Some property ramping from The Torygraph:
Home buyers who are already on the property ladder are finding mortgage payments even more affordable, the CML figures showed. They typically needed only 10.6pc of gross income in November 2009 to cover mortgage interest payments. Other than a brief low of 10.2pc in the middle of 1996, this was the lowest debt burden for home movers since the CML started recording this data in 1974.
First-time buyers spent an average of 14.4pc their of gross income on mortgage interest in November, the lowest figure since May 2004, according to the Council of Mortgage Lenders (CML).
OK. What are the missing figures?
1. What interest rate are they paying now compared to then,
2. How high their incomes are now, compared to then. FTB age has gone up from late 20s to mid-30s over last ten years, and there are far fewer FTBs nowadays (just the richest few), so in relative terms, FTB wages are much higher.
3. How big their mortgage (as a multiple of income) is now compared to then,
4. How big their deposit/equity is now compared to then,
5. What type of home are they buying now compared to then.
It's not much consolation if:
a) An FTB in the 1990s could buy a three-bed house for 2.5 times income with a 10% deposit @ 6% interest = 14% of income (i.e. average earnings £12,000 x 2 x 2.5 = average house price in mid-1990s £60,000) and
b) Today's FTB is buying a two-bed flat costing 4.5 times income with a 25% deposit (from The Bank of Mum & Dad) @ 4% interest = 14% of income (i.e. earnings £20,000 x 2 x 4.5 = £180,000).
I've exaggerated a bit, of course, but you get the general idea.
There’s a Surprise
10 hours ago
6 comments:
"on the property ladder": ladders lead both ways.
The lenders are back to using 'affordability' criteria again. It didn't work last time. And it's not going to work this time. Judging someones ability to pay based on entirely false current interest rates is going to lead to lots of dostressed borrowers and lenders with lots os bad debts.
Why don't they just stick to the 3.5+1 max that has worked for donkey's years? Why?
I'm sorry to hear the lenders are doing that again Mr Lola. It was at the heart of the losses lenders suffered after 1989 and, in my view, it's at the heart of recent crunchy credit problems.
In essence it means two third of the loan is made on sound grounds and the remainder is pure equity lending without the lenders being protected by the higher interest rates the market demands for the added risk of equity lending.
A bad deal is a bad deal however you dress it up.
By the way, I hope you're feeling better Mr Lola.
The interest rates are artificial, as are the initial conclusions, therefore.
Yeah, Mark, but that's maths. The British don't do maths. Unfortunately.
It's a newspaper story. Newspapers are interested in stories, not facts. Facts are the things that you include if they make your story more interesting /prove the point that you are trying to make and ignore if they don't. If they'd included all the maths, it would be about as newsworthy as "dog bites man".
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