House Price Poll

[Triggaaar]

Houses are places to live in, not investments to achieve capital growth.

While lovely, that's obviously not true. Houses are places to live, but someone has to own that house - either you, or some sort of investor (or govt), and since not everyone can buy a house (in any country in the world) there has to be investors for everyone to be housed.

As to what house prices are reasonable, it totally depends on the economy, which is ever changing. With interest rates as low as they are, house prices are really too cheap today, but obviously we expect interest rates to rise at some point, so with that in mind I think house prices are a little (5%) high at the moment.

 

[HovaGirl]

i thought i put that already: to free up the supply of family sized homes.

i know, no ones want to think about it or for their parents/grandparents to have to move, lots of memories and social attachments. i have a Gran not happy to move either, she lives in a 3 bed house and my late Grandad did too. my parents, my partners and my cousins parents all have 4 bed houses. my sister is in a 2 bed flat with baby, same with two cousins, myself in a 1 bed flat. it doesn't make sence to have 2 generations in large homes while the younger generation cannot afford to buy similar sized homes.

the idea we can just bulid our way out of this quadry is unfeasable and we'd have to build/move lots of support infrastructure (schools, shops, GPs etc). i dont know how it can or will be resolved, but there needs to be at least a discussion on issue.

There is little problem with the supply of family-sized homes. The problem is the cost of buying them. While property prices in the rest of the UK are plunging, those in Brighton and Hove are benefiting from the knock-on effect of London prices more or less holding their own. Prices in Brighton & Hove haven't been dropping as much as they might, but when the London buyers start falling away, and when the repossessions start rolling in, there will be a glut of properties on the market, and, like everywhere else, prices in Brighton & Hove will drop through the floor. As to building our way out of the problem, that will just add to it, particularly in Brighton. There is very little space left to build anywhere, which means building land is expensive, which will be reflected in the price of the houses built.

 

[Triggaaar]

Absolutely. If you imagine a 30-year-old on a salary of about 30k p.a., and his partner on a salary of about 18k p.a., at the 3xsalary + partner, they could get a mortgage of almost 110k. Somehow, they have to scrape up savings of 35k (bank of Mum & Dad?) for the deposit on a property of 35k + 110k, which means 145k. What can you get for 145k in Brighton, in which to raise a family?

I've explained this to you before (sorry for patronising, but it's frustrating). A couple on 30k + 18k with a deposit of 35k can easily get a mortgage of 4/5 times their joint salary. They would have no trouble buying a house for £250k, which will buy you something in the suburbs. That would cost them about £1k a month on a currently available fixed rate deal, and long term I'd budget for around £1100 to be safe. They couldn't rent for much less than that, and they'd own their own home where the rent doesn't keep going up.

 

[HovaGirl]

I don't disagree with the sentiment, but the problem with using Brighton as an example is that salaries are well below average and house prices are well above average - Whereas somewhere like my home town of Derby where salaries are above average, house prices are way cheaper than Brighton, everything is more affordable.

It must be very frustrating being young and wanted to buy in Brighton.

Indeed it is, but it always has been. In 1978, We had to borrow £1,500 for the deposit on our first house which cost £11,500, to get a mortgage of £9,500, on a combined London salary of £3,000. That loan crippled us for 3 years but we moved 3 years later, having sold it for abut £17k. We bought another for about the same price, did it up, and sold it 18 months later with about £3,000 spare. We bought our last house for £21k in 1983. (Moved in the day before Brighton played ManU at Wembley!) Can't remember the salary at the time, but the profit from the previous house funded the deposit on it. We sold it late in 2007 for £230k, which was a drop of 40k on the asking price. A similar house then sold for only £150k a few months later, but needed doing up. Since then, a similar house which needed doing up sold for £225k, which is far too high. Others have been on the market for about £260k and have sold but for less than the asking price. Agents have said that sellers are asking silly money, but Londoners after cheaper properties have been funding the market in Brighton. It is London-by-the-sea, with prices to match, but not the salaries, as you say. Brighton is like a giant over-priced village where its children will have to move from the area if they are ever to buy a home in which to raise their families.

 

[HovaGirl]

I've explained this to you before (sorry for patronising, but it's frustrating). A couple on 30k + 18k with a deposit of 35k can easily get a mortgage of 4/5 times their joint salary. They would have no trouble buying a house for £250k, which will buy you something in the suburbs. That would cost them about £1k a month on a currently available fixed rate deal, and long term I'd budget for around £1100 to be safe. They couldn't rent for much less than that, and they'd own their own home where the rent doesn't keep going up.

Not any more. The whole point about the bursting of the property bubble is that too many people in the previous decade were getting mortgages way above what they could afford. At the time, banks were almost giving money away. That has now stopped, and it is proving extremely difficult to get a mortgage. The reason it has stopped, is because the banks and lenders know that prices are going to plummet by at least 35%, if not more, hence, most mortgages now demand a deposit of about 30%, alongside the old 3x salary +1x second salary. This is to prevent too many new buyers ending up in negative equity. The exception is the buy-to-let market, which will still let you borrow as much as you like, as long as you have the 30-50% deposit, and that the rental value of your property is 10-12% higher than the mortgage you will pay. This is fine while the interest rate is so low, but will torture people when the interest rate does eventually rise. At the moment, the banks are trying to prevent this. (Mind you, they're getting their money by charging outrageous interest rates on credit cards.)

 

[sten_super]

That has now stopped, and it is proving extremely difficult to get a mortgage. The reason it has stopped, is because the banks and lenders know that prices are going to plummet by at least 35%, if not more, hence, most mortgages now demand a deposit of about 30%, alongside the old 3x salary +1x second salary. This is to prevent too many new buyers ending up in negative equity.

I'm sorry, but this is nonsense. I'm currently on the lookout for a FTB mortgage; there are a load of 90% LTV offers out there, and Nationwide have recently started offering 95% LTVs if you take out a specific savings account with them first. I haven't actually applied for one yet so don't know about multiples, but my understanding (from talking to other people in a similar position that have recently been accepted for mortgages) is that they've been able to get over 3 times joint salaries and 4 or 5 times single salaries.

 

[HovaGirl]

I'm sorry, but this is nonsense. I'm currently on the lookout for a FTB mortgage; there are a load of 90% LTV offers out there, and Nationwide have recently started offering 95% LTVs if you take out a specific savings account with them first. I haven't actually applied for one yet so don't know about multiples, but my understanding (from talking to other people in a similar position that have recently been accepted for mortgages) is that they've been able to get over 3 times joint salaries and 4 or 5 times single salaries.

Well, good luck to you. We tried for a mortgage a couple of months ago and found it almost impossible. (Technically, we're FTBs on a vast salary, but we have too few mortgageable years ahead of us.)

 

[beorhthelm]

Well, good luck to you. We tried for a mortgage a couple of months ago and found it almost impossible. (Technically, we're FTBs on a vast salary, but we have too few mortgageable years ahead of us.)

so why are you trying to say the multiple and deposits are the problem based on your experience, when your age is the problem for you? fact is, everyone i know, and theres a few a work and myself, who have wanted to move and have decent deposits/LTV have had no problem obtaining mortgages in the past couple of years. yes the >90% LTV have problems, but thats were the problems were, so this is good long term. as for the prices, they have been rising in London the past year. prices have stabilised and dont look like going anywhere much for a year, at least not before we how much or how fast interest rates will increase.

 

[HovaGirl]

so why are you trying to say the multiple and deposits are the problem based on your experience, when your age is the problem for you? fact is, everyone i know, and theres a few a work and myself, who have wanted to move and have decent deposits/LTV have had no problem obtaining mortgages in the past couple of years. yes the >90% LTV have problems, but thats were the problems were, so this is good long term. as for the prices, they have been rising in London the past year. prices have stabilised and dont look like going anywhere much for a year, at least not before we how much or how fast interest rates will increase.

It's not our age that is the problem. We have a good salary which could pay the mortgage off within a decade or less. The problem was there were almost no mortgages available, however much we wanted to borrow. We went through a broker who hunted around and rang people, but unless we had about a 30% deposit, we wouldn't get a mortgage. To raise a deposit of that size, we would have to take out a huge loan. We decided against this, because we feel strongly that prices are too high in Brighton and that they are going to drop, and we didn't want to buy a house which would eventually be worth less than we paid for it, while paying back a huge loan. There was almost nothing available, unless we went into the buy-to-let market and raised an even higher deposit. The only buyers around at the moment, seem to be the flush buy-to-letters who are living off the rapidly rising rents on their properties. They can pay almost anything and get huge mortgages, but I suspect even that market will dry up, particularly when interest rates rise, and when the market is flooded with the repossessions which are slowly building up.

 

[beorhthelm]

It's not our age that is the problem. We have a good salary which could pay the mortgage off within a decade or less. The problem was there were almost no short term mortgages available,

i've corrected for you.

 

[HovaGirl]

i've corrected for you.

You have corrected something which is false. The term was not the problem. (Don't you read the news? Have you actually talked to any brokers or mortgage lenders?)

 

[beorhthelm]

You have corrected something which is false. The term was not the problem. (Don't you read the news? Have you actually talked to any brokers or mortgage lenders?)

have you tried to obtain a full 25 year term mortgage or a remortgage an existing term? everything above suggests not, you're a first time buyer with ~10 years to repay. i did talk to leaders recently, mine went through no trouble 6 mths ago, my boss brought about a year ago without too much trouble (first time in London), work college moving with bank happy and others i know have got through the process recently without 30% deposits you talk of.

 

[HovaGirl]

have you tried to obtain a full 25 year term mortgage or a remortgage an existing term? everything above suggests not, you're a first time buyer with ~10 years to repay. i did talk to leaders recently, mine went through no trouble 6 mths ago, my boss brought about a year ago without too much trouble (first time in London), work college moving with bank happy and others i know have got through the process recently without 30% deposits you talk of.

We live abroad and sold our house in 2008. We had hoped to sell at the height of the market, but we still had to take 40k less than we were asking. Since then, asking prices of the same sort of house have maintained, though I know they are selling for less. Some sellers refuse to move on prices and have taken theirs off the market. We are FTBs in that we are not part of a property chain and that is the value of FTBs. We asked about all mortgages, 10-25 years. There are mortgages available - there always are - but they are very thin on the ground, and that is my point. As I said, we could get one with a large deposit, but decided prices were still way too high. We are waiting for them to drop and then we will see what we do, though I fear the British habit of buying their own little castle is past its sell-by date. There's a new world unfolding where cash will be the key, not property.

 

[Triggaaar]

Not any more. The whole point about the bursting of the property bubble is that too many people in the previous decade were getting mortgages way above what they could afford. At the time, banks were almost giving money away. That has now stopped, and it is proving extremely difficult to get a mortgage. The reason it has stopped, is because the banks and lenders know that prices are going to plummet by at least 35%, if not more, hence, most mortgages now demand a deposit of about 30%, alongside the old 3x salary +1x second salary.

I'm sorry, you're wrong. We discussed this in the 'Greece' thread, and during the discussion I contact a mortgage broker, and this is what they wrote to me:
"as discussed given your salaries of £30k and £16k then I can see no reason why you should not be able to borrow well over £200k if you so wished.
Lenders will lend 4-5x joint incomes still"

Lenders were lending irresponsibly, sometime over 100% mortgages - crazy. That doesn't mean you can't get still get large mortgages.

This is to prevent too many new buyers ending up in negative equity.

No it isn't. Banks are there to make money, and they lend to make money, and they decide on their lending criteria to minimise their risk - not to protect us against negative equity.

The exception is the buy-to-let market, which will still let you borrow as much as you like, as long as you have the 30-50% deposit, and that the rental value of your property is 10-12% higher than the mortgage you will pay. This is fine while the interest rate is so low, but will torture people when the interest rate does eventually rise.

That's largely wrong too. They normally want your rent to cover 125% of the mortgage at a given mortgage rate, and you also have to have your own earning too. And if people have put down a 30-50% deposit, the rent should easily cover the mortgage after interest rates go up, and if it doesn't, the landlord deserves to lose for stupidity. Obviously if interest rates go over 10% we're all knackered, we just have to hope that doesn't happen.

 

[HovaGirl]

I'm sorry, you're wrong. We discussed this in the 'Greece' thread, and during the discussion I contact a mortgage broker, and this is what they wrote to me:
"as discussed given your salaries of £30k and £16k then I can see no reason why you should not be able to borrow well over £200k if you so wished.
Lenders will lend 4-5x joint incomes still"

Lenders were lending irresponsibly, sometime over 100% mortgages - crazy. That doesn't mean you can't get still get large mortgages.

No it isn't. Banks are there to make money, and they lend to make money, and they decide on their lending criteria to minimise their risk - not to protect us against negative equity.

That's largely wrong too. They normally want your rent to cover 125% of the mortgage at a given mortgage rate, and you also have to have your own earning too. And if people have put down a 30-50% deposit, the rent should easily cover the mortgage after interest rates go up, and if it doesn't, the landlord deserves to lose for stupidity. Obviously if interest rates go over 10% we're all knackered, we just have to hope that doesn't happen.

Lenders were lending 100+% mortgages at 5-7 x salaries. You are suggesting that nothing has changed, except for the percentage of mortgage being now lent.

Banks are protecting buyers against negative equity, but that is in the banks' interest, not in the buyers. If buyers default, then the banks repossess the houses and will have to try to sell them at massive losses. Been there, done that in the early 1990s. They have learned a lesson from that. And that was at a time when mortgage rates went as high as 17% and when the value of our house dropped by 30%, leaving us in negative equity from which it took 10 years to emerge.

As to the buy-to-let, I'm writing only what I was told and the impression I got was that as long as the rent was much higher (125% as you say) than than the mortgage payment, and you had a fat deposit, then the amount of the actual loan was more or less irrelevant.

 

[eastlondonseagull]

I don't disagree with the sentiment, but the problem with using Brighton as an example is that salaries are well below average and house prices are well above average - Whereas somewhere like my home town of Derby where salaries are above average, house prices are way cheaper than Brighton, everything is more affordable.

It must be very frustrating being young and wanted to buy in Brighton.

But in Chesterfield, where my missus is from, salaries are low and house prices are ridiculously high. And with interest rates so high for 10% deposits, a £150K home will still mean a mortgage of nearly £1000 per month – which is not easy.

House prices need to fall, but sellers are refusing to budge on the whole, unless they're forced to move and have to cut the asking price in order to get a sale.

 

[eastlondonseagull]

W

As to what house prices are reasonable, it totally depends on the economy, which is ever changing. With interest rates as low as they are, house prices are really too cheap today...

But interest rates are only low if you have a whacking great deposit. Which few people have. House prices are far too high.

 

[Tricky Dicky]

I've explained this to you before (sorry for patronising, but it's frustrating). A couple on 30k + 18k with a deposit of 35k can easily get a mortgage of 4/5 times their joint salary. They would have no trouble buying a house for £250k, which will buy you something in the suburbs. That would cost them about £1k a month on a currently available fixed rate deal, and long term I'd budget for around £1100 to be safe. They couldn't rent for much less than that, and they'd own their own home where the rent doesn't keep going up.

Not read all the thread, so excuse me for butting in, but ..... you're on very dodgy ground if your repayments are 1k a month and you've only allowed for an increase to £1100. When rates do rise, they'll be going up my more than 10%. Also, I don't think many people are offering mortgages of 4 to 5 times salary any more.

 

[seagullsovergrimsby]

A colleague at work has recently had his mortgage offer knocked back by the potential lender. He is on a 30 hours per week contract and consistently does another 18 hours single rate overtime per week but the lender has told him the overtime isn't guaranteed so they wont include it in his annual salary. Other colleagues who have taken out mortgages 3 or 4 years ago had the overtime element included in their annual salary.

 

[Gully]

Not read all the thread, so excuse me for butting in, but ..... you're on very dodgy ground if your repayments are 1k a month and you've only allowed for an increase to £1100. When rates do rise, they'll be going up my more than 10%. Also, I don't think many people are offering mortgages of 4 to 5 times salary any more.

I agree with the dodgy ground bit, only allowing £100 leeway in money available to pay the mortgage, although of course that would be totally dependant on the type it is (fixed or capped may not make it an issue).

However, I am not sure about interest rates rising to over 10%, at least not in the next few years. I am not an economist, but I believe the country would be completely and utterley screwed if they did. When I bought my last house, on returning from overseas, I managed to get a mortgage that was over 5-times my basic salary...though this was calculated on affordability, I was able to put down a reasonable sized deposit and the lender was Northern Rock!!!