FTB expectations too high?

Paul_M_5

chucky wrote: »

so a £1 million house will need a £900k mortgage and a £300k salary for the 3x salary multiplier. how many people do you know earn £300k?

these salary multipliers are too simplistic and totally unrealistic and stuck in 1982.
that's how it was and seemed to work but it needs to change and be developed for modern lending

Presumably by "modern lending" you mean lying on a self-certification form so you can borrow 6x salary to get 125% of the valuation of the house?

There are good reasons why some of our biggest banks (which also happen to be among the biggest commercial banks in the world) were on the brink of bankruptcy before the government stepped in. "Modern lending" was one of them.

I think you've proved a point -- although perhaps not the point you intended to prove .

mewbie_2

chucky wrote: »

these salary multipliers are too simplistic and totally unrealistic and stuck in 1982.
that's how it was and seemed to work but it needs to change and be developed for modern lending

Yes, it's a case of "Buddy, can you spare a new paradigm"

eidt. btw if I get any further up my own I won't be able to type.

MissMoneypenny

brummybloke wrote: »

when i was growing up, people had a 1 bed flat for their first house, unless they had very well paid jobs or inheritted money. a few years later, they sold and got a 2 bed terrace or something along those lines, then moved up again a few years later.

nowdays though people seem to be complaining that 3 bed semis in decent areas should crash to 3 times the average wage so they become more affordable?

I bought my first property in 1980. It was a 3 bed terrace in a good area, close to London. I was a single girl in her mid 20s and I was still able to put money into my pension.

That's the level the house prices should be getting back to.

chucky

Paul_M wrote: »

Presumably by "modern lending" you mean lying on a self-certification form so you can borrow 6x salary to get 125% of the valuation of the house?

There are good reasons why some of our biggest banks (which also happen to be among the biggest commercial banks in the world) were on the brink of bankruptcy before the government stepped in. "Modern lending" was one of them.

I think you've proved a point -- although perhaps not the point you intended to prove .

errr no, that is not what i mean or even said... if you had bothered to read the rest of the thread you may have understood what the discussion was about instead of jumping in. see below

chucky wrote: »

as far as FTB's go yes. but i don't agree if you're stepping up the property ladder. there are lots of life circumstances that can improve your personal wealth. if you restrict borrowers to multipliers it doesn't work and people go back to lying about salaries to get higher mortgages. this isn't the thread to discuss this though.

olly300

MissMoneypenny wrote: »

I bought my first property in 1980. It was a 3 bed terrace in a good area, close to London. I was a single girl in her mid 20s and I was still able to put money into my pension.

That's the level the house prices should be getting back to.

Where you on average earning?

Or did you have above average earnings?

By average I mean the median.

I have spoken to various people older than me who brought 3+ bedroom houses as their first houses in London in 60's, 70s and early 80s. They were either university graduates and were earning above average earnings, or older couples (30s) with children like my parents. They all brought in areas which at that time where not considered especially nice.

Rosie75

olly300 wrote: »

Where you on average earning?

I have spoken to various people older than me who brought 3+ bedroom houses as their first houses in London in 60's, 70s and early 80s. They were either university graduates and were earning above average earnings, or older couples (30s) with children like my parents. They all brought in areas which at that time where not considered especially nice.

My parents bought a 3-bed semi in a "good" part of London in the 70s, when they were in their late-20s. My mother worked a 0.3FTE job as a auxilliary nurse and my father was a lowly clerk in local government. They had no help from their families, having emigrated to England in their mid-20s. They sold this house recently, at the same time as my partner and I (mid-30s, both university lecturers) bought our first house. Admittedly we didn't overstretch ourselves (but then neither did my parents), but the house we bought was half the price of that my parents sold. And that's not to mention the holiday home that they bought in addition, which in itself is more expensive that the house we bought. I would be very suprised if people in their 30s or younger could hope, never mind expect, to own the kinds of homes their parents generation did. It's nothing to do with expectations - in fact, most people I know around my age don't expect that they will enjoy anything like the lifestyle that their parents did. I suspect that most of the posters some of you refer to who come on these boards at the age of 22 saying they want to buy a 3-bed semi are bought down to earth with a nasty bang after a few hours of house-hunting.

clk299

Absolutely. At the moment I want to buy somewhere that will be my home, but that I won't feel my heart sink when I come home to it (having lived at uni in an 8ft x 8ft room, I know what small rooms do to your mental health). I don't want a lot. If I had a partner I would be quite easily able to afford to buy somewhere to live! But I don't and I can't live with my parents till I find one.

I look at my parents' house and I cannot imagine ever owning a house like this, it is unimaginable. My parents' house is worth about 15 times my salary. My salary isn't likely to go up much.

butterfly72

Turnbull2000 wrote: »

That aside, I'm shocked that the OP or anyone else on this thread has failed to mention that all important salary inflation. Salary inflation if the primary function of the supposed housing ladder. 20% in the 70's, 10% in the 80's and still near that in the early 90's meant the mortgage burden on your first home rapidly eased, allowing you to borrow more and upsize to a family home by the time you're 30. Now though, first-time buyers are already in this age group, near peak of earnings potential and face salary inflation of 2-3% at best or even negative.

If they buy a 1-bedroom flat at 30, you can bet your bottom dollar that it'll be many, many years until their salary inflates enough for a 3-bed semi.

I agree and was goinng to post regarding earning potential. We are FTBs and the wrong side of 35! I'm probably earning as much as I'm going to for a while as I want to start a family very soon. The OH has a decent wage but not that much more scope for improvement. (unless he decides he really can become a corporate prat and climb further up the managment ladder).

We are hoping to buy a 3/4 bedroom semi/detached as FTBs - effectively skipping a few rungs on the ladder. This is because we're not sure that we'll have much scope for moving up but can afford this on one wage and want to possible stay in the house for a very very long time. We really don't want to live in a flat with a family. I know many do, but thats not for us - we've been renting flats for years and it drives us mad! And thats not being snobby... have you seen some of the lovely posh flats out there - some bigger than houses!

Anyway, I think my point is that we feel that if we buy below what we can afford now.. if prices take off again we may never be able to move up as our wages will not be increasing with prices.

Graham_Devon

Why does this argument even exist?

I see this in a lot of areas, such as the financial websites etc, with people around 40-50 all saying they had it far far worse. Yet were now saying that this generation should be happy with their 1 bed flat at 35 years old.

There seems to be some sort of competition to be the "worse off".

Buying my house just over 2 years ago, at a massive expense, and now being in negative equity, with 2% government wage inflation if that, I can honestly say I don't want to be the one who is worse than some FTB in the seventies or eighties. I can't save really, life is too expensive with the house payments, my wages are set for the next 3 years, so nothings going to change, the equity is going down, so my chances of being able to go up in bedrooms looks pretty slim.

If anyones got it the worst, it's those who bought last year. Someone bought the exact same house as me 2 doors up 14 months after mine. It was 17k more than I paid....£171,500....for a shared ownership tiny little 2 bed house (the footprint is apparently 6m x 9m for the WHOLE house....absolutely crazy. But what choice do we really have? Rent? Well thats a choice, and one, looking back I should have taken now, as I wouldn't have to pay to leave. But I didn't have it as bad as 2 doors away.

Can remember my dad saying how hard it was in their day, they bought the house I grew up in a year before I was born. Mum didnt work, 2 bed house, big garden, garage, drive, utility, outhouse thing, much bigger rooms, loads of storage, room to extend (as they did and got a third bedroom). All on my dads lorry driver wages. HOW can people say it was so much harder??

Just as a sidenote, if were going to compare, we need to compare everything. Things such as council tax, was the equivalent in those days taking around 7% of an average 20k wage (after tax)?

I wouldn't have been able to buy if it wasn't for shared ownership, on about 30k a year. The very fact that shared ownership exists states it must be harder these days.

olly300

Graham_Devon wrote: »

Why does this argument even exist?

I see this in a lot of areas, such as the financial websites etc, with people around 40-50 all saying they had it far far worse. Yet were now saying that this generation should be happy with their 1 bed flat at 35 years old.

There seems to be some sort of competition to be the "worse off".

It's because they are not comparing like with like.

In recent years the price of consumer products like clothes and electric goods has decreased in real terms so to older generations it seems that younger people have a lot of stuff, which is true.

However the price of houses has increased exponentially.

So while people in their 30s without children can afford lots of consumer products without running into debt, they can't afford to get a mortgage on a reasonable size property unless they are earning a high salary.

And even if those in their 20s and 30s brought nothing and saved up due to the fact it's harder to get a well paying job without a degree, those in their 20s have student loans to pay off.

Graham_Devon wrote: »

Buying my house just over 2 years ago, at a massive expense, and now being in negative equity, with 2% government wage inflation if that, I can honestly say I don't want to be the one who is worse than some FTB in the seventies or eighties.

Just as a sidenote, if were going to compare, we need to compare everything. Things such as council tax, was the equivalent in those days taking around 7% of an average 20k wage (after tax)?

I wouldn't have been able to buy if it wasn't for shared ownership, on about 30k a year. The very fact that shared ownership exists states it must be harder these days.

It's different these days because when those in their 40's and 50's where in their 20's and 30's they could still get council housing or have security of tenure when they did a private rental.