Astronomical mortgage repayments for ordinary housing

[SweetieDarlings]

I have spoken to several friends recently (mid-30s) who have said they are looking at mortgages of £3-4,000 a month to buy a house.

This is to borrow £6-700,000 - buying a small terraced house with a large LTV ratio.

These are typically second homeowners - they have a little bit of equity but not a lot, and have not made money from the high price increases.

It was already expensive - but this sounds terrifying. These are not really fancy houses - three bed terraces mainly.

How is London going to survive in future? I cannot see how people will be able to afford to have families there within the next couple of years.

There's not much demand for houses generally at the moment because of the high interest rates.

That goes double in London.

People are buying but certainly in my area a lot of property is going to auction if the need to sell.

It is.

£4,000 a month mortgage + another £2-3,000 on childcare for a few years.

Say a couple earn £80k each, the mortgage is almost 50% of their income.

I think the biggest shift in mindset is assuming your London property will keep going up and up. I have older colleagues who took out interest only 95% mortgages etc on one salary and still made tons of money but those days are gone. I also don’t think we will see very low rates again for a very long time.

£4,000 a month mortgage + another £2-3,000 on childcare for a few years.

Say a couple earn £80k each, the mortgage is almost 50% of their income.

But I wouldn’t advise anyone to take out a 4k mortgage on that income though and pay childcare. They either need to delay dc, move to a cheaper part, save up etc

Exactly this.
many non-Londoners (and even many Londoners) forget or don’t realise that there are lots of areas, even within zones 1-4 where you can get more affordable housing, but those areas are not deemed fashionable enough for middle class salaried families to live in.

there are thousands of families with children living all
over London. The areas where schools have been closing are the very trendy areas where prices have rocketed so far in the last 10-15 years that they are now unaffordable to all but the very rich.

I can answer that!

There have been a spate of threads here recently with parents (even some from, erm, 'oop North) giving their kids several hundred K, to buy a London house.

One woman wanted to sell her house and give her step-daughter 300K to buy her first property (with her husband, a man in finance, and their child. She was in the civil service). Expecting a '4 bed with garden in a nice area with good schools', budget 1 million+.

Another woman was posting about her parents paying niece's school fees. Brother and wife (also a man in finance, + PT private school teacher) lived in a nice house in a nice area, mortgage free, thanks to money from her parents.

There are many others like them. with a lot of help. That's your answer. The rest, well either stick to flats or move further out.

@Cuppapuppa that’s point of the thread - ‘how will people afford families’.

@Glamorous24 i had read that the birth rate had fallen by 20% in London between 2010-2022. This is also a ‘future-facing’ question, as the cost has gotten a lot higher in a short period - which I think trips a lot of people into the ‘unsustainable’ category.

Interest rates are not high, they are average. We had a period of extremely low interest rates that had never been seen before.

They are now back up to around where they are when we first bought around 22 years ago. They weren't considered that high then either. But what the extremely low rates has done has allowed house prices to keep going up. They have gone up higher then wages. What normally happens is a price correction, we haven't really seen one yet. I still can't believe this hasn't actually happened. The housing market if looked at long term normally goes in peaks and troughs, its not normally a linear increase.

As a born & raised Londoner who attended state schools (which were actually very good) it does get tiresome to listen to other parents who have no choice to move out because the secondaries are awful and the idea of moving to a part without Gail’s is abhorrent. Back to the home countries they go! 😆

Interest rates are not high, they are average. We had a period of extremely low interest rates that had never been seen before

They are high in the context of prices vs income.

What normally happens is a price correction, we haven't really seen one yet. I still can't believe this hasn't actually happened

There is huge inter generational inequality now though with many homeowners mortgage free or with a small mortgage.

People have been moving out of London for decades. Likewise, I am a Notherner who moved to London for work. I don’t know why you have have to make it a “them” and “us” situation.

@SweetieDarlings but I already said they won’t hence the birth rates.

Because there are still many people desperate to buy, due to the shortage of rentals. But also, people who aren't desperate to move are simply staying put, instead of selling for a lower price. Especially those who overpaid during the Covid boom.

@Glamorous24 I certainly believe that there are cheaper areas, and cheaper housing in London, but it's still crazy compared to the rest of the country.
A quick look at Rightmove, 300K in zones 1-4 only buys 3 bed properties with problems. Hence all 'in need of modernization', 'cash buyer/investors' only, etc.
Near Manchester that would be a 3 bed semi in good condition, good size, garden and driveway.

If house prices drop, won’t people be trapped in negative equity?
Also the question should be why aren’t their affordable housing because especially in London plenty of fancy apartments being built.
I’m glad I live in North East.

There have been a spate of threads here recently with parents (even some from, erm, 'oop North) giving their kids several hundred K, to buy a London house.

this is the interesting bit. The country is broke and we have a huge issue with the shift in population demographics and funding a NHS/social care. Income cannot be taxed more much particularly with the stagnant wages we’ve had for years. I think government will start to tap into that housing wealth.

Prices in Manchester have soared and I believe a lot more young people are heading/staying there. People will look to other cities.

Because they sold off most of the affordable housing and haven't replaced it with anything near the amount actually needed to house people. Not just in the capital but anywhere, we know why there is no affordable housing.

The question should be why is there no incentive to build any new affordable housing?

If house prices drop, won’t people be trapped in negative equity?

not for many

There was an article last week about the large number of first time buyers in London that are either cash buyers, or have massive deposits, all thanks to family. The high cost of housing is bolstering inequality.

Re: some areas of London being cheaper. People still want / need to be near their families and support networks (especially with young children), and some areas that are cheaper (not all) don’t feel safe. I say this as someone who is very happy living by Peckham, but when I lived somewhere that my year 1 child came home bleeding after being attacked in school, damned right I moved to a better area, like a shot!

DFL (down from London) has been a thing for a while.

Having said that, the big city lifestyle, I think, doesn't suit everyone.
Many British people see a house with garden as the pinnacle of achievement - no idea why when the weather is too shit to sit outside most of the time anyway.

Even in London, many expect this. When most metropolises (London, New York, Paris, Tokyo) are filled with flats. @SweetieDarlings a 3 bed terrace isn't an 'ordinary' house in cities like this. That would be a 3 bed flat. And flat prices have stagnated somewhat.

It's a mathematical fact - the more densely populated an area is, the less the amount of space for housing. A block of flats on the same land can house thousands more people than houses.

People need to distinguish between having suitable housing, and having the house of their dreams. If they want a house, and are low earners then maybe London isn't the place for them. Can't have it all - landed property and big city buzz. Even if every square inch of London was built on it would be impossible to fit everyone into houses.

Because there isn’t enough profit in affordable housing.
If house prices drop in the whole country, people will be trapped in negative equity in the North East, maybe not the South East.

There is lots of overpriced houses/flats still sitting on the market. I’ve seen houses reduced by 300k plus and they are still overpriced

If house prices drop in the whole country, people will be trapped in negative equity in the North East, maybe not the South East.

Are people more likely to have mortgages in the NE?

We’ll just wind up with a two tier society:

1. people whose parents either didn’t/couldn’t buy property, or did but they didn’t inherit (care fees etc)
2. people whose parents bought property and then inherited the property or the value of the house

It’s already starting. My parents and in-laws are all in their 70s and our financial future looks completely different depending on whether they need care or not - these are all ‘normal’ workers whose £30k houses from the 80s are now worth over £750k now.