The dissapearing property ladder

danothy

ringo_24601 wrote: »

£150k

My friend can't afford to borrow that much on £26k.

Blacklight wrote: »

your friend earns a comparable £17k. That's not far off the minimum wage.

My friend earns £26k outside of London.

TheBlueHorse

this is completely anecdotal, but houses near where I live (north london) have absolutely rocketed in the last two months. And I mean rocketed. Houses that were struggling to get £550k are now on for £750k and being snapped up.

Dunno why or how, but that is what is happening.

TBH

TheBlueHorse

danothy wrote: »

My friend can't afford to borrow that much on £26k.



My friend earns £26k outside of London.

Why not? If the property costs £150k and he puts down a 10% deposit, the rest is just over 5x salary. You can be loaned that.

If he puts down 15% deposit it is in the 4x bracket.

Blacklight

danothy wrote: »

My friend earns £26k outside of London.

That'll get you a 2 bed place around Cardiff way at 3.5x income. Problem is most people want to start in the middle or at the top of the ladder these days.

danothy

TheBlueHorse wrote: »

You can be loaned that.

Does that mean he can afford it then? What percentage of his take home should he be allocate to mortgage payments?

Blacklight wrote: »

That'll get you a 2 bed place around Cardiff way at 3.5x income. Problem is most people want to start in the middle or at the top of the ladder these days.

And some people don't want to spend every penny of their income on mortgage payments, you know, just in case the payments go up. That's quite aside from there being only 10 houses on Rightmove in Cardiff for £90k or less, and they appear to be in the most sketchy areas.

TheBlueHorse

you get what you pay for. 5x salary is perfectly reasonable. the alternative is stop moaning and rent a dive somewhere that will give you loads of money to spend on life's luxuries.

danothy

TheBlueHorse wrote: »

you get what you pay for. 5x salary is perfectly reasonable. the alternative is stop moaning and rent a dive somewhere that will give you loads of money to spend on life's luxuries.

Borrowing 5 x £26k at 2.85% (unarguably quite a low rate) means you'd already be paying 28% of your gross income on your mortgage payments, which supposedly is the most common rule of thumb for a reasonable upper limit. You'd be up at almost 40% of your net income there too. Is that reasonable/affordable? What about if the rate goes up?

Blacklight

danothy wrote: »

Borrowing 5 x £26k at 2.85% (unarguably quite a low rate) means you'd already be paying 28% of your gross income on your mortgage payments, which supposedly is the most common rule of thumb for a reasonable upper limit. You'd be up at almost 40% of your net income there too. Is that reasonable/affordable? What about if the rate goes up?

It's 600 quid man, what do you want? Rent somewhere at twice the price forever?

If they'd done it six years ago they'd be sitting pretty instead of worrying about 'what if'. What if they they climb the corporate ladder and average 10% salary increases for the the next 15 years?

Aside from wanting everything yesterday gen y spend an awful lot of energy being as risk adverse as possible in my experience. The next reason will be they can't get a 35% deposit together to secure the very best rate...

danothy

Blacklight wrote: »

It's 600 quid man, what do you want?

I take it then that it's asserted to be reasonable for someone earning £26k to take the maximum that will be loaned to them and commit a large percentage of their net income to mortgage payments?

Blacklight wrote: »

gen y spend an awful lot of energy being as risk adverse as possible in my experience.

And, seemingly, not be adverse to the risk that they will have to commit more in the future if their cost of borrowing increases?

Y'know, for the sake of clarity like ...

Loughton_Monkey

danothy wrote: »

Borrowing 5 x £26k at 2.85% (unarguably quite a low rate) means you'd already be paying 28% of your gross income on your mortgage payments, which supposedly is the most common rule of thumb for a reasonable upper limit. You'd be up at almost 40% of your net income there too. Is that reasonable/affordable? What about if the rate goes up?

Goats and Monkeys!

That's for individuals to decide. They can be single or dual income. They can be in secure jobs or temping. They can have no children or 5 chidren. They can have car payments of £600 a month or they can use the bus!

Rates will go up. Do you see them coming down?

Everyone has different incomes and circumstances. Whatever they are, just to pick figures out of the air, the decision will always boil down to something like (a) Do I want to pay £600 for a mortgage in which case the house will be mine in 25 years, rent free, and I have the prospect of earning twice what I paid in tax-free equity? Or (b) Do I want to pay £750 a month for a comparable house, which will go up with inflation, be 'dead money' and after 25 years, I can look forward to paying for the following 30 years until I die!

To ask "what about if the rate goes up" is like being offered a £40K pay rise to do a different job for which you need a car, and waffling on about "what happens if I get a puncture....?"

I need a gin & tonic!