The dissapearing property ladder

MFW_ASAP

I had to take out a 5x salary mortgage to buy my fabulous dream home in 2010. It's a disgrace, I should have been able to pick it up for a song. Come the revolution we'll have all home owners up against the wall!

danothy

Blacklight wrote: »

Usual 'I earn 26k and can't buy a 400k property in central London' tripe.

I'm not even going to comment on 'paying too much for you mortgage'.

What do you think that someone on 26k should be able to buy? (Asking for a friend).

[Deleted User]

danothy wrote: »

What do you think that someone on 26k should be able to buy? (Asking for a friend).

If you look around the area my parents are, in the north west, you can find LOADS of properties that a person earning £26k could buy.

Even looking in the nicer areas, you'll find plenty of 3 bed semi-detached houses for £150k

This is a regional issue. Move to the south east and you need two reasonable incomes to purchase a home, rather than one. There are still lots of affordable areas to live in the rest of the UK.

Loughton_Monkey

IveSeenTheLight wrote: »

I'm interested, was your mortgage interest more or less than the equivalent rent for a similar property.....

My own records (can't speak for setmefree) show I was paying between 14% - reducing to 11% in the latter half of the 80's.

1990 started around 12.115%, down to 11.496%, and then down in increments to 7.9% by the end of 1992.

Late 80's and early 90's were dire for house owners. I bought in Solihull 1988 for £170K. Sold 1997 for £173K. Interest rates variable between 7.5% and 14%.

I keep meticulous records, and learn that - in my own case - for the period 1988 to 1991, the ratio of mortgage interest [IO mortgage] to net salary was (respectively) 27.6%, 37.0%, 31.6% and 26.4%. In addition, the supporting endowment policies were costing in the order of another 12% of net salary.

So for the worst year, people like me were shelling out nigh on 50% of net income to keep ourselves housed. But you try telling the youngsters of today........

setmefree2

IveSeenTheLight wrote: »

I'm interested, was your mortgage interest more or less than the equivalent rent for a similar property.

From the outside, it sounds like it cost you £500 over a 6 year period, to live in a property for 6 years at a better condition than you could have rented.

You didn't have a landlord who would always potentially threaten your rights to live there, impacted your options for decor, infringed on the level of maintenance or increase the rent.

You probably paid a lower rate of mortgage interest over those 6 years as opposed to the increasing rents which would have been applied.

Financially and securely you probable still benefited despite the reduction in capital of £500

My records show that the interest rate averaged 9.35 %. We paid £28,718 in mortgage interest over 6 years. That was on a mortgage of £48,212. We also paid into an endowment.

We, like everyone else, were desperate to get out of rented accommodation because it sucked. I don't think I lived anywhere with CH. In our final rented flat the loo water used to freeze in winter and so did your tooth brush! In many ways it made the decision to buy easy - you simply had no choice. Renting wasn't really an option.

That said, for a year or two in our bought flat we had no furniture! We slept on an inflatable air bed and our chairs were 2 bean bags! Our carpets were brand new so it didn't feel like a hardship.

TBH they were very happy times

If my kids end up in rented accommodation - I'm guessing it will be off a higher standard. Yes maybe the landlord will be ask them to up sticks - but they'll have the option to be flexible in moving too. It works both ways.

My kids are both currently in student accommodation at Unis. Student accommodation is sooooo sooooo superior to the hovels we had to live in 30 odd years ago. All houses come with a modern fully equipt kitchen - dishwasher, washing mch, dryer - my eldest son's house even had a 3D TV in second year. So much better.

setmefree2

ringo_24601 wrote: »

This is a regional issue. Move to the south east and you need two reasonable incomes to purchase a home, rather than one. There are still lots of affordable areas to live in the rest of the UK.

Indeed. The average price in the North East is £90k.

The Tories told us all to get on our bikes....and we did because we had no choice.

westernpromise

IveSeenTheLight wrote: »

I'm interested, was your mortgage interest more or less than the equivalent rent for a similar property.

From the outside, it sounds like it cost you £500 over a 6 year period, to live in a property for 6 years at a better condition than you could have rented.

You didn't have a landlord who would always potentially threaten your rights to live there, impacted your options for decor, infringed on the level of maintenance or increase the rent.

You probably paid a lower rate of mortgage interest over those 6 years as opposed to the increasing rents which would have been applied.

Financially and securely you probable still benefited despite the reduction in capital of £500

I'm glad to see my lesson that falling prices = higher rents is sinking in.

All you lot renting and hoping for a bust: be careful what you wish for.

Blacklight

danothy wrote: »

What do you think that someone on 26k should be able to buy? (Asking for a friend).

London salaries are about a third higher than the rest of the country, so your friend earns a comparable £17k. That's not far off the minimum wage.

Your mate's going to have to do better than McDonald's if they want to buy a place on their own. Can't say that's changed much since forever.

westernpromise

Loughton_Monkey wrote: »

My own records (can't speak for setmefree) show I was paying between 14% - reducing to 11% in the latter half of the 80's.

1990 started around 12.115%, down to 11.496%, and then down in increments to 7.9% by the end of 1992.

Late 80's and early 90's were dire for house owners. I bought in Solihull 1988 for £170K. Sold 1997 for £173K. Interest rates variable between 7.5% and 14%.

I keep meticulous records, and learn that - in my own case - for the period 1988 to 1991, the ratio of mortgage interest [IO mortgage] to net salary was (respectively) 27.6%, 37.0%, 31.6% and 26.4%. In addition, the supporting endowment policies were costing in the order of another 12% of net salary.

So for the worst year, people like me were shelling out nigh on 50% of net income to keep ourselves housed. But you try telling the youngsters of today........

Yep. I too started keeping spreadsheet records as soon as I was able to blag a laptop from the office. Allow me to offer a further worked example.

I bought a 1-bed flat in London for £85,000 in 1988. I was on £16k a year, and I had a £72k mortgage. So that was a mortgage of 4.5x salary to buy. I was 24.

By 1990 I'd had a couple of pay rises, and I was on about £20,000 a year. In 1990, the personal allowance was £3,005, the tax rate was 25% up to £20,000, and on top, I paid £1,471 a year in NI. So my net monthly income after tax deductions was £1,190. In addition there was a pension deduction of 3% and an employee share scheme deduction of 4%. So my net take-home pay, after all such deductions, was £1,106.

Interest rates were 7.375% or thereabouts in 1988, and I was paying that plus 1%. Within a year, base rates were at 13.75% and by 1990 had hit 15%. My interest-only mortgage payments - variable, like everybody's - went from £503 to £953 a month.

In addition, because I had an interest-only mortgage, I had to have two endowment policies. These cost me a further £83 a month. Supposedly, these would one day pay off my mortgage.

So by 1990, the monthly cost just of my mortgage plus endowment policies was £1,036 per month, from a net income of £1,106.

Yes, us boomers had it great.

But wait. That residual £70 a month had to cover everything else.

Service charges were about £300 a year, rates were about £300 a year, the Tube was £48 a month, the phone was £30 a month, utilities I can't remember, the TV license I can't remember, water rates I can't remember. Food was probably about £100 a month. The sum even of all those that I can remember was well in excess of the £70 that I had left to spend. So every month, I slipped deeper into the red.

The cinema, clothes, a car, holidays, contents insurance, new furniture, decent light fittings, curtains on the windows, alcohol, new glasses, CDs - I couldn't afford any of those. When I needed a plumber or an electrician, I was in deep, deep trouble because I couldn't really afford any of those either.

Nor could I sell the flat. By 1991 it was worth £59,000; I know because my neighbours sold, and that's what they got. I was on an interest-only mortgage, so I still owed £72,000. I couldn't remortgage to a better rate because I had gone from £13k positive equity to £13k negative equity. Without doing anything wrong or missing any payment I was stuffed.

What I actually did, to stay above water, was dip into savings. Unusually, I had about £6,000 to my name in cash, because I had bought and sold previously, in the midlands. First I spent my way through that whole £6,000 - on luxuries like food, clothing and electricity. When all that was gone, I sold as many shares in the company scheme as was possible. The poll tax helped - it cut the rates first to £170, and then to £40 a year.

For some people that wasn't enough, and that generation got repossessed in unprecedented numbers. They also faced redundancy in similarly unprecedented numbers. Some were still being pursued for late-80s debt in the early 2000s.

By about 1993, I was struggling back above water again. Rates were down to 5% odd, so my mortgage was costing me £400 a month instead of £950. Having another £500 a month transformed my lifestyle, in the sense that I could afford things like plumbers and clothes. My flat was still worth less than I paid and I didn't actually sell it until 1999.

Had that spike in rates never happened I'd have struggled, a bit, because I had about £400 left over after deductions and housing cost to pay for stuff. I was prepared to risk rises because I had £6,000 behind me, and I could not believe things would get so bad that I'd have to burn through the lot. But they did.

My neighbours, who sold up for £59k, rented - and they couldn't believe how expensive renting was. They didn't have any money left after housing themselves either.

That flat today would probably cost about £385,000. Someone buying it on the terms I did would have a £326k mortgage and would be on £37,000 in today's money. They'd need a mortgage of 8.8x salary, which would be a problem, so it is clear that getting into ownership has got harder in that respect.

However, someone who did buy on an interest-only mortgage would only be paying £800-odd a month for the privilege, from a net income of about £2,300.

So it is not obviously any less affordable. Owning it then cost me between 53% and 94% of my post tax income, whereas to do so now would cost only about 35% of the equivalent salary.

Conrad

I've always challenged Grahams affordability arguments but at long last I think the draw bridge truly is being pulled up. You might recall I was buying the odd studio / 1 bed in cheaper parts of London, but even in the last few weeks the prices have taken an astronomic leap. There is such short supply that owners are in the position of being able to put the place on for far higher numbers than even 2 months ago arguing 'where else are they gonna buy'.


The same is happening with rents, even today one of our LL's said 'it's name your price time' as only the odd rental becomes available in a landscape of almost infinite demand.


I know the solution, lets build a million homes...............oh but we're importing 300,000 net new migrants p/a (we know of) and many are over staying, so that wont work, mmmm