Tuesday, May 5, 2009

Latest Halifax FTB Affordability Review

Housing at its most affordable level for more than six years

Home affordability for potential first-time buyers (FTBs) has reached its lowest level in more than six years. According to the latest Halifax FTB Affordability Review, the house price to earnings ratio - a key affordability measure - is lower now than it has been for more than six years. Furthermore, the house price to average earnings ratio has declined from a peak of 5.84 in July 2007 to an estimated 4.34 in March this year - a fall of 26 per cent. The proportion of disposable earnings devoted to mortgage payments - another affordability measure that includes the impact of interest rate changes - has also fallen significantly due to the combination of the decline in house prices and the cut in interest rates to record lows.

Posted by jack c @ 10:57 AM (2462 views)
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25 thoughts on “Latest Halifax FTB Affordability Review

  • japanese uncle says:

    If there are any people feebleminded enough to commit to the still lunatically overpriced house market, so be it. After all God helps those who help themselves.

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  • Let’s just replace affordable with less expensive shall we?

    Affordability is yet to come, if you equate that with still having money of your own to spend. Another topic indeed.

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  • stillthinking says:

    At its most affordable unaffordable level.

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  • letthemfall says:

    Least exorbitant for 6 years. This affordability measure is another thing. I do wonder whether all the VI hubris will encourage house buying soon, and then when interest rates rise again we will see part 2 of the crash. I’d rather prices fell straight.

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  • Why does the FT simply report all this without adding its own analysis – what is the likelihood that IRs will rise and what will this do to one of the affordabilty measures, why so few FTBs? etc. After all this is in the FT Adviser section.

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  • The bankers trap may turn on the hunter.

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  • happy mondays says:

    Martin Ellis, housing economist at Halifax, said: “There has been a marked improvement in housing affordability for potential first-time buyers in many parts of the UK over the past 18 months. This trend continued in the first three months of 2009.
    Thanks for the info Martin, what would we do without these financial guru’s..

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  • Either “house prices are going up, up and away” or “affordability is going up, up and away” in the land of Halifax statistics.

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  • happy mondays says:

    @ Ju, If there are any people feebleminded…The country / world is full to the brim with this sort! Whether it be the housing market, or gang culture, football fans or any one else who has not the individuality of free thought!

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  • Confusedsaver says:

    what happened to the Halifax house price index for April?

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  • Affordable at 0.5% base rate, what about when base rates return to 5%+

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  • They base their model on a male earning 36k per year with a 47k deposit!!

    Why not base it on a male who just inherited 500k and is looking to buy a house cash, it would be just as pointless as what they do at the moment!!

    Halifax’s measure of affordability is a joke, your average FTB does not have 47k tucked away

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  • An Bearin Bui says:

    All this does is confirm that housing has been unaffordable for FTBs since 2003, something that most sane buyers or prospective buyers already know. House prices would need to return to 2001 levels to beome affordable for FTBs at average historic interest rates (c. 5%). House prices at 150k still require a deposit of 30k from the FTB at current mortgage rates – that’s not very affordable. I can’t think of many 24 year olds with 30k burning a hole in their pocket, unless it’s from their parents/grandparents. Older FTBs who are around 30 and have been waiting out the bubble may have such money but they’ll be aiming to buy more than a 1-bed FTB property, especially as they know that prices aren’t going anywhere for a decade so they won’t be able to trade up.

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  • mark wadsworth says:

    Woo hoo!

    Down from nearly six to just over four, and we’re only about a third of the way through the crash – multiple of three, here we come!!

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  • george monsoon says:

    Not nearly affordable enough. During the Boom, only those with common sense would avoid the trap of huge mortgages… now, due to banking missmanagement, even the ignorant are unable to pile themselves into debt.

    I give it another 3 to 4 years before we begin to see things level off..

    as Mark has pointed out @10 “Multiple of Three, here we come”
    I say, multiple of 3 on a “single” wage, here we come!!!

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  • @ 11… Now that’s what I call sensible lending. I’m sure most UK children and teenagers would agree to that too.

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  • I agree 3 x single would suit. Unfortunately they’re lending 4 x joint at present providing you have a deposit so unless the consumer refuses to borrow as much as the banks will lend then it’s unlikely to drop that low. Sorry.

    Lets hope for S2R1’s new level of enlightenment amongst the population.

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  • Hardlanding says:

    First time buyers still have to find at least a 10%-15% mortgage deposit for a product with a massive default risk premium priced in.
    How many are going to find the 25-30% + to get the better deals that are closer to actual base rates?

    The lenders know how much lower the prices are going to fall and have priced them into their products; i.e. another 25-30% of current prices. Even these “best buy” rates have a 2% markup on real bank base rates and 1% over LIBOR so are well padded over the “cost” of borrowing.
    Any “best buy” table tells you all you need to know about how much further we have to fall.
    When we see 95% mortgages again at a much lower premium compared to 75% we’ll have some real green shoots.

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  • bidin'matime says:

    The headline should read “House price crash is good after all!”

    @4 Letthemfall – I only said to my wife this morning that Phase 1 is now complete and we await Phase 2… What will trigger it is hard to say, but a Sterling crisis seems a good bet. Then when people realise that double digit IRs are a real possibility, then str2007’s concerns will be answered – lending ratios really will be knocked back to sensible levels.

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  • japanese uncle says:

    Have a look at the Mail on Sunday Money pages, you find that most advantageous mortgage deals invariably involve high percentage of deposit (from 20-50%!!’) They are assuming max 50% further HP drop, while the evil message of ‘green shoot’ is leaking between their lips like a fart.

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  • Whateveryftbthinksofthetimes says:

    The Times is soft Strong, absorbent and you cant tell the difference between its housing market headlines, and a fecal smear.

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  • george monsoon says:

    4x joint income is unsustainable for one simple reason. couples have children, which puts the pressure on income.
    Either one parent gives up work to look after the child, or you pay 400 – 600 quid a month for a childminder.

    I have never bought into this theory that joint income could ever work.

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  • Confusedsaver says:

    where are the April figures for the Halifax house price index?

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  • george

    Fully agree, it’s far too high, but the fact of the matter is, that’s what you can curently get (with 40% deposit anyway).

    The thing IMO to watch will be what is supporting the market.

    If BTLers get into trouble and by my reckoning most should be topping up their existing portfolios by now, never mind expanding them. But that is down to the banks to ask for top ups. I’ve seen a couple of articles but it’s not big news yet.

    If interest rates do stay low and they make the money available, then general public will take it and spend it.

    I don’t see any fear of the housing market yet.

    Bidinmytime

    I wouldn’t bet on double digit interest rates.
    This time there is such a debt mountain it would instantly fold the whole country.
    They simply won’t do it, instead I think they’ll be some kind of international agreement on keeping the wheels turning.

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  • it_is_going_with_a_bang says:

    FTB mortgages – which lets face it realistically means 90% (ish ) LTV just don’t exist at any affordable rate whatsoever.
    5.99% is about the only rate I can find that at 90% and thats without the no doubt stringent credit checks and conditions.
    So the idea that this is a FTB market is complete tosh.

    If any FTB really thinks this is a great time to jump on the housing ladder then they probably deserve what they get themselves into.

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