House price rises

lisyloo

The value of our house rose to around £80,000 - yet the 3 bedroom ones rose to near the £140,000 - which has priced us completely out of the market.

It's a bit unlucky that you didn't buy at the "right" time but none of us have a crystal ball.
I would suggest not trying to buy at the top of an asset bubble.
Look at the graph on
https://www.housepricecrash.co.uk

If you can't buy then many other people can't either so this is not sustainable.
Sit it out and wait for "better" times i.e. lower house prices.

This is unfortunate if it doesn't fit in with your family requirements, but this is an asset market and not a regulated "let's make it fair for everyone" system.

I sympathise with the situation you are in but I think you are probably better off than about 98% of the worlds population.
There is a website somewhere that puts you on the "global rich list".
Perhaps look at it in a global perspective to make yourself feel better.

You have a roof over your head and food on your table, so you are indeed very rich on a global basis.

ukbondraider

lypsey wrote:

UKBONDRAIDER
You say "My sister earns £40K. Her boyfriend earns £35K. This is approx £2400 and £2100 net per month respectively. If they can get a 4x joint mortgage this will be £300K. A £300K mortgage over 25 yrs at 5.15% fixed for 5 yrs is approx £1750 in mortgage payments"

It is very simple and that is why 3.5x salary or 4 x salary has worked for the last 60 years. Interest rates have been low for the last decade and the norm is closer to 7 or 8%. I would also like to point out that they are not the average person in the UK and I think the average wage is closer to 21 or 22k . But anyway the point on interest rates is this. Say your sister has 20,000 pounds a year that she can use for a mortgage AFTER expenses. . The 20,000 can't change it what she has LEFT

At 4% she can borrow 500k ie 500k x 4% = 20,000
At 5% she can borrow 400k ie 400k x 5% = 20,000
at 6% she can borrow 333k ie 333k x 6% = 20,000
at 7% she can borrow 285k ie 285k x 7% = 20,000
at 9% she can borrow 222k ie 222k x 9% = 20,000
You can clearly see that if interest rates rise even 2 or 3% the borrowing possiblilties can change by 40 or 50%. People tend to forget a small interest change has massive massive effect. Now I have given 20k as their dispossable income after expenses and of course your sister is in avery fortunate position she can clearly afford more than that but as I say there are not many people in her position

As a small aside I paid 15% interest rates 20 years ago and I am not saying this is going to happen again but believe me that nearly broke me and I was only 20 years old . Please don't be so flippant about affordability

I watched a property program 2 years ago and they featured 2 idiots who were paying a mortgage of 1700 a month and they said they had a fixed rate of 4% (it was an introductory thingy) and they said if rates went up they were bu££ered. Any way look at it know they could be paying close on double that. I would suggest they are bankrupt

Why does everyone rabbit on and on about rate rises and that current rates arent the norm. I have said 10 million times time that for the prudent even a 100% increase to 10% will not affect them. People also continually talk about a rate rise to 8% as if it is going to happen. I dont have a crystal ball so I dont know what will happen but what I will tell you is that the Bank of England are fully aware of what a 8% Repo Rate (Base Rate) will do to society and given that they have learnt from past mistakes it is very unlikely to happen (IMO of course) unless the country can take it. If they do it, they will do it very slowly to allow people to adjust.

Besides, if you want to pay your mortgage using a non fixed term then good luck to you but why should you have the luxury of paying cheaper rates for nothing?

Like you say, lending is at a historical low so would it not make sense to adjust other variables to match the conditions?

Basically if a price fall does happen everything else being equal, you can bet there are plenty of people currently on the sidelines waiting to buy thus ensuring that the so called crash will in effect only be a soft fall. I know if prices halved I will be in there buying 5 more houses. I'm sure many other people will do the same so how many houses will actually be available in this situation?

arthur_dent_2

I consider myself to be in a very good position. I may not have a large home or money but I do have a stable marriage 2 pain in the bum children :-) and an assett that is far more important than money, time.

There is not a single bad thing in my life that I don't feel will resolve itself in the future, I was stating the facts of how I live to show that it is not always possible to click your fingers and afford a house. Those who weren't lucky enough to buy at the time we did are probably stuck at home still with no prospect at ever being able to afford a cardboard box let alone a house.

If Uk bondraiser thinks that everything is just a case of working harder or tweaking your spending then I will have to whole heartedly disagree. (I don't drink or smoke or go out by the way.) £40,000 plus salary is a fairy tale around here and secretarys are certainly not on £60,000 with bonuses

The highest salary that I am aware of in my circle of friends and family etc, is around £20,000 and believe you me that is a high wage for these parts.

Rachman_2

cronosoft wrote:

At the time we bought our house in 1999, we paid £19,500 for it. It was hoped that after a few years we may be able to upgrade to a slightly bigger house - at the time a typical 2 bedroom house was around £30,000 or £40,000 for a 3 bedroom semi.
The value of our house rose to around £80,000 - yet the 3 bedroom ones rose to near the £140,000 - which has priced us completely out of the market.

So at 1999 prices you could not have afforded a larger house - or you would have bought one. Presumably your wages were no lower then than they are now. Your income's not risen much (if at all) so how do you expect to be able to afford one now. How did you expect the rises to be at your level and not the one above - that's just not making sense - if you straightline the increases, the gaps always bigger in numbers terms.

You needed a £40K mortgage in 1999, you need a £60K mortgage now - that's got to be affordable in most people's books. Plus, your income is no doubt supplemented by tax credits, pension credits and the like.... - even on basic wage you would be making £12K a year - do the overtime and £20K a year is achievable £ or £400 a week gross - I managed that no problem on £4 an hour basic).

And even assuming your wife is working, on £17K a year combined, you were not really going to be affording the 3 bed house back then either..... so why do you think it ought to be affordable now - you will no doubt say it's because of wages, well if they are not there, why not move to where they are ?

Alan_M_2

A large enough number of buyers are overexposed, not to mention those that bought on IO mortgages because they couldn't afford repayment mortgages at current levels of interest rates.

Variables have been adjusted to the historically low conditions, but with no thought for them returning to normal levels for the average investor.

If prices do fall, lending criteria also changes of course if you're a cash buyer it's at this stage where you fill your boots and pick up pocketfulls of repossessed properties desperately being offloaded by the lenders.

If you're a BTL investor then you'll also want to pick up at this point, but don't think you'll be picking up anything with 10% deposits, as a result of getting their fingers burnt many lenders won't be offering BTL borrowing as they'll have got their fingers burnt, those that will be offering them will want 30% or 40 % deposits or looking at it as a commercial loan.

I'd hazard a guess you're in your late 20's and have known nothing throughout your adult life other than huge increases in value in property?

When the prices start to tumble, the gravy train doesn't stop, it derails, and all the lending practices you've become accustom to all stop.

Alan_M_2

Rachman wrote:

So at 1999 prices you could not have afforded a larger house - or you would have bought one. Presumably your wages were no lower then than they are now. Your income's not risen much (if at all) so how do you expect to be able to afford one now. How did you expect the rises to be at your level and not the one above - that's just not making sense - if you straightline the increases, the gaps always bigger in numbers terms.

You needed a £40K mortgage in 1999, you need a £60K mortgage now - that's got to be affordable in most people's books. Plus, your income is no doubt supplemented by tax credits, pension credits and the like.... - even on basic wage you would be making £12K a year - do the overtime and £20K a year is achievable £ or £400 a week gross - I managed that no problem on £4 an hour basic).

And even assuming your wife is working, on £17K a year combined, you were not really going to be affording the 3 bed house back then either..... so why do you think it ought to be affordable now - you will no doubt say it's because of wages, well if they are not there, why not move to where they are ?

Did you even bother to read the original post fully?

If you did you'll clearly see the limited income stated at the bottom of it, the guy is making an effort by setting up his own business and is currently only earning £100 a week.

Get your head out of your backside and realise that this is a very real position that hundreds of thousands of people in this country are in and that your life in London is actually a microcosm and bears very little relation to the reality
of the average member of the public.

Rachman_2

Alan_M wrote:

Did you even bother to read the original post fully?

If you did you'll clearly see the limited income stated at the bottom of it, the guy is making an effort by setting up his own business and is currently only earning £100 a week.

Get your head out of your backside and realise that this is a very real position that hundreds of thousands of people in this country are in and that your life in London is actually a microcosm and bears very little relation to the reality
of the average member of the public.

Dear me, you obviously missed the day at Charm School.

The OP to this part, Mrs Arthur Dent commented she expected to be able to buy a three bed house for her and her two kids. I simply extrapolated off those numbers given by her husband to get to the point where it was clear they needed a £60K mortgage to step up. There are two adults in the house. That's 3 times an average income of £20K (and I note Mrs Dent says she has plenty of time on her hands - I presume from that she's not working (or not full time).

My life in London is irrelevant - I know exactly what people outside get paid too - believe it or not, I don't close my eyes to the rest of the UK or the world and not all of us quaff quails' eggs and exercise droit de seigneur with your daughters on the bonnet of our Porsches.

Average wages can and are achievable - like I said, at £4 an hour in 1997 I could easily make £400 a week by working overtime and weekends - and I did - though I did not have a wife and kids to want to go home to. If the wages are not there, so move to where they are - or up your income (which is what Mr Dent is choosing to try to do).

By doing far less hours than I did and with the tax and family credits available now, the jump to that 3 bed house ought to be affordable, even on the 3 times multiple...... - I appreciate the OP is setting up his business (for which I wish him well), but to expect to have the same numerical gap to a larger house as in 1999 is a bit peculiar (to me).

cwcw

cronosoft wrote:

Perhaps I can shed a bit of light on it... (I'm Arthur Dent's husband btw!)


At the time we bought our house in 1999, we paid £19,500 for it. It was hoped that after a few years we may be able to upgrade to a slightly bigger house - at the time a typical 2 bedroom house was around £30,000 or £40,000 for a 3 bedroom semi.

Unfortunately, due to a number of factors (for example, a massive rise in the demand for low cost housing to cater for the 30% increase in population to the area from migrant workers) house prices rose at a much higher rate in this area (Boston, Lincolnshire) - especially the cheaper houses with several bedrooms, which were bought up to split into multi-occupancy bedsits.

The value of our house rose to around £80,000 - yet the 3 bedroom ones rose to near the £140,000 - which has priced us completely out of the market.

There are also so few houses now for sale, and those at the lower end of the market that do come up for sale are snapped up so quickly.

Nearly everyone we know in our street bought their houses before the property boom, which I guess is how they've managed to survive!

Boston is an apallingly paid area of the country to live in. The average wage (and I don't mean the MEAN wage, but the MODE wage - the amount that most people earn) is very near the minimum wage.

Often the migrant workers are on far less than minimum wage, once gangmaster arranged accomodation, travel, uniforms etc. are taken into account.

Both myself and my wife are not unskilled or uneducated workers - and we've both been to college/university.

Typical wages that we've earned whilst living in the area (over the past 15 years)

My wife: £3.20 per hour - maximum earned £5.05 per hour
Myself: £1.48 per hour, £2.15 per hour , £3.65 per hour (deputy manager), maximum earned £5.15 per hour

I'm currently self employed, and earning around £100 per week, and trying to grow the business.

I'm sorry, but I don't understand this. You DID buy before the boom. 1999 was as good a time to buy as almost any in history. The problem isn't that you bought at the wrong time, nor is it that the larger properties have risen by proportionally the same amount. The problem is much more fundamental, and that is that you clearly don't earn enough. Obviously you intend to change this by growing your business, but the reason that you can't upgrade your property is because you have made the decision to put your time into doing this and not by taking on full time employment. It's a risk that may or may not pay off, but it is the reason for you not being able to get, at most, a £60k mortgage to upgrade your property (£140k - £80k, assuming worst case of no equity). Personally, if I had 2 children to support but they were sharing my bedroom in a 1 bed house, and my business was earning me £5k a year, I'd put my family first, give it up and get a full time job.

Also, I don't understand how some people implying that someone on 20% of the UK average salary not being able to buy a property worth 78% of the UK average house price is any indication of unaffordable pricing or an imminent crash. I'd say it was an expected scenario. Historically, property ownership hasn't been a right or privilege that extends to those who are so badly off and simply can't afford it. I don't see why people think things should be any different now.

tomstickland

Why does everyone rabbit on and on about rate rises and that current rates arent the norm. I have said 10 million times time that for the prudent even a 100% increase to 10% will not affect them

Because most people are on 2 year fixes or variable rates so an interest rate rise will affect them.

Jim_B_3

ukbondraider wrote:

Basically if a price fall does happen everything else being equal, you can bet there are plenty of people currently on the sidelines waiting to buy thus ensuring that the so called crash will in effect only be a soft fall. I know if prices halved I will be in there buying 5 more houses. I'm sure many other people will do the same so how many houses will actually be available in this situation?

Why didn't that happen last time? Or the time before etc.?