The Property Ladder

FilthyLuka

Can anyone explain how this works?

I'm a prospective first time buyer and i really dont understand how this works. I want to know how you climb the ladder.

Do you buy your first house for say £100k with a big mortgage, then watch it rise in price while paying off a chunk of the mortgage (hopefully).

the sell up and get a full £100k mortgage again and buy a bigger place - repeat this cycle until you get where you want to be?

any other ideas?

F_T_Buyer

The property ladder used to work in that over time your income (wages) increased making the debt you had far smaller in comparison.

The problem is now this doesn't really work. Wage inflation is pathetically low that it won't shrink the debt enough. You will also find that the average wage only increases in line with the cost of living (which excludes house prices), so any additional income you get goes directly on increased council tax, petrol costs, gas bills etc.

There is an exception for those who progress in their jobs and enter a high salary band - but this is more of a career ladder, rather than a property ladder.

I have seen many times on TV people saying "I hope [my house] goes up in value so I can move up the property ladder" - This is just inherited thinking and a ridiculous statement!

Personally I think it's another 'buzz word' that is constantly used and repeated by everyone when talking about their favorite subject.

In reality the property ladder no longer exsists. Especially as many first time buyers are buying on interest only mortgages so are not even paying off the capital! Also those who pay off the capital debt can now afford to borrow more, but this isn't really a property ladder.

silvercar

Your career progression should match your move up the property ladder. FTB starting out have small mortgages and little equity. Inflation erodes your mortgage in real terms and you progress up the career ladder. When it becomes time for property number 2 you can afford a larger mortgage and have some equity and on it goes.

meanmachine_2

Except, silvercar, FTBers are now in their mid 30s and at the peak of their careers/earning potential.

That's why the property ladder is now an outmoded concept.

It'll just take a few more years till the whole thing seizes up completely.

meanmachine_2

silvercar wrote:

FTB starting out have small mortgages

I beg your pardon?!!!

Run that by me again?

160K for the average FTBer property - 7 times average earnings!!!!

No wage inflation because of immigration/globalisation.

How does it all work again?

poopscoop

meanmachine wrote:

Except, silvercar, FTBers are now in their mid 30s and at the peak of their careers/earning potential.

ermm excuse me, but are you saying they're not good enough anymore? Simon Woodroofe started Yo! Sushi in his 40s

lynzpower

I absoutlely HATE the whole "ladder" issue so much its really turning into the thing I dislike the most, coming in higher than banks

If its to be believed, up you go buying bigger, more expensive etc, BUT WHY? Who needs a 6 bed house when their kids have flown the nest. Just consumption for consumptions sake.

itsakidsworld

When I was 21 I purchased my first house after renting. It was a lovely two bed terrace and we gutted it and made it our home. We then decided we wanted another child, which was great fun trying to make as it took my wife along time to actually get pregnant!!!!! So in between our fun, we found a three bed semi. We increased our mortgage and then after a few years my wife said she would like another baby!!! Yum, yum I thought, more fun!!!! However, she got pregnant quick this time so my fun was short lived!!!!

Then we needed another bedroom!!! Oops, we looked at building an extention but estate agent said no point. Better to move. So I built us a four bedroom detached house with lots of room for everyone. But the mortgage got bigger and bigger, the kids wanted more and more, the wife said "what about......." STOP i said!!! No more kids, no more moving, no more expense!!!!

But the mortgage got bigger and bigger as we borrowed more and more and the kids wanted more and more and more!!!! I think I must have had a mental breakdown somewhere and I cracked with all the pressure.

Now the kids are grown up and growing up, they are moving out and we need less and less room for the junk we collected over the years. Now we are looking back at the street with the lovely two bedroom houses again which are now five times more in value than when we purchased them first time. My wife says "we had some fun when we lived there didn't we". Yes I said but since we moved we have had little fun and lots of worry!!!

We self-created our own destiny because of greed!!! Simple as that and now I spend my days unravelling what I did wrong, whilst sitting in this lovely building which has four walls in soft white, no windows, nothing sharp in the room and my arms are tight together with a white jacket they make me wear all day!! I can just about type with one finger sticking out. But boy oh boy, am I happy!!!!!!;)