House Prices set to be 10 Times Income

The unrelenting rise in UK house prices leaves many first time buyers faced with a situation of average house prices being up to 10 times average income.

The most general mortgage multiple by major banks is at the moment 5 times income. This mortgage lending is based on new criteria of affordable lending.

If a first time buyer wanted to get a mortgage equal to 6 times income, they would probably have to use a non conventional mortgage such as self certification mortgages.

To get a mortgage equal to 7 times income or more, it is likely a borrower would feel inclined to exaggerate income (lie) or save a huge deposit, or ask parents to ask as a guarantor.

The future looks bleak for future first time buyers as the high house prices are merely a reflection of demand being much bigger than supply. Why house prices have increased so much in the UK

To reduce house prices to affordable levels would require a big increase in the number of affordable housing being built. However, this is unlikely to occur given the restrictions placed on the building of new houses.

Another option in the long term, is to follow the example of Japan and use 50 year mortgages


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6 Comments:

Anonymous Refinancing said...

Why do you suppose the solution to these high priced problems is always longer financing, larger loans, and higher interest? I think the idea of a 50 year mortgage is atrocious. You may as well just rent your home for the rest of you life. Although if family were as strong in the western world as it used to be, long-term mortgages could benefit the family and the home could stay in the family for generations: like they used to. Of course we all know that's not how things work anymore.

June 15, 2007 at 9:57 AM  
Anonymous Richard said...

Increasing my mortgage term from 31 years to 47 was a very good financial decision for me. I'd rather have an affordable mortgage now. Who cares about having money when your old? The world will probably have ended by then anyway :)

June 15, 2007 at 10:38 AM  
Anonymous Freddie Aguilar said...

I found your website that captures my interest while searching the internet for particular keywords related to real estates. This is a very informative blog of yours. Keep up the good work. You may also check Real Estate Investments and TIC Investments if it interest you for additional information's. Thank You...

June 26, 2007 at 10:40 AM  
Blogger Richard said...

Thanks Freddie,

I was impressed with your website. Shame I don't have money to invest :)

June 26, 2007 at 11:38 AM  
Anonymous Freddie Aguilar said...

I found your website that captures my interest while searching the internet for particular keywords related to real estates. This is a very informative blog of yours. Keep up the good work. You may also check Real Estate Investments and TIC Investments if it interest you for additional information's. Thank You...

June 29, 2007 at 10:47 AM  
Anonymous Leicester Renter said...

prices just keep going up and up and up. i think with the market as it is at the moment the best thing to do, is rent. multiples for mortgages are ridiculous. The best thing to do is stockpile reserves, wait for the market to turn then buy.

August 6, 2007 at 7:09 AM  

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