OK boomer - House prices have doubled as a proportion of salary since 1970

[cinamon]

@saranoor You say "could" get a 100% mortgage on a £375,000 house but one can't get that because affordability rules mean the banks will not lend such high multiples of income.

 

[saranoor]

@cinamon From my experience affordability is done based on monthly expenditure. Take the 1979 model

1979
Mortgage - £297
Average wage - £500
Income percentage- 59%

2019
Mortgage- £1400
Average - £3000
Income percentage- 45%

Which means that even based on affordability calculated as monthly expenditures, with the interest rates at the respective rates (17% & 1.64%) it means that houses were actually less affordable then

 

[michael25martin]

@saranoor Salary inflation much higher. So redo these 5 year into the 25 year period.

 

[saranoor]

@michael25martin This is based on current average full time income, not don’t on inflation, this is both pre tax

 

[michael25martin]

@saranoor Which is why it doesn't tell the whole story. The reason the older generation is rich is that when they were in debt they had high inflation and when the had assets they had low interest. They lucked out. It may have been rougher for them to buy at outset, but 5 years in their debt had worded in real terms and they were much richer. It's not a contradiction to say it was less affordable for them to by initially, but much more affordable than now overall.

 

[saranoor]

@michael25martin Agreed but in the same way for people now, it’s much harder to get on the ladder with a deposit etc, but once on you are paying much more capital off much sooner so the debt is decreasing much quick

 

[adamgibson991]

@saranoor Well, the 1979 salary of 6k was the average where the 36k salary today is ~30% higher than the average (28ish k)

 

[saranoor]

@adamgibson991 The average full time salary in the uk as of 2019 is £36k

 

[adamgibson991]

@saranoor Ons figures put it at 28k ?

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours#timeseries

 

[saranoor]

@adamgibson991 This is combined part time and full time, I would say it’s reasonable to base it off a single full time income only to give a fair comparison to 1979

 

[adamgibson991]

@saranoor That's fair, although I'm still surprised it's 36k, the ons like has it at 30k, (I'd looked at a lower figure earlier)

"Median weekly earnings for full-time employees reached £585 in April 2019, an increase of 2.9% since April 2018."