FTB's need to save for up to 30 years in order to buy a house

Graham_Devon

Young adults face decades of scrimping before having enough money for a deposit to buy their first home, a charity has revealed today.

London is badly affected - with single people facing an average of 30 years of saving, while couples with children face 21 years.

But the problem is not confined to the capital - high outgoings and house prices combined with lower incomes mean couples with a child in Devon, Cornwall and Leicester would need longer to save for a deposit than the same couple living in some areas of London.

The study looked at earnings, house prices, rents and spending on essentials in local authorities across the country.

A single person could need more than 14 years to save enough for a deposit, trapping many in uncertain private renting or forcing them to live with their parents well into adulthood.

In nearly two thirds of areas in England (60%), couples with a child could face over a decade of saving for a deposit for a home of their own.
Shelter has created an online calculator for people to find out how long it would take them or their children to save for a home of their own in their area, based on their individual circumstances.

Independent research commissioned by housing charity Shelter shows that people in their 20s meaning a generation will be stuck renting for longer.

Nationally, it found that couples who start a family in their 20s could be saving for a deposit for 12 years - nearly double the time faced by childless couples.

Couples without a child face an average of six and a half years of saving, and almost double that time in London (11 years).

It's important to note that this article and study does not suggest mortgages are the problem, rather that, as stated in the third paragraph, high house prices, high outgoings combined with lower incomes is the issue here.

“Despite working hard and saving what they can each month, today’s young people face life-changing choices between starting a family or buying a home of their own. Imagine a 28-year-old couple weighing up their options: they can save for a home now and put off starting a family until they’re 35, or they can start a family now but accept they’ll be renting until their child is a teenager.

Bang on the money if you ask me.

Shelter encourage the government to get on and build houses. The current government have so far launched four seperate house building programmes, but since those announcements, house building is down.

Mark Prisk has relied on statistics to state that actually, housing is now more affordable than any time since 2003.

http://www.mirror.co.uk/money/personal-finance/house-prices-first-time-buyers-need-1962846

And the shelter calculator is here: http://england.shelter.org.uk/campaigns/building_more_affordable_homes/a_home_of_their_own?src=hpban-c

Very basic tool. But at least shows the problem.

HAMISH_MCTAVISH

Graham_Devon wrote: »

It's important to note that this article and study does not suggest mortgages are the problem, rather that, as stated in the third paragraph, high house prices, high outgoings combined with lower incomes is the issue here. .

Here are the averages for England.

ENGLAND

Average first-time buyer house price: £139,920

Average first-time buyer deposit: £27,984

( Deposit = 20% !!! )

Years for a couple to save average deposit: 6.5

Years for a couple with a child to save average deposit: 11.8

Years for a single person to save a deposit: 14.3

It should be blindingly obvious to you Graham, that if you reduce the deposit required by half, from a 20% deposit to a historically normal, prudent and sensible 10% deposit, then the amount of time required to save for it reduces by half as well.

Of course if you go to a 5% deposit from the current 20% deposit, the amount of time required to save for it reduces by 75%.

Which would mean a couple could do it in 18 months, a single in 4.5 years, and a couple with children in 3 years.

This study proves absolutely that the current absurd deposit requirements are ruining the young's ability to buy a house.

Simple as that.

WestonDave

The deposits are higher because banks are fearing falling prices so they will only lend say 80% to cover the likely loss firstly if the price falls, secondly of lost back interest on a loan in distress and thirdly a lower sale price due to auction. The 3rd has always been the case, but when prices were rising the expectation was that by the time a repossession situation arose the price would have risen enough to cover these "margin" costs so they were willing to lend 95% or 100%.

So if we are calling for falling prices we need to be careful what we are wishing for. Bank balance sheets are already in a relatively weak state. Knocking 10% off their loan security will mean they end up closing down lending until the balance of loans to security value recovers. Also going back to the situation above - finding 20% of a £200k house (£40k) is actually better than finding 30% of a £150k house (£45k) albeit the ongoing costs are lower.

Much as I would like to see more affordable homes available in my kids interests, I suspect the solution is going to take as long as it took to get in the mess we are in - i.e. more than a couple of years. Static absolute prices falling in relation to earnings or maybe prices falling very slightly at a pace which is sustainable compared to the rate loans get paid off is possibly the best financial solution.

In the longer term the deposit issue may become resolved as granny who lived in a £200k house shares out her estate with her 2 kids who then pass on enough to each of their 2 kids to have a deposit.

Where I live I can see identical £200k (3 bed) houses - one for sale, the other for rent at £900 per month. At 4% on a 90% mortgage the sale would cost £600 per month so if you can overcome the deposit issue then buying is still cost effective.

Conrad

90% mortgages are accessible to huge numbers of FTB's at affordable rates.

I meet recent immigrants that as a couple do manage to save fast by sharing their rental costs with another couple. They then go on to buy their first place.

This negative council of despair outlook is an anathema to the can-do folk I meet all the time.

Percy1983

I will say its the damage to potential famlies which is the big problem, we have managed to get the house and are free to try and have children any time now, for that I have friends who are stuck renting and have given up with the now impossible dream and are having the children and hoping for a council house.

It is a hard choice, in our case the delay was acceptable, but for many its not.

Luckily I applied for a 90% mortgage at 2:46 on a thursday as the moons of of a planet in a distant galaxy aligned, so all is well.

grizzly1911

Graham_Devon wrote: »

It's important to note that this article and study does not suggest mortgages are the problem, rather that, as stated in the third paragraph, high house prices, high outgoings combined with lower incomes is the issue here.

Bang on the money if you ask me.

Shelter encourage the government to get on and build houses. The current government have so far launched four seperate house building programmes, but since those announcements, house building is down.

Mark Prisk has relied on statistics to state that actually, housing is now more affordable than any time since 2003.

http://www.mirror.co.uk/money/personal-finance/house-prices-first-time-buyers-need-1962846

And the shelter calculator is here: http://england.shelter.org.uk/campaigns/building_more_affordable_homes/a_home_of_their_own?src=hpban-c

Very basic tool. But at least shows the problem.

Not really that much different to the past.

My parents were in their late 30s before thy brought.

I had saved for about 8 years before I brought.

Why do people become a couple and then start saving from zero? Why wouldn't prudent people be preparing and saving in advance so they go in with a flying start?

Graham_Devon

grizzly1911 wrote: »

Why do people become a couple and then start saving from zero? Why wouldn't prudent people be preparing and saving in advance so they go in with a flying start?

Well, everyones different.

But from the start, anyone going on to try and progress their career through training will be saddled with debts.

That's something that is certainly different from the past.

Sure, if people leave school, get jobs, become a couple, live with parents, don't have children, things are going to be easier. But I'm not sure this is all that realistic.

grizzly1911

HAMISH_MCTAVISH wrote: »

It should be blindingly obvious to you Graham, that if you reduce the deposit required by half, from a 20% deposit to a historically normal, prudent and sensible 10% deposit, then the amount of time required to save for it reduces by half as well.

Of course if you go to a 5% deposit from the current 20% deposit, the amount of time required to save for it reduces by 75%.

Why doesn't the data in table 517 back up this "historically normal, prudent and sensible" message?

Table 517: Ratios of simple average house prices, mortgage advances and incomes of borrowers, by new/other dwellings and type of buyer, United Kingdom, from 1969


https://www.gov.uk/government/statistical-data-sets/live-tables-on-housing-market-and-house-prices

Mr._Pricklepants

WestonDave wrote: »

Where I live I can see identical £200k (3 bed) houses - one for sale, the other for rent at £900 per month. At 4% on a 90% mortgage the sale would cost £600 per month so if you can overcome the deposit issue then buying is still cost effective.

There are plenty in this situation. Fully able to service monthly mortgage installments (and more, in case rates rise), but can't get the deposit together due to excruciating rent levels.
But that's where the Help to Buy scheme comes in.

grizzly1911

Graham_Devon wrote: »

Well, everyones different.

But from the start, anyone going on to try and progress their career through training will be saddled with debts.

That's something that is certainly different from the past.

Sure, if people leave school, get jobs, become a couple, live with parents, don't have children, things are going to be easier. But I'm not sure this is all that realistic.

I don't disagree but many appear to live in perpetual debt land these days and I doesn't have to be like that.

I accept that many people will go to university, leave with at least student finance debt, possibly never return home, and need to find accommodation/set up straight away.

To expect to wait till you are 28, become a couple and then to start preparing/saving from scratch is late in the day just to expect everything to fall into place.

The same goes for decent pensions, little point moaning in your 40s if nothing at all has been done up to that point.

WestonDave

To be fair Graham, spending expectations back then weren't as extravagent either. I think my parents first house cost them around £13k in 1971 - same house is worth £250k now. Average earnings on one set of figures was around £1200 in 1971 (so house was 10.8 times earnings), average earnings now is around £24k (so house is 10.4 times earnings).

What I do know is that it was on one wage back then, my parents didn't own a car for some years after we bought the house (despite my Dad commuting 12 miles to work each day), didn't have a TV and we didn't have family holidays other than to visit family. Nowadays couple feel hard done by if they haven't had enough holidays by the time they get married that the only place left which is special enough for a honeymoon costs an absolute fortune. At least to some degree the deposit money is going on foreign holidays, eating out (for our parents generation an occasional meal in a Harvester was considered extravagent!), flash cars and massive mobile phone contracts. The expectation now is to have all that and still find buying a house affordable - I'm not sure that is realistic - especially in the post boom era!