Momentum, momentum, momentum

Here is a rough transcription of the presentation for people who are hard of hearing. Apologies for the lack of grammar, I am working to improve the automated transcriptions -
presentation warmly relied you can do a whole is a market yet this am Halifax released arm a bit of paper yesterday with some information on it and part of that is regional affordability to thousand 7/4 three etc at the top bearing white click on map to see the Halifax document I thought it quite interesting will go through this are let’s go at it from the bottom Southeast so that’s kind of the London area of the United Kingdom now we’ve got long-term average which is 1983 to 2012 I think it’s rather comical that long-term average comes from 1983 that as far back as they go but still and we can see that the number down at the bottom right there is 48 so that the long-term average of mortgage payment as a percentage of disposable earnings nearly half so the long-term average in the south-east for am paying your mortgage is nearly half of your disposable earnings that’s the long-term average so let’s shuffle across to the first column which is 2003 7/4 three which is representing the peak of the bobble let’s say and it was up but not at that much to 56% just over own ago but a little bit over half of your disposable income going to mortgage payments right just since so Wilford finished be that columns off 2000 and 12/4 to soak up to date now it’s dropped down to 32% of your disposable earnings go for mortgage payments that go up to arm some of the others had to start again in the long-term average column 1983 long-term and it’s going through the various regions 3029 3034 3736 4348 so most of the other regions are around a third from a third and and a little bit above and we can see over the 2007 Q3 column for North Yorkshire Humber etc then got up to 4440 4448 so quite a little bit more than the long-term average and we can see now in the 1:45 thousand 12 they are now well down our look up in the north it was 44 now it’s down to 24 Yorkshire and Humber was 40 and now it’s down to 21 weaknesses huge dropping down is so this is an arrangement to save the housing market its suit her for our let’s say half is because house prices have come down so new mortgages are less but basically it is because of this UK base rates the actual mortgage you’re paying on and her adjustable rate mortgage its adjusted to the UK base rate or something based on the UK base rate UK base rate being the Fed funds target rate or what is called in the press the interest rate centrally bank arranged interest rate and you can see that at the end it is fallen right down from where it was and in that 2007 at six and now it’s down to just above bugger all and you can take the long-term average back to that chart because it goes back before the long-term average it goes back to 1979:2 UK house price earnings ratio so this is our long-term average cut across the middle layer of UK house price to earnings ratio and often used to work out by a bank whether you can afford your mortgage or not now the long run average across the middle there is scraped in just above four now we’ve got to say that again we using this long long term average going back to 1982 which isn’t that long it’s at the modern end of the period and it is including the great big housing boom and when you include a great big boom of any sort in your long run average that long run average is liable to be very high so we can imagine that at blue wiggly line which probably will get itself down to some sort of average and it’s got to come down to that long run average line probably and that long of ridgeline should really be a little lower to allow for it including the boom and take into account that when things come down to averages from the boom they generally overshoot and go even lower so we can expect 3 to 3 1/2 if all things were equal but obviously in the UK like everywhere else there are other factors that need taking into consideration that go to the national nationwide nominal house price and against the white heading is the link to the website where this can be found and their nationwide nominal house prices as in the number that you pay for a house interesting it goes all the way back to 1975 just before the modern average year where you pay £6000 for a house or £7000 on average front house and it’s gone up to nominal, 185,000 at the peak in 07 it’s dropped down and at the time of this chart which isn’t up to date it was trying to get back up again but harmed that’s the nasty is looking thing because when things crash they often go down people think oh well that’s enough they go up awhile and then the crash down again but that was nominal let’s move over to real house price index what they’ve done with this is apply some sort of inflation indicator and we can see now that in 1975 the average price for the house was £75,000 so we grieve you can see that they’ve they’ve put inflation in there to try and show the peaks better and the the high Peak in 07 is nearer £200,000 and it’s to show the peaks and the coming off the peaks that was a peak in 1979 1989 along bottom to 1995 and then that’s huge boom up to 07 and then they put in a bottom 409 and hopefully they’re probably thinking that you got a 79 bottom and 89 bottom surely we can have an 09 bottom but these people house sellers so I don’t think it’ll be there the will have to be huge and other factors to keep house prices up there and hopefully we can get from all this that the gravity of house prices is downwards and these other arm factors will have to be very strong including the powers that be especially central bank action to try and keep house prices up or government fiddling to trying keep houses up they will have to be very strong because the gravity is very strong to Bill bring them down and here we go back to where we started and the UK base rates this is the part of the antigravity kit that the powers that be are using with that foot at the bottom how can they possibly ever take their foot off the bottom but just consider that whole chart as an overall hole going back to 1979 present the naps and the totally clear top left bottom right movement that has encouraged house prices in general to move up and for banks to think it’s safe to lend the housing because that base rate is always moving downwards servers always going to be a general momentum for house prices to rise because as a momentum for UK base rates to fall but now UK base rates are on the floor with scene in the first chapter mortgages are reasonably cheap on average to maintain but can the British the UK people maintain those prior those mortgage payments being so over indebted and keep house prices up the momentum and that’s what you need for banks lending its momentum momentum momentum is against it because the banks know that the UK base rate is as low as it can go it can’t be squeezed any more so what will happen then have to think of other ways to keep house prices up and will they be able to will they bother to leave that for you to decide by