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.

Exactly Whois, so as i said unthread , we went with the smaller space option. We made the sacrifice.

With the next move, we will double our living space.

The op asked how people move up the ladder.

Make a good strong first purchase, prioritising location location location. That will insulate you to a great extent from dips in the market but you will reap the gains when the market is bouyant

Enjoying, the OP was talking about moving up to the next property though. So you could move ten metres away but if you wanted to get a bigger place, could you afford it?

If school districts are a big issue in London then I need to find out where the worst ones are. But are t schools a bit of a lottery? Friend of mine just got her kids onto fourth choice.

The op asked how people move up the ladder.
But that isn't moving UP that ladder exactly - you went for a house costing £x which was in a great location but smaller space than you could have also had for £x.

You are now buying something for £x+y (or maybe £x or £x-z?) which has more space but a less premium area. So its a sideways move, not a move UP the ladder.

Unless we only think the ladder is about size and not about location. Which I don't think it is. 1 1 bed flat in a private block in mayfair is a hell of the way higher up the latter than a 3 bed semi in Scunthorpe.

I don't feel I'm expecting too much. I would love a three bed semi with drive and decent garden. This is the same house my parents started in... When my mum wasn't working

Times have changed! My parents bought their first house for twice my dad's annual salary - my mum didn't work and it was a three bed semi with a garden. My husband and I both work and will probably never afford somewhere like that. Twice our combined annual salary gets us nothing.

It's no secret that I strongly feel we should be creating a lot more social housing. It puts a muffler on house price inflation and, with an adequate supply, you can go back to lifetime tenure so renting isn't nerve-wracking. Plus it boosts local economies by creating work.

Even if everyone's souls are too Tory now to approve of centrally-organised public housing investments, why aren't there more housing co-operatives doing the same thing on a smaller scale?

Enjoying, sorry we cross posted
How do I reap the gain when my place has gone up by X and the place I'd
like to move to, with a small extra room and actual kitchen, has gone up by X multiplied by 2?

£500k in London terms is nothing. My little brother's two bed in a grotty part of Brixton is worth £490k

Exactly, this is the segment that is booming... but it really shouldn't be because how many people in London REALLY have a household income of £100k and want to live in a shitty 1 bed flat in Brixton? There has been a total disconnect from actual normal duel income and house prices. Average house prices in London are like 10x the median income, if the foreign money dries up/the BOMD is exhausted then who is going to prop up the pyramid scheme? Meanwhile I feel rising panic that I should chuck my money into a shitty 2 bed flat and move out of my lovely rented lovely located flat :-)

Although for £500k you can NEARLY get a whole house in Leytonstone, or in wood green etc so its not fair to say that £500 is nothing.

£1-£3mil is doing very well.

Not really - the big family houses maybe, but there has been reduction in transactions over £1m and a reduction in offer prices.

Back in 2011, my parents decided to convert a barn within the grounds of their house to accommodate my newly-divorced sister and her two children. In order to 'even things out' (and do some planned inheritance tax avoidance at the same time) they gifted me and my other siblings a share of a small central London flat my father had used as a 'pied de terre' before he retired. Even owning any property in that location seems like the stuff of legend now! I lived in it for a while paying rent to the others, then when I married, we sold it and I used my share to put down a pretty hefty deposit on a small 2.5-bed terrace in a much less fashionable part of London.

Luckily, I had used the barn conversion project to learn some DIY skills which I put to good use adding value to that house. I can do most things, except proper plumbing and electrics. I actually enjoy DIY and gardening and consider them hobbies so that hellps. House price raises over 3 years (my house earned nearly as much as I did) gave me a good chunk of equity too. I now own a bigger 3-bed semi with a huge garden in an expensive part of the commuter belt - prices rose in that area at the same rate as in London though so I didn't gain differentially from the London market. This house is absolute wreck and again we will fix it up ourselves (mostly me) but I refuse to max out on a big mortgage that means we will both have to work full time because I want to be around for my children and am happy for a bit of a simple life to do so. Many of my friends own much swisher houses and have the cars/holidays etc to match, so that's a choice we've made.

With that in mind, I would tend to agree with Martha even though my life choices echo NewLife's - laughed when you mentioned the Good Life - SIL's nickname for me is Barbara, she of course is Margot! I think the very sudden leap in house prices happened around the turn of the century when there was massive destabilisation of the economy, working women being a norm long before then. The insidious creep is also to my mind more driven by chronic undersupply (lack of building) and then low interests rates before the lending habits of banks. Let's not blame the house price disaster on the working mother!

To summarise, even though I have put some work in, I wouldn't have had a hope of getting into the London market without a wodge of family cash. Aged 27, I had been a student until 25 (PhD) and only had two years of a research job, so not a super-salary under my belt. I look around me now and think that things are much much tougher housing-wise for working families than they were 40 years ago and it is not just to do with rising expectations I'm afraid.

That's fair enough op but you don't need to get a bigger house each time you move.

I London suburbs. Bought our 3 bed semi, small paved garden, 13 years ago just before birth of first child for £290K whilst we were both full time workers. It's now valued £690K and no chance of moving as still SAHM which is what we both want. Will have to move out of London completely for a bigger house even when I go back to work. We miss not having a garden (for a tranpoline!) or an extra reception room but the children are happy, healthy and near Grandparents, good schools, parks, etc. My DF bought their 4 bed Georgian house, same town, in 1975 for £21K and on one very average salary. How things have changed. All the large houses over 4 bed, around here are mostly occupied by established home owners who are aged 65+ or the super rich.

What is happening is that when new housing is being built, there is property at the bottom rung of the market as there is an obligation to build this, then it jumps to the 4/5 bed semi or detached as this is what developers make most money from.

What ISN'T being build are affordable properties in the middle. Which is pushing the price up in that belt even further too.

What you end up with, is a concertina effect pushing the price up at the bottom. If you can get out of that, you can get a lot for you money. But hardly anyone can manage that. Most that do, do so as the result of an inheritance at the moment.

10 - 15 years ago, this wasn't the case as people were increasing their equity much faster due to how price rises, and even though the prices were on the rise, the important bit was actually the equity.

I don't see it changing, and I don't see there being any thought put in about the middle of the market as the political mileage (and actual greatest need) is at the bottom. The trouble is, unless you do find a way to move up - which is staying in the same area as much as increasing space, then the problem will pushing up prices in the middle band further due to the sheer demand and significant overcrowding for those living at the bottom of the chain, whilst you have huge family homes with a single elderly occupier.

We are in effect currently now waiting for the baby boomers to start dying off in order for the market to maintain movement.

I think overpaying is the key. Do it as soon as you get your mortgage. If you can't afford to overpay then you can't afford a bigger house.

We won't be buying in the near future. We are in London and the prices are terrifying. Our house has increased 50% in 5 years. That is serious WTAF

We fit into our house, are very close to the City and end terrace. All positives as far as l can tell. Yes l'd love a driveway, maybe another room and a bigger backyard but is it worth £300,000 more than my current home? Fuck no.

Constantly increasing house prices are what makes it possible to keep climbing the house price ladder.

Say you have an income of 60k and savings of 10k. That's a 5% deposit on a house of 200k and the bank won't lend you more than 190k no matter what your income is because the deposit margin protects their investment so you can't buy the 300k house you would prefer. However, you do have spare income to service a larger mortgage than you have, so you overpay as much as possible. You also hopefully progress your career at least a bit.

Time passes - maybe 7 years or so - house prices have risen. The house you aim for that was worth 300k is now worth 400k but your 200k house is now worth 265k. Meanwhile your mortgage has reduced to 160k due to your assiduous over-payments so your equity/deposit is now 105k instead of a measly 5k. Meanwhile your combined income is now 84k (5% per year on average) so the bank is happy to lend you 3.5 times this income which combined with that equity is enough for the larger house.

It only works like this if house prices keep climbing, which is why the government keep funding schemes to help people buy so as to keep fuelling the market and stopping any stagnation or crash.

For those asking, I live in a commuter town about an hour outside of London. It's a lovely town. Good schools etc. Moving to a cheaper location isn't an option as husband needs to be near London for work.

Our interest rate is well over 5% because we were first time buyers with a tiny deposit... It's all we could get! For our terraced house we are paying over £1200 a month in mortgage bills. Not much chance to overpay. Especially as I'm also paying £500 out in childcare.

Could extend. Downstairs loo, go into loft but I don't want to spend too much as not my forever home and I don't think it would add significant value.

Lots of good advice here re looking into whether this mortgage is best for us, waiting til childcare is out the way and overpaying.

Maybe I just need to wait it out and see what the situation brings in a few years.

Good point whois had forgotten that! Although the initial rate would have been much higher than more recent deals...

Firstly - bollox to the whole working women line - my mum is 70 and we ONLY managed to buy our first house because SHE worked (1972) and saved the deposit - and continued to pay the mortgage when my dad buggered off

I would say 70% of her female friends also worked - it's not a new concept

Oh yes and I purchased my first house aged 28 for £25k - shit area but the seller paid the deposit

Money from that went into the 4 bed I got with DH aged 31

Equity from that was my divorce settlement aged 40

Purchased new build using equity and mortgage - sold 5 years later with £60k equity - purchased current 4 bed last year (compromise is it's a semi) £150k held back 30 for renovation - now worth £190k - £70k equity

will sell in 5/7 years and buy a smaller house with smaller mortgage as kids grow and head off to Uni etc - plan to keep going until mortgage free

But I don't live in an area where house prices are stupid - although 4 beds in this town range from £95k for a nasty dump in a crime zone to £450K for a new build box

I haven't posted before just lurked....

Anyway we will be able to afford the next house (which incidentally will be smaller!) because we bought a cheap doer upper and have done the doing up ourselves.

We don't live in an expensive area and our street is not what I would call desirable but our house is nice and very large. Our street is mainly bought up by landlords and ours will most likely be sold to one and they will make a bloody fortune renting it out. We could rent it out ourselves but would have to save another deposit and I don't want to wait that long to move!

Also to the pp who asked how anyone can buy at 18 - I bought at 19.

I've worked since 16 and me and oh simply saved every spare penny for about a year and got a mortgage with a 5% deposit - our interest rate is high but should be better when our fixed rate ends and we swap to a better deal / get a bigger mortgage to buy the next house!

To be honest though if we lived in the SE or London I imagine we wouldn't have a cat in hells chance of buying anything - let alone a four bed house! It's a lot easier and a lot cheaper here (Yorkshire!)

Anyone on this thread going it alone? Just curious.

Who knows what will happen to house prices in the near future ! According to Radio 2 news item today London prices are dropping (I suspect because of loss of tax relief on BTL, so properties being put onto market?).
DH & I bought a dump in a cheap area. Not with an eye to doing it up and making money, but because it was what we could afford (unless we bought a flat, and then you have other problems)

I'm on my own but not the proud owner of a mortgage, i rent. And unless things change dramatically i cant see me being in a position to buy any time soon. If only i'd been smart way back when i was in the bank

BMW6 I could only afford a flat. Wondering what problems you're thinking of? If I did get an extra room iD still on,y be in a flat.

Martha, do you regret not buying before?

I suppose she could have been working full-time from 16, but would a bank give an 18 year-old a mortgage?

they gave me one 2 months before I turned 19. Why not?

I had a good deposit, good credit and a full time job. Why would my age be an issue?

We bought our first house 12 years ago for 185k with a deposit of about 45k. Joint income was 45k. Sold for 195k a few years later and bought house 2 for 300k (joint income was 70k, mortgage about 250k). House 2 is now worth about 400k, mortgage has been paid down to 200k and our joint salary is 90k so we could afford a 500k house or maybe more if we stretched ourselves. I think you'll struggle on 60k joint income, sorry. It might work out cheaper to add an extension to your existing house if that's an option for you.

Absolutely! If i hadnt become pregnant with DS1 i would have been on track to buy around 2006/2007. i got pregnant in 2004 and had to use savings as a deposit and rent on my own place and buy furniture and baby stuff, and also to support myself through maternity leave. Cant help but wonder what i would be sitting with now in terms of property if things had gone to plan.