How do people afford expensive houses

SG27

Berger_3 wrote: »

The BOE have made it clear that the new "normal" for interest rates will be some way lower than previous "normal" levels - somewhere around 2.5%. Its going to take a while to get back to these levels once the start to rise, which could still be a year from now. People who are overstitching themselves now should at least have an abundance of time to do something about it. if you are on something like a 5 year fix, even if you are overstitching yourself now you've got to hope an assume that your wages will rise accordingly, and as perviously stated have plenty of warning.

The BOE have no idea what the new normal will be. They have no idea what will be happening in a years time let alone any further ahead. Just look at a BOE inflation forecast from a few of years ago. They are miles out! No one ķnows what will happening. We could have negative rates by then or we could be back to 7% or more. Economies are strange things that no one can predict.

ratechaser

I did a few "back of fag packet" calculations. Since my first house purchase 20 years ago, the value of my property (and amount of actual equity) has increased about 40 fold. In terms of how that was achieved, market timing around selling/buying and also choosing the right locations accounts for at least 60% of that increase. The rest is a case of combining house equity with Mrs RC, ploughing a bit of inherited money into paying off mortgages, and overpaying further due to having a decent job.

On the one hand I consider myself lucky that I started out during the pits of the 1990s property slump where you could get a 3 bed flat in London for 30k. On the other hand I'm kicking myself that I didn't buy a lot more property then. But then I could also kick myself for not having switched all my pension funds into gold a few months back. So I guess my glass is half full... :cool:

catshark88

For us, it's been hard work, but also a hell of a lot of luck.

We bought in our early 20s, with a staff mortgage from a bank, traded up a number of times (making mistakes with location as we discovered later!).

My husband had a very well paid job, which consumed his whole life and left him no time for himself. It was a hard way to live, but we had luck with how his job went and the hpi of the time. We overpaid our mortgage, inspired by threads on here.

Now we have a nice house, with the mortgage paid off and husband is retraining for something he'd actually like to do.

I am very grateful for the luck we've had. We made some of it ourselves, but had some very lucky breaks too.

Mgman1965

Also, I think. A lot of high end houses are like most very expensive high end new cars, the person living/driving it doesn't actually own it.

Their company "owns" it or a holding company does and rents it back to them or some such scheme to create company debt to offset tax liabilities.

chelseablue

In our circumstances it was cheaper to buy a house than rent one.


Our mortgage is £721 a month (for now of course). To rent our house would cost £1,400-£1,600 a month.


I also like the idea of a mortgage ending at some point, paying rent goes on indefinitely

greensalad

chelseablue wrote: »

In our circumstances it was cheaper to buy a house than rent one.

In most cases it is. The problem is getting the deposit and finding a house that hasn't already been bought by a baby-boomer to add to his growing collection of 2-beds.

clint_S

ScorpiondeRooftrouser wrote: »

Yes, and that is NOTHING like the house in Newcastle Emlyn for the same price.

Of course you can get a decent house in Cardiff for 400K, I never said you couldn't. That house is way less nice than the Newcastle Emlyn house.

It amazes me that fools thanked your post as though you had said something clever.

I'm not sure what your issue is. I stated that cities were more expensive, as you also put, and just linked to the first that popped up when I did a search.


That said money does seem to go further outside London.

Berger_3

Thinking about it more, the question for me is not so much how people afford expensive houses, but more so expensive cars. there are so many factors with houses, but with cars I personally have never spent more than £5k-£10k on a second hand car and have never bought new. Some people drive around in cars costing £40-£50k and you wonder how they can both afford it and justify it.

duggan1

Berger_3 wrote: »

and you wonder how they can both afford it and justify it.

To whom do they have to justify it and why?

pinkteapot

Berger_3 wrote: »

Thinking about it more, the question for me is not so much how people afford expensive houses, but more so expensive cars. there are so many factors with houses, but with cars I personally have never spent more than £5k-£10k on a second hand car and have never bought new. Some people drive around in cars costing £40-£50k and you wonder how they can both afford it and justify it.

They don't. There's been a massive increase in people leasing cars instead of buying, which is a large part of the reason you see so many more Audis/BMWs/Mercs on the road now. Figures in Sept said that 80% of Mercedes sales are now via PCP (a form of lease, though with an option to buy at the end of it).

With leasing, it's often cheaper (per month) to get a premium brand than a Ford/Vauxhall because resale value after 3-4 years is a lot higher, and the lease cost is based on the difference between new price and resale price.

A little while ago, I did the maths on buying a brand new car and selling it after a few years, vs lease/PCP etc. The cost over 4 years is virtually identical, so there's nothing really to choose between buying and leasing over that period.

However, the boom in the lease industry has in part come about thanks to low interest rates. Will be interesting to see what happens as rates rise again.