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How the pound in your pocket has vanished

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    How the pound in your pocket has vanished

    I have always said house prices are not a reflection of what people will pay for a house, but what the banks will lend. When the banks were only lending salary X 2.5 then prices increased steadily with wages. When banks increassed the lending ratio, house prices went higher.

    WAGES THAT CAN’T KEEP UP WITH HOUSE PRICES

    In 1997 the average wage was £16,826 and the average house price was £59,199 – a little over three and a half times more.

    The average wage has increased steadily – it’s now £27,287 – but house prices have shot up.

    The real startling increase was in the 1990s, when because of reckless lending house prices grew to £181,364, seven and a half times the average wage.

    Devils in the detail: Horrors that hide behind the financial reanimation...The economic data that could give you sleepless nights | Daily Mail Online
    Fiscal nomad it's legal.

    #2
    Which is why "call me Dave" wants zero interest rates forever.

    How about doing something about house prices? As a start, remove mortgage tax relief on BTL.

    Comment


      #3
      That would suggest deregulation of the financial industry is the true culprit behind the UK credit crisis. A policy put in place by the Tories. You can't spend what you've not got. The banks realised this and gave Labour a lottery ticket.

      The question is, will lending ever constrain back to historic levels? It would seem to me we'll have a zombie economy for many many years while salary and lending ratios are out of kilter.
      "Never argue with stupid people, they will drag you down to their level and beat you with experience". Mark Twain

      Comment


        #4
        Originally posted by BrilloPad View Post
        Which is why "call me Dave" wants zero interest rates forever.

        How about doing something about house prices? As a start, remove mortgage tax relief on BTL.
        The landlords would only increase rent to compensate. I know this because it's what I would do. Tenants would be the real losers. There's no single quick fix for so many years of damage. Until wages increase to close the ratio 'real growth' is not going to happen until beyond the 2030's is my bet.
        "Never argue with stupid people, they will drag you down to their level and beat you with experience". Mark Twain

        Comment


          #5
          Originally posted by BrilloPad View Post
          Which is why "call me Dave" wants zero interest rates forever.

          How about doing something about house prices? As a start, remove mortgage tax relief on BTL.
          Hush now Brillo, I'm about to get a BTL next year
          In Scooter we trust

          Comment


            #6
            Originally posted by alreadypacked View Post
            I have always said house prices are not a reflection of what people will pay for a house, but what the banks will lend. When the banks were only lending salary X 2.5 then prices increased steadily with wages. When banks increassed the lending ratio, house prices went higher.
            It was only 2-2.5 times combined salary when I applies for my mortgage back in 2002, one bank that offered me a mortgage (Which is now mostly owned by the state) offered me more than 3 times our combined salary. Fortunately for me my Mrs said there's no way we need to spend that much on a house.
            In Scooter we trust

            Comment


              #7
              Originally posted by scooterscot View Post
              That would suggest deregulation of the financial industry is the true culprit behind the UK credit crisis.
              Deregulation? The banks were strong-armed into lending to 'sub-prime' borrowers. That sounds like the opposite of deregulation to me.

              Comment


                #8
                Originally posted by scooterscot View Post
                That would suggest deregulation of the financial industry is the true culprit behind the UK credit crisis. A policy put in place by the Tories. You can't spend what you've not got. The banks realised this and gave Labour a lottery ticket.

                The question is, will lending ever constrain back to historic levels? It would seem to me we'll have a zombie economy for many many years while salary and lending ratios are out of kilter.
                Er no, it would suggest central banks are behind it as they supply the cheap credit and coordinate fractional reserve banking. Calling this 'deregulation', just because the banks can lend at lower reserve ratios (if any at all) is extremely misleading.

                Not to mention strong government encouragement - both Labour and Tory - to banks to lend, including implicit bailout promises that materialised. Same tulip as the US. This isn't a problem limited to one party.

                Now that banks are being held to higher reserve ratios of a whopping 4% the argument has emerged that this will increase risky lending. Blatantly self-interested nonsense, of course.
                Last edited by Zero Liability; 31 October 2014, 09:41.

                Comment


                  #9
                  So explain to me how it is Canada have avoided this crisis whist maintaining a regulated financial industry?
                  "Never argue with stupid people, they will drag you down to their level and beat you with experience". Mark Twain

                  Comment


                    #10
                    Originally posted by scooterscot View Post
                    So explain to me how it is Canada have avoided this crisis whist maintaining a regulated financial industry?
                    Question does not compute

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