MSE News: Home ownership dream dwindles for young renters

Brallaqueen

tara747 wrote: »

Even with the 3.5 salary BORROWING cap, they could just save more and add it to what the bank will lend them if they want to buy a more expensive house... simples.

I'm interested in this because, according to the Nationwide mortgage calculator, my deposit appears to have no effect on the amount that they will lend to me. They seem pretty set on salary multiples (crap, for me).

dorset_nurse

I agree. If I wanted to push the boat out and can afford the monthly repayments I wouldn't want to wait.

Froggitt

I have two points to make.

Firstly, the "nation of homeowners" that we are will soon see owned houses passed through the generations e.g. grandfather to grandson. So even though the grandson may be on a low wage, he is not automatically excluded from home ownership.

Secondly, how on earth does johnny foreigner who rents all his life afford his rent for thirty years once he retires?

HAMISH_MCTAVISH

Percy1983 wrote: »

the number of people who can't afford houses is growing.

That's because the number of people in the UK is growing significantly faster than the number of houses.

ukcarper

jgriggle wrote: »

An interesting little exercise for anyone who bought their house a few years ago is to go to one of the inflation calculators, and work out how much you paid for your house in today's money. Or even to find out how much your children are paying in rent compared to what you did at the same age. You may be shocked!

Let me give you a little example:

My Dad bought his first house (a two bed mid-terrace) in 1978 for £11,995. At the time he was earning £4,000 a year. After a few years of diligent saving, he was able to put down a 10% deposit and borrow the rest comfortably within the 3.5 x salary that was the norm.

In today's money that would be a salary of £18,320 a year (a little less than what I earn now and about average for where we live). The house would be £54,937, requiring a deposit of £5,494, and a mortage of £49,443. To me that's sensible. By no means easy, but do-able.

As it happens, that same house recently sold for £149,000. As most mortgages seem to require a 20% deposit now, I'd have to save up £29,800!

So whereas Dad had to save about five months worth of take home pay for his deposit (which would still be a struggle for most) I'd now have to save up getting on for TWO YEARS worth of take home pay, even though I earn the same (adjusted for inflation) as he did.

At the time Dad was paying just under a quarter of his take-home pay on rent (for a bigger house than the one I'm in at the moment!). The norm for most renters now is paying out at least half your salary on even the tiniest house/flat.

Try using this site http://www.measuringworth.com/ukcompare/ as it gives you wage inflation as well and you will see that wages have outstripped straight RPI by quite a lot. In fact wages will be £27.6k now.

HAMISH_MCTAVISH

tara747 wrote: »

But I must say that it's not normal for every renter to spend 50% of their salary on rent. We spend less than 10% of our joint salary on rent for a very nice house in the nicest part of our city (with rates/council tax included in the rent), maybe we are just lucky. Are you living in London or somewhere unusually expensive?

The average mainland UK rent is now almost £700 a month, and rising rapidly. Up 4.4% in the last year, which is twice the rate of wage inflation.

Council tax in the mainland UK is paid by the tenant, not the landlord, and adds a further £1500 to £2000 per year on average.

So for that to be less than 10% of joint income, you'd need to be on over £100,000 a year as a couple.

franklee

Brallaqueen wrote: »

I'm interested in this because, according to the Nationwide mortgage calculator, my deposit appears to have no effect on the amount that they will lend to me. They seem pretty set on salary multiples (crap, for me).

Really don't see your issue with the amount you can borrow depending on your salary. Then you add your deposit to the amount you're borrowing to get to the amount you can pay for the property. You need a certain LTV to get a deal or the best deals but if you've a big deposit presumably you're OK on that front.

Gorgeous_George

Here's a couple of ideas that could help people to buy their own homes...

1. A validated rent book should be accepted as proof of budgetability when lenders consider making a mortgage offer. If you can prove that you have paid £650 per month in rent there is little excuse for not allowing a 100% mortgage with a £500 repayment over 35 years or to the age of 65.

2. Mortgage offers should have capped repayments. For example, take a mortgage with a £500 monthly repayment and you should be given a promise that you will not be asked to pay more than £600 - plus index linking - for the life of the mortgage. Instead, you would be able to extend the term indefinitely even if it is necessaery to go 'interest only' in order to maintain the index linked mortgage repayment.

GG

Brallaqueen

franklee wrote: »

Really don't see your issue with the amount you can borrow depending on your salary. Then you add your deposit to the amount you're borrowing to get to the amount you can pay for the property. You need a certain LTV to get a deal or the best deals but if you've a big deposit presumably you're OK on that front.

Thanks franklee, what you say makes a lot of sense and what I said could have been clearer.

I was speaking hypothetically - that even with evidence of savings and a good deposit lenders seem unwilling to compromise on salary multiples.

geoffky

I was 18 when i bought my first house in 1982..no one could afford to buy that house now days on a one person wage and it was a 19k mortgage..people now have been royally shafted..high house prices only help the banks and the higher they go the more people have to pay out of their wages just to keep a roof over thier heads....when will the madness end...