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Originally Posted by Yellow_Festiva
I can't remember the exact statistic... 4-6 decades ago the average house cost 3.? times the average wage.
Now the average house costs 8-9 times the average wage.
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People whinging about these statistics cracks me up laughing. 4-6 decades, or even 2 decades, ago a bank wouldn't give you a loan for more than 3 or 4 times your annual income. That has now changed so they will give you a loan for 8 times (or even more) than your annual income. Its because we have easier access to money that house prices are up. Because more of us are in the market. Its the low interest rate that is the cause. Ultimately its your ability to repay the loan over your life (30years) Higher interest rates lessen your ability. If the banks started charging the interest they did in the 80s the multiple of annual income would go down by default. High interest rates = less players in the market, less players = more risk to banks so they take less risk by reducing the amount they will lend
If you want house prices to go down, you have to have less buyers, the only way to have that is by having high interest rates. What in this country pushes up interest rates better than anything? High unemployment!
Everyone wants a manison in the city or by the beach, my olds bought a fibro house in Mt Druitt, we moved up market to Campelltown in the early eighties (yes compared to Mt Druitt it was upmarket at the time). They now live in Cairns retired and are kickin back in thier eighties. When they hear people complain how hard it is to get into the market for young people they laugh. They worked thier ***** off and bought thier first house in thier forties.
It has never been easier. you may not get the suburb you want or the 4 x 2 with pool but its not so hard as most make out.
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The lending standards of today would have caused the old bankers to fall off their chair in laughter. Old days , 20% deposit , this was needed for several reasons , 20% deposit of actual savings shows that the borrower can save and is disciplined in his living standards and not living behond his means. It shows he is of good character and a much safer candidate for the bank . It also gives the bank as well as the owner a buffer and shows that they wont run at the first sign of trouble . You would be less inclined to walk away or go bankrupt if you had actually put in 20% from your hard earned savings. Today or not long back you need no deposit at all , and as if this was not bad enough some would let get away without having the stamp duty or legals fees. I can still hear the old bankers laughing from their grave.
Question is how and why did we go from very safe and stable lending practices to very unsafe and unstable lending practices. In the old days you actually needed a real job that could actually be proved , you also needed to have been working there for a number of years , not like now whete you can work for a few weeks or months then get a loan , and in some cases have no job and get a low doc loan and state whatever you want as income, no questions asked, yes this was happening.
The other thing is when your loan is ten gimes your wage, people have no money left over to spend on or grow the economy , cause its all going in interest payments. This spare money could be used to invest in your future as wlll as grow the economy though actual spending of real money. To have all your eggs in one basket is not a clever way to position yourself .An economy is grown through hard work , savings and investing in growing buisinesses. I still cant understand how we lost the plot and decided that borrowing more money was the way to go when growth and savings and investing is actually hows things are done and work.