Rachel Reeves, Labour Response

Fair enough. Apologies for shooting from the hip. I do get a bit wound up about some people's agenda with "boomers" etc.
Yes, we did get lucky in that house prices and pensions were a lot more favourable. Nevertheless it was the generations coming out of the late forties, fifties and sixties that voted in Labour governments of Wilson, Callaghan and Blair. The younger generations that followed haven't been able to do the same.
Hopefully this present lot in power are making enough of a bad job of running the economy that even those of whichever generation who vote Tory in the belief that they're better off financially will have the scales fall from their eyes. Apart from the richest 5% of course who will be loving it.

 

Yeah, not denying that, it's gradually getting worse. Like I was saying, if I had been in a position to buy 3 years earlier, the same house I bought would have been half the price, it went crazy for those few years (turn of century) and ever since then more gradually.

I'm not even sure what could be done about house prices though without absolutely tanking the market and leaving millions of folk in negative equity.

If you put wages up, house prices will follow suit.. Is there even answer to this that wouldn't either keep making it harder to get on the ladder or the alternative above of impacting millions of house owners?

 

Just chatting with someone this morning and they were saying due to the average house price being significantly higher than the 90’s the current interest rate equates to around 11% back then.

 

There is no nice answer. I'm increasingly of the view that a house price crash would be the best answer for society overall though.

 

I'm lucky. I'm finally mortgage free, so a house price crash will only affect us if we come to move or sell. It would make upsizing or relocating easier as the new place would be cheaper and we'd get proportionally the same from our current house - if current house is £200k and we wanted to move to one for £300k, it'd cost us £100k but if the prices fell 50%, ours would be worth £100k and the new one £150k so only cost us £50k. When it comes to selling without moving, we'll probably both be dead so it wouldn't matter to us but it means any beneficiaries would get less.

But, I can see a crash would make it very uncomfortable for a lot - especially anyone that bought in the last couple of years - and also make it easier for the young ones who are currently priced out. And very attractive for anyone overseas who wanted a UK property portfolio...

IIRC a lot of the economy is based on house prices, so a crash would hit a lot of unforeseen places.

 

If it doesn't crash then young uns aren't going to be able to afford a house without either a well paying job or significant help from mum and dad. I think an entire generation will become utterly disillusioned with life and society, and it's already starting.

 

As a young un in my 30s, this has been the case anyway for the last 6/7 years. None of my graduate friends have got on the housing ladder without parental help. I know couples on £80k a year combined who can't afford a deposit. I'm more likely to go into rent arrears than be able to run a car and have a holiday abroad a year.

Austerity gave us a **** start. Then Brexit onwards has infuriated people of my generation.

 

If you crash the prices, the people all over the property chain become stuck because they end up in negative equity etc.
So with nobody moving house, the entire chain stops so unless people start building millions of new houses at affordable prices which just won't happen because of materials cost, labour cost with the wage increases.

I think the opposite and that a crash would be the worst outcome.

Quite a few other countries already for the majority rent their homes rather than buying, so as hard as it may be for the upcoming generations, it's something that will probably happen. Home ownership will become less common.

 

I'd disagree with this. House prices have pretty much tracked inflation since the removal of the gold standard by Nixon. House prices are higher and inflation is similarly so.

Also interest rate is 2.25% so if a mortgage is £100,000 you must pay £2,250 in interest per year. Not sure how this can equate to 11% as the interest is the proportion you pay the bank/gov not a flat amount, but maybe I'm missing the point?

 

I think the point was that as a proportion of income today's mortgage payments are similar to the worst seen in 80s/90s, when interest rates were in double digits. And they're going up further...

 

I'm in my 30s, not sure whether I'm a young un any more or not! I have a house, I was lucky enough to be in a position to get on the ladder and have moved up a couple of times but at the same time I've seen mates struggle.

As you say, after starting work during the recession it's just been **** piled on top of **** for a lot of our generation.

 

It's bad enough for people on decent money and for mates not earning a lot with mouths to feed, it's really tight. They're working hard to keep a roof over their head and have hot meals and Christmas presents. Aspiring to own any significant assets is pie in the sky.

 

If mortgage rates reach anything approaching double-digits, the number of people unable to pay their mortgages will skyrocket followed by repossessions. At that point, nobody is moving and the market is flooded with property for sale as the banks try to recoup some of their losses. House prices will not stay high in that scenario - and might be snapped up by overseas investors with the weak pound.

How far they fall - and how fast - is a question I don't want to think about.

 

That's when I got on the property ladder. Previous few years were utter nuts. Even when the banking crisis happened, avg house prices more or less maintained and slowly increased.

 

Yeah that was about it

 

I was born in 1965, which technically makes me Generation X & as my first musical influences were punk I'm happy with that.

Never have & never would vote Tory, but these are even more right wing than any that went before them.

I get lots of folks my age & older saying what is everyone worrying about... FFS.

My Dad's generation, (born in 1936) had it tough certainly. I think for young 'uns growing up now things will be nearly as bad in many ways, which is awful.

 

A lot of younger people (one or two on here), whilst rightly pointing out the price of an average house as multiple of the average wage was much lower then they ignore the fact that this capital cost is only half the story. If you are borrowing to pay for the biggest purchase most people will ever make in their lifetime the monthly outlay as a proportion of income is the crucial figure .
If interest rates are high then the monthly mortgage payment is mainly interest rather than reducing the capital amount outstanding. It is therefore dead money. Over 25 years at 15% you end up paying way more than the property was and sometimes is valued at even after inflation. If you buy a house at low interest rates you benefit by lower repayments or make overpayments meaning that overall you will see the value of the house rise due to inflation but have paid out less 'dead money' due to lowre interest.

Just try checking out the total cost of a 25 year mortgage on a £8k house at 12-15% rates with an annual average income of 1£900 per annum gross at the income tax rates that applied back in 1970 compared to a £150k house 25 years at 2-3% with an income of £20k now. The proportion of mortgage repayments to average income was higher than it is now AND the bulk of the payments as I said dead money. You were actually paying more for something of lower value so even with inflation the sale of a house bought then barely makes up for the total outlay over 25 years

Calling boomers selfish nuggets is insulting and and the statement "...accumulating load of equity" is twaddle. It has come at a price. Most people could not afford foreign holidays, nice cars, mobile phones internet etc etc as they sunk most of their money into paying the mortgage and subsistence. Very few could afford to eat out in restaurant (not that many existed back then!)


As

 

Interest rates weren't at 15% for the life of the mortgage. These days the payments are extortionate even at historically low interest rates due to the price of houses. And these are rates which can only go one way.

And the massive appreciation in the value of the asset over the term of the mortgage more than made up for it. Plus add into that that wages grew substantially - between 1983 and 2003 the mean and median wages pretty much doubled. Between 2003 and 2018 they went up about 12%, with the mean wage being lower in 2018 than it was in 2008. In that same 15 years house prices pretty much doubled.

There are reasons young people really struggle to get on the housing ladder, and it isn't because they've got smartphones.

 

You are ignoring the massive rise in property prices though. My first house in Barnsley was 18k. I bought that in 1988. That house now would be easily £150k. It's two bedroom terrace, up near Locke Park with a garden & garage.

Sadly in my case I had a divorce that cost me £20k & a business that went under that lost me £30k. Neither were things I could do anything about.

Eventually got back on the property ladder with a one bedroom flat in the nicest part of Headingley. I own half of it & a housing association own the other half. I'm not really affected by this too badly. If I hadn't been in that position my DJ business would have gone under lockdown. Loads of folks are not so lucky. The rental market prices will go through the roof as well, so not just home owners in this.

The problem now is everything is over geared. I see a worse crisis ahead than we've ever seen with negative equity, homelessness, etc. Rates could go to 8% which would leave most people without a pot to piss in.

 

How much profit margin do property developers make on each house they build then sell?