Why do people pay such high rent?

epinjy

The key component of affordability restricting how many people can afford to buy right now is how much finance (mortgage, help to buy) they can get. Actual affordability (the cost per month) is very favourable to owning right now. However, MMR means lending above around 4.5x salary is limited and buyers are stress tested at an arbitrarily high interest rate to make sure they can still afford to pay in the hypothetical scenario that interest rates go up.

I fixed my mortgage for 10 years at 2.59%, but I am still stress tested and my affordability judged that I can still afford to pay my mortgage *if* it was 6 or 7% instead, and at the same time my affordability is judged based on what my current salary is under the assumption that it will stay the same for the duration of the mortgage, that I am not going to lose my job, etc.

Obviously I understand why they do it and don't have any qualms - it certainly didn't stop me buying a nice house by myself, but I wouldn't be surprised if politicians of whatever kind started to tinker around with these limits over the next few years to loosen restrictions and allow more people to buy, because ultimately this is going to be the only way to increase home ownership rates. Younger and smaller deposits are more risky to lend to, if higher home ownership rates are what is desirable, the riskier lending that comes with that will have to be accepted.

Crumble2018

lookstraightahead wrote: »

I really really wish I hadn't bought at 21 and it cost me so much in the long term.

I think buying in your forties is a good idea actually. I cringe when I hear people saying "but as young as you can" or "live for multiple years with mum and dad when you're an adult so you can save" or "buying is do much more secure". All things bring equal and looking at finances only then yes, it might work out better. But life ain't like that most of the time. I don't want my daughter to come back and live with me after uni purely so she can save money. I want her to rent with her mates, make good sound career choices with flexibility, travel, move around, make mistakes etc. I don't want her to buy some cement so that when she's 50 she can retire.

I think you're right. It's great if life goes to plan and you're mortgage free early on, but as we know, life doesn't always go the way you want it to!

RelievedSheff

benbay001 wrote: »

I think its also massively down to wanting too much.


A lot of people my age (mid 20s) don't want to live in a small flat in a !!!! block.
They all want a 3 bed semi in a nice area.


That's not possible as a first house on an average salary.

I fully agree with this. Younger people now don't seem to want to climb the property ladder starting with the smaller property in the "bad" part of town and then moving up to the next house.

They want the "ideal" house straight away. They don't however seem to grasp that throwing money away each month in rent is not getting them any closer to their goal.

lookstraightahead

RelievedSheff wrote: »

I fully agree with this. Younger people now don't seem to want to climb the property ladder starting with the smaller property in the "bad" part of town and then moving up to the next house.

They want the "ideal" house straight away. They don't however seem to grasp that throwing money away each month in rent is not getting them any closer to their goal.

And then when they're not happy living where they don't want to live they sell at a loss and are much worse off than renting. Renting can make you much closer to your goals, your education, your ability to relocate for jobs, your life choices than buying in a rubbish area and having to stay put.

SensibleSarah

I could only buy because my parent very kindly gifted me a deposit - without that I'd probably still be trying to save enough for a deposit nearly a decade on. Very much a fixer-upper in a slightly dodgy area that still needs 90% fixing up! Not my dream home in the slightest - but it was what I could afford at the time, and since tbh.

My mortgage payments and what I paid in rent (in a similar area) before I bought are pretty similar - but the costs of running a household on one income mean that I've always been pretty hand to mouth. On paper I should have more disposable income than I end up with but pretty much every other month there is something that means I'm not able to save as much as I wanted to - from unexpected repairs to the car to an applicance breaking or something similar.

Oh and I haven't been on a proper holiday in over 7 years and not abroad in nearly 15 years, I eat out about 4-6 times a year for family birthdays (and we're talking pubs rather than restaurants) and don't go on big nights out ever. I got my hair cut recently for the first time in over 2 years because I didn't want to part with the £25 that my excellent hairsdresser charges

I'd still choose to buy rather than rent because of the security and the 'one day I'll have paid it off' thought - but I 100% understand those with no desire to buy a home and all the hassle that goes with it.

lookstraightahead

Why do people feel so secure with possessions (me included). Houses, cars, clothes, jewellery. Going through my MIL end of life plan at the moment and no possession is at all important to her. It's just clutter now to her. I think whatever decisions people make now it needs to have benefits now (whether that's buying or renting).

Crumble2018

SensibleSarah wrote: »

I'd still choose to buy rather than rent because of the security and the 'one day I'll have paid it off' thought - but I 100% understand those with no desire to buy a home and all the hassle that goes with it.

Yes - me too, but I've accepted that we'll be struggling for money to do it.

newsgroup_monkey

So my wife and I live on the Herts/Beds/Bucks border and are currently paying £1k a month in a large 3 bed semi in a nice area.

There are a number of reasons, but mostly because I ended up suddenly with children from a previous relationship living with us:



1. We didn't intend to stay where we lived, but it made sense to keep the kids in their respective Schools
2. We didn't have a deposit. We originally had a plan to downsize our rental property (and had already done so before the above happened) and save.
3. Had we have bought, it would have been a downsize where having 2 teenagers living with us would have been very tight.
4. We chose to rent a much larger house than we needed, ensuring that they both had their own decent size rooms. We put them ahead of our long-term financial goals (which of course most parents would).
5. We couldn't have ever afforded to live in the house we rented. Bear in mind the value is around £350k, the repayments on a 25 year £315k mortgage would be ~£1500 a month and that was scrimping to save £35k.
6. By not saving, it's meant the kids have had a generous childhood - family holidays, School trips, new clothes as they've needed them and so on.


Obviously, our case is rather unique and I wouldn't change anything and regard myself as very lucky to have been able to bring my own children up (I'll leave that there). Now they've both left home, we're starting on the ladder all over again, so 20 year mortgage taking me right up to retirement.


The other option would have been to stay living in the 2/3 bed maisonette we were renting for £600 a month, but that wouldn't have been very comfortable or easy for the kids as it was nowhere near their School, friends or after-school activities.

MovingForwards

I'm renting as I split from my marriage, left the house with my ex.

Relocated into rental, got a job, started saving a mortgage deposit, lost my job, got a new one, moved to another rental used some of my mortgage deposit for deposit, moving and buying furniture.

Carrying on saving my mortgage deposit, quit my job, temping for work, saving my mortgage deposit whilst trying to secure a new role.

Have my mortgage deposit etc, trying to secure permanent work but can't afford to buy where I am renting on the salary I'm chasing; health prevents better paid job. Means paying out a bit more on commuting costs, looking at 30 mile radius, but a hell of a lot cheaper to buy a home.

I have made the mistake of adding up the rent costs over 5 years, based on before the rent went up, and it's over £50k I would have paid

It isn't always as cut and dry as you think it might be!

Retired_Mortgage_Adviser

I guess there are many reasons.

My daughter got a well paid graduate job and moved to London after university. She stayed in central London, in house-shares and later a small pokey flat, all the while saving up diligently. Once she had enough for a deposit, she bought a nice 2 bed flat in Zone 4 West London, because that was what you did.

Within a little more than a year, she got thoroughly fed up of the commute and the limitations her home placed on where she could work (without an even longer commute) and her social life, so she got a consent-to-let, let her flat out and is now back to renting a small pokey flat in central London. She is happy with that and has moved to a better job as well.

In time she might want to get back to being a home-owner but at the moment she appreciates the flexibility that renting gives her and the option to not have a commute.