Should I Buy? BBC News sowing doubts

movieman

How much would 150K get you in London or the south in general?

Around here, just outside the M25, it would probably get you a two-bed terrace in the chav-zone: great if you don't want to go outdoors at night and don't mind driving a car so crappy that they won't steal it and set it on fire. Whereas in 2000 you could have bought a 3-4 bed detached house in a nice area for not much more.

Even my parents' house in the south-west is valued at nearly 250k, in an area where the average wage is probably below 20k and which they bought around 1970 on a factory worker's salary. It would simply be impossible for a similar family to do the same today, whereas it would have been doable ten years ago when the house was valued at around 80k.

I'd certainly be interested to know how many 23 year olds earn 20k in the north: doesn't matter how cheap houses are if you can't earn enough to buy one. A friend's ex-lodger had to come down here in the mid-90s to earn enough to go back up north after a few years and buy a house for cash. Of course it only cost him 40k back then...

lightspeed

This is where the confusion lies. I think that there is quite a gulf between houses in the south and houses in the north when it comes to "value for money". As i mentioned before, although houses are still overvalued, 150K up here will go much further than down south therefore i dont think that people grudge paying these prices as much. It is very difficult for me to visualise what you will actually get for your money. I imagine that i would be quite disgusted, hence, why there are many people very angry about the way in which the housing market has gone and in turn i guess that these are the people wishing the market to crash.

I think that you are probably right about salaries in the north. They are certainly far less than in London but obviously when it comes to property our money goes a lot further. I am not quite sure about average salaries but 20K is probably a bit more than the average joe up here earns in a year, but having said that i know plenty that do.

Have a quick look at this link http://www.fish4.co.uk/ls/nortistff/homes/advert?adId=11034398&sid=80226D26FDBB781345&pos=30&src=search&tot=55&page=3. This demonstrates the difference between north and south.

F_T_Buyer

lightspeed wrote:

Yes, if you can ONLY afford IO then you obviously cant afford a repayment mortgage. However, i feel that IO mortgages can also be beneficial to certain groups of individuals e.g.

1) Those at the start of their careers and those you are young enough that they are at the lower end of their earning potential. If someone is 23 earning 20K an IO mortgage may allow them to afford the home that they want instead a home that have to settle for due to financial constraints. All this knowing that in 1, 2, 3 or 4 years time that same person is likely to be earning 30K due to the nature of their occupation. There are many careers where this can happen e.g. police, teaching, accountants etc... (timescales will differ)

The one thing I would point out, is the average age of an FTB is 34, and mid thirties is the age where your earning potential is probably at it's maximum.

Also, the CML today said the average FTB salary is £33k. FTB Mortgage = £106k. Mortgage multiple = 3.21x.

http://news.ft.com/cms/s/facca41a-fb42-11da-b4d0-0000779e2340.html


When you look at figures like this, you can see what's going to happen to the market at some point!

KrazyFool

just buy it, else youll be waiting and waiting and........

lightspeed

I must not be average then. I am 24 and my partner i 26. Yes, we have borrowed slightly above the multiple listed above but both of our earning potential if far from its maximum.

I guess that every situation is different.

poopscoop

meanmachine wrote:

Here's the report the OP is referring to.

Think Evan Davies is great, but Jaysus the 10 OClock News is really dumbed down these days.

No wonder the unwashed masses think house price rises are a good thing.

http://news.bbc.co.uk/nolavconsole/ukfs_news/hi/newsid_5070000/newsid_5073800/bb_wm_5073878.stm

yeah, Evan Davies is great. He presents Dragon's Den, that Entrepreneurial programme

movieman

Yes, we have borrowed slightly above the multiple listed above but both of our earning potential if far from its maximum.

If you're borrowing 3.5x your _combined_ income, I hope you don't plan to be unemployed or have kids. There's a reason why banks usually used to only lend up to about 2.5x a couple's combined income, or 3.5x a single income.

poopscoop

movieman wrote:

If you're borrowing 3.5x your _combined_ income, I hope you don't plan to be unemployed or have kids. There's a reason why banks usually used to only lend up to about 2.5x a couple's combined income, or 3.5x a single income.

maybe they want to become unemployed, start their own business, sell part (or all) of it and then have kids?

ftbworried

I'd certainly be interested to know how many 23 year olds earn 20k in the north: doesn't matter how cheap houses are if you can't earn enough to buy one.

That's actually really outdated. Us northerners are not all miners and clog-makers anymore you know! Infact an increasing proportion of big firms are now operating offices the north (particularly the north-west) including many banks and financial institution (Barclays, MBNA, Bank of New York etc). Not to mention other large business like IT (CSC, EDS, Fujitsu etc) and scientific companies (British Nuclear Group, Astra Zeneca etc).

Infact one of my fiances friends from uni (she graduated at the same time as him) fled to the big smoke in search of fortune- what has she found? A £23k a year job (at 26 years old) having to house share, and massive competition for jobs from all the other mugs who still think London streets are paved with gold.

Many of my (sub 25 year old) friends here earn around (and above) the 20k mark. My fiance works in the north west and he earns £40k + (26 years old). I lived and worked 'down south' and my wage was no more competitive than similar positions in the north. Faced with cheaper housing, SIMILAR wages and friendlier people I see no point to living in London.

sarah_elton

tomstickland wrote:

I'd suggest borrowing less than you could to give a decent buffer for future IR rises and also to free up money for more interesting things than paying a mortgage.

Use this mortgage repayment calculator:

http://money.guardian.co.uk/calculator/form/0,,603156,00.html

To work out what happens to your repayments as the rate goes up.

Know exactly what mortgage rate you can afford up to. I know for me it's 8.5% on current pay, to still have a sensible amount of fun money each month.

If you can't afford at least a few % points IR rises it's probably not wise in the current climate.