Mortgages and economics

[vehelpfulguy]

Today was an announcement that mortgages are starting to become 10 times people salaries.

Can anyone explain how this scenario below is going to work and make us compete on the world stage.

1) We are a small country with limited housing

2) We allow massive immigration for 10 years, causing a housing shortage.

3) The housing shortage drives up house prices, making people get larger and larger mortgages.

4) Larger mortages means claims for larger and larger pay rises, with drives up the cost of living.

5) It becomes too expensive to make anything in this country, which means everything gets made abroad, reducing our exports and increasing our imports.

Can we carry on like that ?

Where do we go from there?

[stokeace]

i earn �60,000 a year and the thought of a near �800.000 mortgage horrifies me you have to draw the line somewhere and live within your means.my first brought house was my old council house and i would not have been able to get on the property ladder but for that so i guess i have maggie thatcher to thank for that.and im a labour voter.thanks maggie.

[Gromit]

Immigration is not the cause of the housing shortage and the problem is older than 10 years.

The wave of Eastern European immigrants have not bought houses here (they are usually in rented accomodation) so their presense has had no impact on the housing market.

The main cause is very simple. There are not enough houses being built. And a massive increase in singles dwelling. As we have become more affluent, we can now afford to buy houses/flats on our own. And has been said earlier, we are living longer.

4 is incorrect. Wage rises are usually pegged to the inflation rate which is now conveniently adjusted not to include house price rises. The result will be that rather than get morgages and wages will rise, people will instead be priced out of the market.

5 We are not approaching economic meltdown as you seem to be implying. Infact we are doing very well economically.

Can we carry on like this? - No.
With first time buyers and the low paid effectively priced out of the market, the market will diminish in the long run. That is not to say the need for houses will diminish, just that the number of people who are able to buy will decrease.

More houses will need to be built.

[Haggisdj]

I agree that more housing is needed and I am SO against the buy-to-let trend. It just let's the 'haves' get wealthier and prevents the 'have nots' from getting on the property ladder.

Just for the record I am a homeowner..

[rabbitygirl]

About to leave our rental to move away where we have bought 2 houses to refurb - 1 to live and 2nd to sell. This involves leaving (actually kicking out!!) our sons (mid and late 20's) in London area for work. We are not wealthy by any means and worked hard to pay for whats ours as everyone else. Not in a position to help them v much. But I feel v guilty that circumstances and greed of my 'lucky' generation have created todays situation. Think mainly house prices r due to undersupply tho. Would love my sons to get own homes but unlikely. Have told them to accept renting which should still be cheaper. Life is for liviing and not worrying about extreme mortgage payments.

[stokeace]

i strongly disagree haggis a number of years ago i brought 3 run down properties and invested heavily in renovating them [very nearly bankrupting me] and now i am reaping the benefits by renting them if i have had the business mindedness to risk all that i had [and i did] is that so bad?its called enterprise in my mind and now my family is benefiting and that is all i care about.and no i dont rent to students or immigrants.good luck rabbitygirl go for it but please be careful i guess i was a bit lucky in my investments but if you must speculate to accumulate.good luck.