From: Jon S Green 
Newsgroups: uk.finance
Subject: Re: HOUSE PRICES ARE CRASHING
Date: Fri, 05 Nov 2004 21:26:39 GMT

"Tim"  wrote:

>  wrote
> > Meanwhile, the recent interest rate rises have increased
> > mortgage payments to 19 per cent of the annual earnings ...
> >
> > Nevertheless, in 1990, the figure was 34 per cent.
> 
> [If people could afford 34% in 1990, they can afford 34% now too.]

Not quite so, I'm afraid.  People now have additional costs, such as
satellite/cable TV, internet and mobile phone subscriptions, and
additional capital costs (microwave; PC; mobile; ...).

I'll grant that, if sufficiently motivated, people can and will manage
without paying for these things, but they do take up a significant
percentage of income these days.

What they can't manage without paying is the direct and indirect tax
burden (local + national), which is very markedly higher than it was in
1990.  

And it gets worse.  Because of the house price bubble we've been
experiencing over the past few years, there's now no chance of a basic
rate taxpayer being able to afford a first mortgage.  Two BRTPs buying
as a couple still wouldn't make it, unless they're buying a rabbit hutch
in need of updating.  Now, to buy the average home in the UK, your
sample couple's got to have at least one higher-rate taxpayer, so you've
the additional income taxes (not to mention the increased NI) at the
higher rate, too.

Ain't no way you'll be able to spare 34% of gross income any more, for a
first mortgage.  Sorry.


Jon
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