Schrödinger's Housing - affordable and unaffordable at the same time

Spotted by Lola in MoneyAge:

Annual house price growth in the UK has risen to 13.4% in the year to June, the highest level since November 2004, according to the latest Nationwide House Price Index.

2004 was 17 years ago, so we are now on the final leg of the 18-year land price/credit boom-bust cycle, due to collapse again in 2025 or 2026.

“Despite the increase in house prices to new all-time highs, the typical mortgage payment is not high by historic standards compared to take home pay, largely because mortgage rates remain close to all-time lows – in fact, on this measure affordability remains broadly in line with its long run average. However, house prices are close to a record high relative to average incomes.

So buying a home is cheap but expensive?

“This is important because it makes it even harder for prospective first time buyers to raise a deposit. For example, a 10% deposit is over 50% of typical first time buyer’s income. A potential buyer earning the average wage and saving 15% of take home pay would now take five years to raise a 10% deposit.”

Well, duh. The flipside of affordable monthly payments is paying a massive deposit and vice versa. The bigger the deposit, the lower your monthly payments. Most people could afford the monthly payments for a £1 million home if they can stump up a £900,000 deposit.