Housing market

Bought my first property in 1985 when I was 26 - first proper job. Small two bed flat in best part of central Bristol.

Was earning about £9k at the time, the flat cost me £35,000. Put down 5% deposit of £1750 and 3.5x multiplier bang on for mortgage.

Current Zoopla estimate for it is £273,000. 5% deposit would be about £14,000. But that would leave me needing a mortgage of £259,000. Even with a 5x multiplier I'd have to be earning £52,000 a year. First job at 26yrs earning £50k+? I don't think so. Madness.
 
SwingsitlikeHogan said:
Bought my first property in 1985 when I was 26 - first proper job. Small two bed flat in best part of central Bristol.

Was earning about £9k at the time, the flat cost me £35,000. Put down 5% deposit of £1750 and 3.5x multiplier bang on for mortgage.

Current Zoopla estimate for it is £273,000. 5% deposit would be about £14,000. But that would leave me needing a mortgage of £259,000. Even with a 5x multiplier I'd have to be earning £52,000 a year. First job at 26yrs earning £50k+? I don't think so. Madness.
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Explains why the young grads push for wage rises at my place. Problem is they aren't good enough to be paid more than their managers !
Was there ever a time in history where both partners had to work to make ends meet, like now? Your figures suggest that a couple on 26k each would possibly get a shoe in. Our grads start at 30k.
 
jp5 said:
Would much rather buy a place at 2.5x earnings with 15% interest rate than 10x earnings with 2% interest rate.
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Completely agree. At least the person who has 15% interest has not just signed up for a lifeline time of debt as interest rates fell fairly quickly(when compared to a 25 year mortgage) and if you wished to you could then use that 'extra' money to pay off the mortgage early. With debt levels now so high at low interest rates, that is not an option. Stupid affordability test basis.

We borrowed at near the peak rates but then carried on paying the same mortgage payment as interest rates fell. We were lucky, people say 10 years younger than I were not so lucky.

Governments/banks sold our young persons souls to be debt slaves for a lifetime with debt levels so high. I have a good idea lets take house prices out of inflation measures without controlling lending in the big new world, banks and people know best and let house inflation run riot and reduce interest rates further to fuel asset prices further, shocking scandal IMHO, but I do seen to be a bit out of the limb over my thoughts on this.:confused:
 
jp5 said:
Would much rather buy a place at 2.5x earnings with 15% interest rate than 10x earnings with 2% interest rate.
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Just checked and the 1991 figure would require monthly repayments equal to 33% of gross average earnings.

In 2016 the repayments would be just less than 20%.

Interest payments only based upon a loan of 90% of 2.5 x earnings in '91 and 10 x earnings in 2016.
 
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jp5 said:
Would much rather buy a place at 2.5x earnings with 15% interest rate than 10x earnings with 2% interest rate.
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I wouldn't. If I have to pay 'X' amount per month for a property I would rather be paying towards the capital value of the property rather than interest on the loan. If you are going to pay a total of say £300k would you rather not pay £250k of property value and £50k of interest rather than £150k of property and £150k of interest?
 
MetalMickie said:
Just checked and the 1991 figure would require monthly repayments equal to 33% of gross average earnings.

In 2016 the repayments would be just less than 20%.

Interest payments only based upon a loan of 90% of 2.5 x earnings in '91 and 10 x earnings in 2016.
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Just wondering, why are you looking at the "interest payments only" surely you want to look at the full repayment amount, as in 2016 the loan is significantly more...
 
Spoke to an estate agent who came around to value our place... his view on the Woking (Surrey) market, you cant find a good 2-bed starter flat for 250K!!!! .. Family is looking to buy a 3-bed house in part of Kent and will get change from 300K.. Surrey is impossible to get in.
 
CheltenhamHacker said:
Just wondering, why are you looking at the "interest payments only" surely you want to look at the full repayment amount, as in 2016 the loan is significantly more...
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Average earnings 1991 = £13407
Average houseprice = £62500

Average earnings 2015 = £27456
Average houseprice = £286000

Mortgage repayment costs based upon a loan of 90% of average price (Capital & Interest), Interest Rates 15% in 1991 and 3% in 2015

1991 = £721 which is 64.5% of gross average earnings
2015 = £1220 which is 53.3% of gross average earnings

Obviously these are rather crude calculations and make no allowance for factors such as regional variations but I think they show that the current situation is not relatively much different to other periods in our history.
 
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MetalMickie said:
Average earnings 1991 = £13407
Average houseprice = £62500

Average earnings 2015 = £27456
Average houseprice = £286000

Mortgage repayment costs based upon a loan of 90% of average price (Capital & Interest), Interest Rates 15% in 1991 and 3% in 2015

1991 = £721 which is 64.5% of gross average earnings
2015 = £1220 which is 53.3% of gross average earnings

Obviously these are rather crude calculations and make no allowance for factors such as regional variations but I think they show that the current situation is not relatively much different to other periods in our history.
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What I would point out though is that in 1991 the average mortgage was over 25 years, now they tend to be over longer periods such as 40 years.
 
MetalMickie said:
Average earnings 1991 = £13407
Average houseprice = £62500

Average earnings 2015 = £27456
Average houseprice = £286000

Mortgage repayment costs based upon a loan of 90% of average price (Capital & Interest), Interest Rates 15% in 1991 and 3% in 2015

1991 = £721 which is 64.5% of gross average earnings
2015 = £1220 which is 53.3% of gross average earnings

Obviously these are rather crude calculations and make no allowance for factors such as regional variations but I think they show that the current situation is not relatively much different to other periods in our history.
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As an example, I actually purchased our 1st house in 1991 for £65,000 and the mortgage was almost equal to my monthly net take home pay. Wierdly the figures you quote for 1991 are very similar to ours. I was only a trainee so on lowish wages tbh but bought a 3 bed semi -bungalow in Essex after leaving university (NB A similar couple could not buy that property now, that is another issue]

What you are not doing, is looking at the whole picture over the time of the mortgage and allowing for the massive drop in interest rates that did happen from the early 90s and therefore that % you quote was for a short period tbh. (yes I saw friend and family lose their homes, due to the recession and high interest rates, but that is another story)

The debt levels in 2015(multiple) are vastly greater than in 1991, so the stress and the pressure is far great over a far greater period for the people involved, as that percentage will remain almost static over 25 years.

For us the pain with high interest rates was really only for a short period(IIRC about 2 years), as they fairly quickly dropped. So that % you quote above was only a high risk % for a few years(even if my earnings had remain low). Currently that percentage for 2015 will remain a high risk percentage for 25 years.

For myself as an example, as interest rates dropped we continued paying the same monthly figure(as my earnings had increased due to qualifying) and we repaid that mortgage very quickly as a result(like within 10 years IIRC, we did pay alittle bit more as well, when funds alllowed). That would not happen nowdays and the 'couple' would be in a mortgage for 25 years and due to the high mortgage figure of per above of £286,000 and as a result they could default at any point during almost the whole term of the mortgage(25 years) and has to live with the stress of that.

I can see the massive difference between now and then, as my position would be really different, if my time was now and I would be a debt slave, rather than mortgage free. Think about it a bit deeper and my personal example and hopefully you will see what I mentioned in my previous post.

Hope that helps, even though the post is long:o:D
 
Yes interest rates did drop but it took quite a while for them to get to their present levels.

In addition consideration should be given not just to those buying for the first time in 1991 but those who had already purchased and had based their budgets upon much lower interest rates. At least those who have purchased within recent times or are just about to are unlikely to see their budgets blown to pieces by soaring interest rates.

I am not unsympathetic to those who have more recently climbed upon the property ladder, merely pointing out that every generation has been faced with problems.
 
MetalMickie said:
Obviously these are rather crude calculations and make no allowance for factors such as regional variations but I think they show that the current situation is not relatively much different to other periods in our history.
Click to expand...

Except at the moment we are at a historic low of interest rates, and you're saying that repayments now are similar to the peak of a crisis in the 90s.

As soon as interest rates start to creep up again I worry for anyone leveraged at 10x their earnings.
 
It's so much worse nowadays, you can do what you like with the stats, it doesn't change the actualite.

When I left uni in 1986, myself and all of my mates managed to buy houses or flats in various parts of the South East and London within a couple of years. Still managed to live reasonably well. No bank of mum and dad involved.

Nowadays that's impossible by a huge distance. Despite Lawson's boom, briefly mental interest rates and negative equity this generation still faces far a worse situation than mine. It's rubbish, and it's depressing to be impotent in the face of such a hugely destructive phenomenon.
 
I can only get a mortgage for £122k, went to see a flat today. Dirty and needed work, up for a £129,950.

Apparently a £123k offer refused, I would have gone no higher then £120k.

Looking at two more flats tomorrow
 
vkurup said:
Spoke to an estate agent who came around to value our place... his view on the Woking (Surrey) market, you cant find a good 2-bed starter flat for 250K!!!! .. Family is looking to buy a 3-bed house in part of Kent and will get change from 300K.. Surrey is impossible to get in.
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Tell me about it! Born and raised Guildford.... first three houses in Wiltshire. Fourth and current house Monmouthshire. £300k will get you good 4 bed detached in many areas... as for work....hmmm... Tebbitt's Bike required !! I'm currently working in Southampton!
 
Thought I'd update this. We've sold our flat so are on the clock to find somewhere to move to but really struggling to see anything suitable in areas we like that we can afford! Hoping more will come on the market after xmas but starting to get a bit stressed by the whole thing!
 
We sold and moved into our new house on Tuesday there.
I wish i could say it was stressful but i'm stuck offshore and my wife was left to deal with it.
Only down side is i've sold a lovely old victorian house and bought a new build, what was i thinking.
 
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