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Bbc: First-time Buyers 'need £29,000'

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http://news.bbc.co.uk/1/hi/business/5281128.stm

The average couple needs to save at least £29,000 to pay for the deposit and stamp duty on their first home, a survey has suggested.

The Royal Institution of Chartered Surveyors' (RICS) study highlights the burden imposed by soaring house prices.

Prices have risen by 184% since 1995, three times faster than take-home pay.

RICS predicts interest rates will probably be raised twice more over the next 12 months, leading to a slowdown in house price inflation next year.

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Hmmm...

I like the bit about identifying the financial problems of FTBs. But the cynic in me suggests they are only mentioning this story so they can get RICs house price inflation prediction in.

Although two more rates rises??? A few on here aren't even predicting that!

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This was discussed in some detail on Channel 4 news at lunchtime. I wrote a lengthy synopsis of the discussion but the post didn’t appear for some reason. The story on Channel 4 differed slightly. In summary:

- It is the hardest time for FTBs to get on the property ladder in 20 years

- They said it was 300% more expensive than 10 years ago (not 184%)

- The average couple needed to save £30k in deposits and fees which equates to 74% of annual income. They said that a couple would need to save £1200 per month to achieve this.

- It gets tougher for the average couple once they are on the ladder with repayments equating to 22% of monthly joint income for a 2 person household.

What fails to be hitting home to people is that we are in a low inflation economy now. In a low inflation economy the debt is not eroded away by inflation and the burden remains for the duration of the mortgage. If you over stretch yourself at the start then there is nowhere for you to go. The more you borrow, the worse it is. In a high inflation environment mortgages are front loaded. The opposite is true in a low inflation environment.

The market needs FTBs, regardless of BTL. BTLs will not trade up and the second rung becomes the new bottom rung. When people there can’t sell chains collapse and you end up with oversupply. It reaches a point where the only way to sell is to drop prices. The present level of FTBs is 7% according to the NAEA.

The Bank of England discuss the effects of inflation on the economy in this report:

ADJUSTING TO LOW INFLATION - ISSUES FOR POLICY

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The Bank of England discuss the effects of inflation on the economy in this report:

ADJUSTING TO LOW INFLATION - ISSUES FOR POLICY

Great link - thanks. I'll be printing that one out for my train journey home!

As you metion above, it indeed mentions the 'Low inflation confusion which consumers have'

Impact of low inflation on the personal sector

However, it is households where the concern about a failure to adjust is considered a

major issue.

The argument here is that households, while in the short-term realising the

consequences of low inflation in terms of wage claims, nominal interest rates, etc.,

have nevertheless failed to understand the longer-term implications of low inflation.

In particular, it is argued that prospective real pension payments will be lower than

the aspirations of the present working population, and that on the other hand

household debt will be eroded more slowly than presently expected in real terms.

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Great link - thanks. I'll be printing that one out for my train journey home!

As you metion above, it indeed mentions the 'Low inflation confusion which consumers have'

No problem. I also wonder what would happen if we have the situation of low inflation and high interest rates. Surely that would be the worst of both worlds? Where monthly payments are high and the debt never gets eroded truly trapping people that overstretched themselves.

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They really are short sighted on the channel 4 forums. Completely fail to take into account outside factors that can affect the cost of housing such as um, er, let me see a possible recession!!

"Oh no, house prices can only go up and up!" Dimwits!

Edited by Jimothy

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First-time Buyers 'need £29,000

Yeah, and the rest :rolleyes:

I'd need a £60K deposit to get my borrowing down to a level where I could afford the repayments, due to my low wage... and also due to my low wage it would take me until 81 years of age to save that deposit! In fact, if my wage continues to increase at its current rate, and energy, water and council tax continue to increase at their current rate, then in five years time those expenses will be more than my take-home pay!

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Yeah, and the rest :rolleyes:

I'd need a £60K deposit to get my borrowing down to a level where I could afford the repayments, due to my low wage... and also due to my low wage it would take me until 81 years of age to save that deposit! In fact, if my wage continues to increase at its current rate, and energy, water and council tax continue to increase at their current rate, then in five years time those expenses will be more than my take-home pay!

And you wouldn't be the only person that would be affected like that.

Viva La Revolution!!!!!

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Yeah, and the rest :rolleyes:

I'd need a £60K deposit to get my borrowing down to a level where I could afford the repayments, due to my low wage... and also due to my low wage it would take me until 81 years of age to save that deposit! In fact, if my wage continues to increase at its current rate, and energy, water and council tax continue to increase at their current rate, then in five years time those expenses will be more than my take-home pay!

Well said.

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Yeah, and the rest :rolleyes:

I'd need a £60K deposit to get my borrowing down to a level where I could afford the repayments, due to my low wage... and also due to my low wage it would take me until 81 years of age to save that deposit! In fact, if my wage continues to increase at its current rate, and energy, water and council tax continue to increase at their current rate, then in five years time those expenses will be more than my take-home pay!

Poor lamb. You should have worked harder at school.

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Poor lamb. You should have worked harder at school.

Thanks, there was me thinking there was a housing bubble :lol:

Still, according to the 'Annual Survey Of Hours And Earnings' which is dicussed here, I should be getting paid 50% more than I am for the job I'm doing. Given that I'm only being paid two thirds of what I should be, maybe I should only do two thirds of the work. Seems to be a case of me working too hard rather than not hard enough!

Edited by Bingley Bloke

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  • 302 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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