Oh dear..............
Dear Prudence, please say I'm wrong over house prices
By Jeff Randall (Filed: 22/02/2006)
A survey this week by Rightmove, an online estate agency, found that the average house price in England and Wales has jumped above £200,000. By contrast, UK salary levels remain relatively unexciting. The average for men is £25,000; for women, considerably less than that.
So, in order for the average bloke to buy the average house, he must borrow eight times his annual income.
Unless, that is, he's purchasing with the average woman as his partner, in which case they must borrow "only" four-to-five times their joint earnings.
My financial adviser tells me that, even in these times of historically low interest rates, the prudent level of borrowing for a couple is no more than three times their combined income. Gearing higher than that is unduly risky.
Ah, I can hear you say, but what about savings? Mr and Mrs Average don't have to borrow the full amount to buy the average house, because they have some cash tucked away.
Well, figures from the Halifax suggest that the average British household has savings of £10,000. So even if all of it is used as a deposit, my average couple still need to borrow £190,000, way beyond the bounds of prudence.
If I'm missing something here, please write and tell me. If I'm not, it seems that for many would-be buyers, house prices have delinked from economic reality.
The gap is being filled by unsustainable borrowings, which, I believe, will lead inevitably to a surge in repossessions.