To not understand how people afford next house up?

[evilnaggingwife]

We purchased our first house about 3 years ago. A 3 bed terraced house with a tiny garden for around 230k. As first time buyers, we only saved a 5percent deposit and got a mortgage with a high rate! That will end next year when I hope we can get a more sensible rate.

Our house has probably gone up to around 280-300k I'd imagine based on local prices.

dh and I earn around £60k combined (although he is self employed so always tricky to prove income). We have saved enough to pay cost of moving and stamp duty and fees etc of next move.

I keep looking on right move and houses that I would consider next one up are stupid money. I'm talking 3 bed semi with a drive and larger garden... £400-500k!!!! How on earth do people manage this? Are we stuck here forever?

I go to a mortgage calculator online, it tells me how much I can borrow and when I do a search on right move the same types as our house come up... Terraced, not in town, no drive, small garden, small 3rd bedroom.

?

OMD I'm so glad you started this thread

I keep having to explain to people why I can't afford to move. I feel guilty complaining but living in a small flat is starting to do my head in. Thing is, I bought 12 years ago. Prices have gone up such that getting an extra tiny room is now so much extra I can't do it.

So for example, 12 years ago, a bigger flat might have cost about £50k extra - say an extra bedroom and a separate kitchen rather than a studio area. Now that same extra space, in my area which tbh has gone downhill, is going to cost about an extra £150k, that's on top of the amount my flat has made.

my flat making money doesn't benefit me unless I leave London completely but I don't want to leave my family and friends. So I have to accept living in a small place for life, probably, at my age. I don't feel that anything is worth the £100s of pounds per square foot either.

I don't really say anything in real life because it seems like such a first world problem. But just today a colleague said "it isn't great for your mental health, living in a small place and in a crowded rough area". It isn't, no, but many areas that were quiet are now rough and crowded - mine was another planet when I moved here. my commute is already quite long - I'm on the border of Zones 5/6. So I don't think adding to that is a good idea and train prices are very high too.

I wish there would be a house price crash. If prices went back to what they were 8 years or so ago, I could afford to move. It also seems insane to spend any of my savings paying such stupid property prices.

Without going all HPC-loon, increased availability of credit is what has increased house prices. Banks didn't used to take women's pay into account at all for mortgages, and then it was 3 x main salary + 1 additional earner salary, and then suddenly it was 5 x joint salary, and BOOM.

Ah ok. So Women working (women have always worked) wasnt the cause of price increase (considering that their incomes werent taken into account) its the change in how banks offered loans that changed the house prices.

I got my 1st mortgage in 2007 - interest only, 10 times my salary. Insane really but without a doubt a superb financial desicion for me personally. Set me up for life.

House prices started to go up dramatically as more women continued working after having children.
When there was only one working they were cheaper because how could anybody afford to pay much more when the wife was at home minding the family and home.
When we became dual earners we became dual spenders and not only did house prices rise but people's expectations now they had 2 incomes.

I can remember friends having the attitude of not wanting cheap and cheerful and bog standard, they deserved more because they both worked.
They sometimes wanted to give their dc more than they had themselves etc.

House prices started to go up dramatically as more women continued working after having children.

So at the birth of the human race then? As i said, women have always worked. What date have you got fixed in your head before which all mothers stayed at home?

so basically house price rises are the fault of the working woman

You'll have people queuing up to tell you it's all about expectations/hard work/doing up dumps yourself on a shoestring/maximising your income/moving somewhere cheaper OP. The real reason is that we are in a massive, unstable housing bubble that is completely out of kilter with economic fundamentals, and policymakers have absolutely no idea what to do about it, other than keep trying to convince everyone they can to keep propping the bubble up.

It's totally unsustainable and you will find loads of people who have benefited from it trying to tell you that's just how things are these days and you need to suck it up, or that the problem is somehow with you.

The problem isn't with you, it's with our fantasy asset price economy, but who knows how it will all end. One thing is certain, younger generations just don't earn enough to keep the bubble inflated much longer, so unless the govt can convince even more overseas investors to keep buying up houses at these prices who will be doing the buying in a few years' time?

Come 2020-2025 loads of the older generation will need to downsize or need to go into care, and it's not clear who of today's current under-40s, with high student debt and stagnant incomes, will be able to pay the current prices. It doesn't look like there are going to be massive wage rises any time soon....

No they are the fault of the banks cottoning onto the fact they could exploit the changing atmosphere wrt women working and adjusting their selling accordingly. They had an untapped source of money, they tapped in.

Based only on people I know

• shite studio/1 bed flats in London when single

• met and married a partner who had another shite flat. You rent one out, live in bigger one

-prices go crazy, you get pregnant, sell both and move to a house -your income drops as you have kids/go part time / take years off -parents pass away, leave you some money, you extend or move to your "forever" home

i don't know Anyone with children who bought a house in 5-7 years and has been able to go next step up without inheritance.

We have found that as our incomes have increased from starting work at 21 to now a decade later, we have been able to afford more.

Our jobs are graduate level / professional ones, which perhaps offer more scope for increases (and sometimes bonuses in good years) as time goes on?

I hope you find a lovely house soon OP

House prices started to go up dramatically as more women continued working after having children.
When there was only one working they were cheaper because how could anybody afford to pay much more when the wife was at home minding the family and home.

Funny how this coincided exactly with Thatcher's deregulation of the mortgage market, including caps on income multiples

We had our first child while living in a 2 bed flat. We moved up to a 4 bed house with garden, garage, drive etc by buying something that needs a lot of work. But we're the sort tondo the work ourselves, so for example a quote for our new planned kitchen to be fitted was approx £15k. We've budgeted £6.5k doing everything bar plasterwork for ourselves. We plan to add equity this way. If we decide to move once it's finished we should:

1. have been here long enough to have paid off a wedge of the mortgage
2. added value to the property.

We may well inherit at some stage. But realistically that's likely to be needed if either child wants to go to uni.

OP - whereabouts do you live?

House prices in some areas (such as London and SE) really have increased significantly year on year, so it probably does feel like goalposts have kept moving

Martha of course it was the banks, but they wouldn't have done it if it wasn't for the increase in women working.
Yes, some women have always worked but until recently the majority of women didn't.
It was the result of changes in society that let the banks do this, not the fault of women working, but certainly the result.
I saw it with my own eyes, the change from meeting lots of mums in the playground, to seeing lots of gp's or childminders.
Car parks and roads being jammed as women dropped the dc off before going to work, where previously they walked and roads near school were pretty clear.
I'm glad to see we have moved on and now it's dad's dropping off as well

People are struggling now and as the OP finding it hard to move up, but whilst people have homes and are paying these prices they will continue.

I'm fine about renting, really, but it is better financially if you can buy.

OP's perspective is exactly why I never understood why house-owners are supposed to like rising prices. I always despair about house price inflation because the gap to move "up" is bad for everyone.

Newly wed couples want a 3 bed terrace rather than single bedr. flat. People who would have had 4 children in a 2 bed small terrace, 70 yrs ago, now want 5 bed detached. I don't blame dual income for that. (and definitely not the female share of household income!!)

Yes, some women have always worked but until recently the majority of women didn't.

Really? Link?

We lived in a grotty flat in zone 2 London for 10 years, which is 5 years more than we wanted.

Had zero chance of upgrading in London. So we sold up and moved to the west coast of Scotland where we doubled our space for half the price. Only way we could have done it. We are on about £70k as a couple which isn't enough to afford anything decent in London but is a totally different kettle of fish up here.

According to your figures, you've made £70k in 3 years. Of course, other house prices will have gone up too.

Is 5% deposit a normal kind of amount? A 95% mortgage? That would petrify me and it sounds a little as though to move up you need much more income.

How much of the £60k do you save per year?

It's a combination of luck and work. Some people are just lucky and reaped the benefits of a rising market. Others bought and sold cannily. We started small, did it up and moved on. However years of hard work has made bugger all difference to where we are now. We bought at the top of the market in 2006 and 10 years later I'd be lucky to break even on the mortgage. DH and I are now in the process of saving up another deposit as we are now in the position of trying to pay the mortgage down on this place and start again from scratch, as we'll be lucky to walk away from this place and break even.

The next place I live will be my forever home. However my tastes are not particularly demanding - I'm not after a 5 bed detached or anything like that. I am also prepared to move areas completely to get more for my money.

I think a lot of it is luck for a lot of people.
My dh has a £3k inheritance (22 years ago) which paid the deposit on our first place which we just happened to buy at exactly the right time in terms of house prices. (Our ll wouldn't let us put anything up on the walls and we didn't really "settle" there as a result.) Have been riding on that ever since. (Second house increased in value, but not by ridiculous amounts.)
Our current house is also the one that hadn't been touched for 35 years and is a "project". None of our friends would have bought it. (They have really nice - but much smaller - homes.)
Our income has also increased over time (bought fresh out of uni).

I remember my first boss when i was a teen telling me that i should always buy the most expensive house i could afford. He didnt expand on why and it seemed to be the opposite of what i thought made sense (buy the cheapest you can that meets your needs = paid off quicker, easier to manage if rates go up etc)

Can anyone explain the wisdom in his advice or was he just talking shite?

Can anyone explain the wisdom in his advice or was he just talking shite?

When was he born? During the periods of rising general and wage inflation between the 60s and the end of the 1980s, there were bursts of inflation that shark the value of people's debts each time, so it made sense to buy the most expensive house you could afford, because a few years later inflation plus wage inflation would have shrunk the debt a lot relative to your income. That's why inflation (as long as it comes with wage inflation) is good for borrowers but bad for savers - it shrinks savings but it also shrinks the value of debts.

This is why most people who were buying during that period have an entrenched belief in the "property ladder" - because inflation helped motor that along. (The flip side of that is that most of those generations believe that the money they made on their houses was somehow an effect of hard work and good judgment, whereas in reality it was the operation of inflation.)

Since the early 90s we have been in a period of low general and low wage inflation (even negative wage inflation, or in other words falling real wages); but high asset price inflation. House price inflation became uncoupled from general inflation. Since wage inflation wasn't keeping pace, it ought not to have been possible for people to keep supporting rising prices -- so the banks and governments stepped in with low interest rates and a variety of financial instruments and incentives to keep people buying at ever higher prices even if they were actually often earning less. But they are often buying much later in life than their parents, and in an era of low wage inflation and low interest rates they will often not see significant increases in income to allow them to "move up" the ladder.

These days the "property ladder" doesn't work in the way it did for previous generations.