How do people in their late 30s afford £600k+ homes in the South East?

[bluntscissors]

So many people I know with jobs worse than mine have houses worth £600k+

We are in the South East so £600k+ isn’t actually a super fancy house. Of course no one talks about their finances and it would be crude to ask.

I am almost certain if you have a house worth this much then you must have had at least £300k in cash for a deposit otherwise the mortgage would be too much.

My group of friends is only late 30s/early 40s so haven’t had decades to build up equity.

Is my hunch right that they all must have been gifted 100s of grand from their parents? This seems absolutely wild but I can’t imagine another route.

If you have a house that is 600k+ tell me honestly how you managed it?

How many people would you consider ‘lots’?

In London it’s about 500,000 people earning salaries of more than £100k

Is that people living or working in London though?

Those are stats for people earning in London.
Either way, its a lot of people.
Lots is not the same word as most, or all.

The median London salary is slightly higher (£49k) for people who work full time.

As pp's have noted, a couple buying a £600k house with a 90% mortgage of £540k over 25 years would need a combined salary of £135k assuming they were loaned a relatively modest 4x their income. This combined salary is above the median average but not by a huge amount. And some lenders will lend up to 6x income ... https://mortgageaffordability.co.uk/affordability-index

We know (from the national housing survey) that a third of buyers are also getting help from family & friends.

Obviously, if you're single, not in a couple, then it is going to be much harder to buy your own home. That is simply market forces at play and can be traced back to the 1975 sex discrimination act which made it illegal for lenders not to take wives' earnings into account when assessing mortgage affordability.

But a lot of those people will be older

For London residents aged 30–39 who work full-time, the median annual salary is approximately £55,000–£56,000: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/earningsandhoursworkedukregionbyagegroup

If they are close friends, and you ask them for advise on how to afford a 600K house, hopefully they will be helpful and truthful and not offended

@bridgeagapso not a 100k each

Are people still really borrowing 5.5 or 6 x their salary with current interest rates & COL. That seems insane!

They bought small flat when young did a house up and moved. People miss the boat when young happy at home dont want to live in a bad area in a studio flat but it builds equity and start paying some mortgage back. Do a property up and learn to budget as forced. Then in 15 years time it starts to really pay off. They may well be given a smaller deposit of £5/10k to get started but i doubt many people get £100k plus. Im of an age when properties were a lot cheaper but it sas still hard. No furniture dishwasher or central heating. You are happier to tolerate that when younger. But some of my generation werent only wanted a prestigious part of london that just not rich enough to afford. Bascially spolit at home. Thats why parents need to charge a decent rent to make young adults learn to budget. Also may have wasted money private renting. Not possible for everyone to be in this position but many may bad early life choices.

Equity from a previous house?

@Purpl have you seen what’s happened to flat prices? Much harder to build equity now.

We gained about 150k in equity without doing any DIY, it was just the market.

My daughter and husband had no help from family. They saved hard in their twenties and bought a small flat with the deposit. It was in an ‘up and coming area’ in S London and not on a tube route. Not ideal but their gamble paid off. Furnishing it was a struggle and they did accept hand me downs. They next bought a small house and made a profit on the sale of the flat. The house was further out and required a bus, train and bus to reach jobs in the City. After their first child was born my daughter continued to work full time. They moved to a bigger terrace house in a similar area-at a price that would buy a very large house in acres of land in our rural South Yorkshire setting. They have a huge mortgage and had no money for ‘frills’ but five year, and another child, in they can have occasional holidays. They spend wisely and earn City wages. No one has helped them out financially and there has been no inheritance or big wins.
My husband and I have been exactly the same-though people will doubtless say ‘boomers’ had it easy with our 13/15% mortgages. And high unemployment rates bringing uncertainty.

A lot of friends bought their first homes with help from parents/early inheritance and now live in homes worth a lot of money. Making savvy house decisions helps. A 600k home is not really a need in my opinion but a secure home that is affordable.

To be fair most people I know who are my age which is what you’ve described have parents in their late 60s/early 70s to in some cases early 80s. And many of them hand their inheritance or chunks of it to their kids as they dont need it all. Loads of my peer group have had money off grandparents who died say 10/20 years ago.

I would say OP most people I know have bought their houses with family passing down money- they may not have died yet though. Sometimes it’s just spare money.

But also yes there’s lots with high paying tech jobs/solicitors etc too. Or people
who work in trades and have done up their own houses, sold for a nice profit and moved houses several times.

Probably because you know you’ll have over paid it by then.

That’s crazy imo particularly with the costs of childcare, uni, saving for your own pension etc.

Its not remotely crazy. We borrowed 5x until DH is 70, a few years on our mortgage is only 3x our incomes and we're on track to pay it off by 60.
Had we waited, we wouldn't be able to afford our house. It's a calculated risk.

1. Because, as pp's have said, you are likely to get pay rises, allowing you to over-pay and thereby reduce the term.
2. Even if you don't, and want to retire at 60, at least you will have built up a large amount of equity in your own home that you can use to downsize, instead of throwing it away on rent (aka "someone else's mortgage").
3. Rent rises with inflation so, by the time you're 60-70, if you're still paying rent it is likely to be a hell of a lot more than your equivalent mortgage payments would be. And you won't own your own home, so will be much poorer in retirement.

There is a ticking time bomb of people who either can't afford to buy their own home, sometimes through poor life choices, or else don't understand the value of doing so. If those people also opt out of personal pension plans then its a double whammy for the taxpayer who will have to support them with housing benefit in their old age.

Lots of them know they’ll get inheritance by then, promotions etc

Or - just over paying by £100 a month can cut years off. Investments too and paying chunks if you can.

Our mortgage is for another.. 25 years I think but unless we move house again I don’t think it would take anywhere near that long.

I'm still amazed at how much difference small amounts of overpayment make. I wish I'd fully understood that as I'd have been much less nervous buying the house we have.

@FirmSnakeI think it is crazy with the current economic climate. However I don’t think it’s the norm for someone to take out a 40 year mortgage on a 600k house and then have reduced it by a decade in a few years…

Yup we over pay £150 and don’t notice it and it’s taken a good few thousand off in interest so far