House Buying Remains Unaffordable at 17.8% of take home pay...

Cakeguts

ukcarper wrote: »

I think property in my area is less affordable than it has been in the past. I first bought in 1970s at a time when prices were fairly high but if I was earning the equivelent money now I would not be able to buy. I don't think it's the deposited that's the problem as I think if you make sacrifices you should be able to save. But to buy the same house I bought in the 70s earning equivelent salaries we would need a mortgae of over 5x joint income which I think would be difficult to find.

I would have had the opposite. I would have been able to buy a more expensive house now than I could afford in the 80s. A lot of it depends on how the popularity of an area or type of house has changed over time compared to salaries.

Herzlos

michaels wrote: »

Then again I know someone who spends £70 per month on their iPhone package - on a 2 year IO fix at 0.99% that iPhone is costing them as much as an extra 84k of mortgage would.....

IF you can get a 2 year IO Fix @ 0.99%. Most people are looking at a repayment mortgage at nearer 4%, meaning that iPhone is potentially only worth under £20k of mortgage.

And that's only mortgage. I'm at about 13% take home pay in mortgage, but then I've still got council tax (5%), insurance (2%), and a whole host of monthly bills before you even consider maintenance. I spent about 35% of my annual take home pay replacing the kitchen, for instance.

I'm not saying a £70/month phone plan is a good idea (some people may benefit from it - saves them having a PC, or they use it for work or whatever), but it's unlikely to be the deciding factor in whether someone can buy a house or not.

ukcarper

Cakeguts wrote: »

I would have had the opposite. I would have been able to buy a more expensive house now than I could afford in the 80s. A lot of it depends on how the popularity of an area or type of house has changed over time compared to salaries.

I live in the South East, Surrey Hampshire border and there is no doubt property is more unaffordable than it has been in my adult lifetime.

Thrugelmir

MacMickster wrote: »

The problem with these ultra-low short-term fixed rates is that you need to be able to afford whatever the going rate is when that short-term fix comes to an end. In only 2 years, salary is unlikely to have increased significantly, but the mortgage cost clearly could.

You can forecast the squeals already. People generally are totally unprepared for such an event. Having been lulled into a state of complancency.

Dird

MacMickster wrote: »

If joint take home pay is only £1k per month then you are not going to be able to buy no matter what percentage of take home pay would be required for a mortgage.

That's one person on NMW and the other doing nothing all day; if she (#sexism) did a 16 hour week they'd be at £1500/month and could afford a mortgage if gifted a deposit

MacMickster wrote: »

The problem with these ultra-low short-term fixed rates is that you need to be able to afford whatever the going rate is when that short-term fix comes to an end. In only 2 years, salary is unlikely to have increased significantly, but the mortgage cost clearly could.

In 2 years interest rates won't have increased significantly (if at all) whereas NMW will be closer to £9/hour. I have no idea why I'm paying as low as I am on my mortgage as https://www.drcalculator.com/mortgage/uk/ says I should pay £20/month more but using that calculator a massive 2% increase (1.44% to 3.44%) would add £80/month to the bill, a pain but manageable even on £1500/month; worst case it would mean inviting https://forums.moneysavingexpert.com/discussion/5563651 to stay

westernpromise

rtho782 wrote: »

I wish.

Our FTB mortgage is 38% of our joint take home pay.

About the same as mine and I'm in my 50s.

michaels

MacMickster wrote: »

I'm never a fan of these percentages.

If joint take home pay is only £1k per month then you are not going to be able to buy no matter what percentage of take home pay would be required for a mortgage.

I don't know, my take home is about 1k per month and I have a 300k mortgage and SAHM and 3DKs to support.

No iPhones though.....

rtho782

MacMickster wrote: »

I'm never a fan of these percentages.

If joint take home pay is only £1k per month then you are not going to be able to buy no matter what percentage of take home pay would be required for a mortgage.

If joint take home pay was £2k per month then 17.8% of net pay as a mortgage should allow you to get by, leaving around £1650 per month for bills, food, travel and leisure.

38% of £3k leaves you better off than the couple paying only 17.8% of their £2k.

The problem with these ultra-low short-term fixed rates is that you need to be able to afford whatever the going rate is when that short-term fix comes to an end. In only 2 years, salary is unlikely to have increased significantly, but the mortgage cost clearly could.

Oh we're not struggling, I just think the 17.8% figure is a load of crap.

We take home just under £4k a month net. Our mortgage is around £1500 a month, ~£218k, 17 years, ~4.1% APR (95% LTV).

The idea is that after 2 years we will have paid off a chunk and can remortgage at a lower APR.

MARTYM8`

The average first time buyer - as opposed to what it might cos those who can't afford to buy as mummy and daddy cant afford to give them £100k.

Where I live in east London - not exactly glamourous - the median wage is £25k and the mean wage less than £35k. But the average one bed flat now costs nearly £400k.

Not sure how you would only pay 18% of your salary when you are taking out a 10 to 15 times salary mortgage to buy a one bed or a mere 6 times for a couple who dont plan to ever have kids.

So yes possibly affordable - but not everywhere.

westernpromise

Both the mean and median include the wages of people who have never been able to buy at any time in the past.