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Are People Just Missing The Point

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Surely three factors determine the effective affordability of houses

1. Salaries

2. Mortgage Rates

3. House Prices

Please see attachment.

rpi_base_earnings.zip

House price affordability has only marginally increased in recent years.

Houses are significantly more affordable now than they were in 1989 !

Realist

rpi_base_earnings.zip

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You want to combine by multiplying really, not by adding, and you want to factor in MIRAS. Here's my graph, posted a little while ago, of Monthly repayments on a base rate mortgage on an average house - it's deflated by RPI not by wages, if anyone has reliable wage inflation index figures I'm happy to do that.

We're at Green.

colours.gif

post-8555-1179902049_thumb.jpg

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You want to combine by multiplying really, not by adding, and you want to factor in MIRAS. Here's my graph, posted a little while ago, of Monthly repayments on a base rate mortgage on an average house - it's deflated by RPI not by wages, if anyone has reliable wage inflation index figures I'm happy to do that.

We're at Green.

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I agree re multiplying and including MIRAS.

You will laugh at source of earnings data

Its in the graphs section on this site

http://www.housepricecrash.co.uk/graphs-av...nings-ratio.php

Obviously sourced from Nationwide

http://www.nationwide.co.uk/hpi/downloads/FTB_HPER.xls

It is for 1st time buyers but I dont think that makes a real difference.

I am really interested to see result of you combining.

Presumably this would then be the difinitive graph for affordability

Would anyone disagree ?

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22k is the average uk wage, £1,394 a month after tax. When you reach that value a couple, one person is working to pay the mortgage the other for bills and living. IMHO this has always been spycological the breaking point, its doable but people start to think whats the point. The graph shows that this level was reached in the past, then we had a crash.

However the governments focus on flats is interesting, they are trying to manage expectations, if people are happy living in flats and spending an entire income on the mortgage house prices can go even higher. IRs at 7->8% will cause a crash as long as people havent fallen for city centre living

Edited by moosetea

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