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House Price Crash Forum

Affordability Of Current Debt Levels

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Although i am a major bear when it comes to house prices and debt levels the key point for me in terms of when the next crash comes is affordability. To track this i use:

http://www.cml.org.uk/cml/statistics - ML3 table statistics. What it shows is that back in 1990 interest payments were over 25% of income whereas now it’s less than 15%.

Although we've had an increase from a recent low around 10%, is it really enough to cause the increase in current personal bankruptcies and insolvencies? I know unemployment is on the up but i think im missing something. Where were brankruptcies back in 1990?

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What about other debt, such as credit cards/loans.

Also what about Oil prices, Council tax prices(poll tax), Electricity prices and gas prices back in 1990?

This is why the situation is different to any before IMO. The cost of living is entirely different, that's why interest rates will only need to move by a small amount to squeeze people. If they revert back to what I am lead to believe is the historical average of 8% then a lot of people are in a lot of mess.

Edited by peemac
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Well, if you look closely you also see that the median wage of the ftb has increased dramatically in that period.

In fact back in June the CML reckoned ftb median wage was 35k. ONS recon median for the nation is 25k.

However you look at it, this suggests that either the average ftb earns 40% more than the median wage, or they say they do.

So affordability may remain about right - just the quality of the goods has plummeted....

It's also worth considering whether that %ge is of gross salary, or net disposable after all taxes (yes including the tv license now...) and basic living costs (gas, elec, phone, car) and other secured and unsecured debt(including student loans - or is that tax!?). My guessing it is against gross salary. Given the sheer level of tax hikes and energy costs across the board, I would imagine that disposable income on 35k is down dramatically.

Of course I also forgot that the taxman is now taking - what 2% off your deposit...? ie you had 25% deposit, but hey presto now its 23% cos he gets his share...

Edited by RichB
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Also is the proportion of debt (the amount borrowed for property) to wages, higher?

Don't just count the interest.

What about wage inflation then, and what is expected now?

In fact back in June the CML reckoned ftb median wage was 35k. ONS recon median for the nation is 25k.

Wonder which area they did that research. I'm in the west and I can say that not one of my family earns over 35K

apart from me!

Edited by OzzMosiz
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