amount of debt people are carrying nowadays as well.

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Great find this...

A couple of questions though... Does this affordability index include the increases in indirect taxation, utilities etc....

Don't forget the amount of debt people are carrying nowadays as well.

Its just based on percentage of take home pay. I would put in utilities and indirect taxation if it was my index.

I reckon this is a possible reason for houses being unexpectedly affordable.

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Its just based on percentage of take home pay. I would put in utilities and indirect taxation if it was my index.

I reckon this is a possible reason for houses being unexpectedly affordable.

Another 'essential' for a family is a car. They cost about the same in £££ in 1990 as they do today. possibly more so if you buy with a loan. (interest rates are lower today)

Compare the price of a Ford Fiesta or a Mazda MX-5. They haven't changed much in over 15 years.

A car loan took a bigger chunk out of the monthly salary back then.

Also electrical goods like TV, washing machine, video, and a computer cost the same in £££ back then.

It's a very complex thing to work out (affordability comparison)

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Another 'essential' for a family is a car. They cost about the same in £££ in 1990 as they do today. possibly more so if you buy with a loan. (interest rates are lower today)

Compare the price of a Ford Fiesta or a Mazda MX-5. They haven't changed much in over 15 years.

A car loan took a bigger chunk out of the monthly salary back then.

Also electrical goods like TV, washing machine, video, and a computer cost the same in £££ back then.

It's a very complex thing to work out (affordability comparison)

How come we or priced out don't have any indexes like this. We ought to be able to find some useful data from various places we can collect each month to give an idea of affordability.

We could do a standard mortgage affordability index and the same computation but with IO mortgage.

But include bills and council tax. Basically all the costs that might vary on a house from year to year. Assume maintenance doesn't change much, perhaps a car and electrical goods would be a sensible thing to have in the mix to but would lose the focus of the index.

If anybody wants to work out where we can get this information on a regular basis we can play about with it to show what we all know is going on.

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This 'affordability index' is a load of tosh.

(1) It is calculated from take home pay. It should be calculated on disposable income after deducting essential outgoings (and correcting for inflation). If you wack an extra £1000 pa on the council tax or the annual train ticket, this makes a big difference someones affordability.

(2) It only includes the people who can afford to buy. Today we have a record number of people who are saying they cannot afford to buy. Where do they appear in the numbers?

If I am wrong please put me right.

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Haven't you missed three very important factors for FTBs?

In the 90s, it was the done thing to have a pension. Today it is not.

In the 90s, it was the done thing to pay off your debt (endowment or repayment). Not the case today.

In the 90s, people generally had kids in the 20s. Not really possible today and buy a house.

It all comes back to what priorities are. If the mania about property continues, it could continue to rise much further. But there will be a point when the lack of a pension will be a major major problem. There will be anger if the only people having kids are those living in council houses.

I'm sure there will be a point when FTBs say enough is enough, and not care about property. Many of my friends (mid 20s) don't give a toss about getting a property. Then sentiment will change.

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  • 339 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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