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.

We bought a 3 bed Vicrorian terrace in an OK area for £140k in 2004 (90% mortgage). We sold it for £165k at the end of 2012 and bought our current 6 bed semi-detached Victorian town house for £337k (80% mortgage).

We managed this by increasing the amount we earned. I retrained completely and now earn almost 3 times as much as I did in 2004. DH earns over twice as much.

House prices have gone a bit crazy since then, and it's now worth around £450k (we've done nothing to it in the interim). We've just remortgaged - we're keeping the monthly payments the same, but the current LTV means that we've been able to reduce the term of the mortgage.

Anyone on this thread going it alone?

yes - single parent to 3

Extend, extend, extend!
Our Victorian cottage has had the side return filled on and kitchen taken out into the garden to make a big eat in kitchen
And the loft has been converted to add a master bedroom and bathroom
Next step is to convert the basement to make a playroom, bedroom and study
When it's all done, we will have converted this place from being somewhere around 1100sq ft when it was built to just over 2300 sq ft
It's the way it is going in London, because Stamp Duty is just too prohibitive to a move.
Yes, we would like a bigger garden but the loft was done for the same as we would have spent on stamp duty if we spent the same as we would have got for selling, without spending a single extra pound on a new place

Spare, yes stamp duty part of my issue too.

Thing is as I get older I'm such a homebody as well...I'm going to have figure something out. Gah.

Both my DDs (30 and 26) are going it alone -one in SE London, one in Manchester
We have been able to give them each a hefty amount (inherited from DH family) and both had a substantial legacy (again DH family) some years ago . Otherwise DD1 would never have got on the ladder and DD2 would have struggled . We did it because DD1 was paying extortionate rent for a one bed flat, admittedly in an up- and- coming area- she has bought in a less desirable area but it is 5 mins walk from a station ( 20 mins into central London) , 2 bed with tiny garden and not especially 'rough' . Her mortgage repayments ( 4 times her salary )will be half her rent . The day she collected the keys the agent told her he could sell it tomorrow for £30,000 more than she'd paid , untouched - it took 6 months from offer to completion . 'Done -up' (it needs about £7,000 spending on electrics and the like.The rest will be gradual DIY ) about £45,000 more. Certainly a modernised flat down the street has just sold for that. It is no great advantage though, as if she were to want to move 'up' ( either bigger or a better area) the price differential is huge. I suppose her only 'hope' would be to meet /marry someone in the same fortunate position . Meantime she will let the spare room and at last be able to make decent pension payments, afford the odd holiday, theatre trip etc .She is only too aware how fortunate she is .

Your dc are very fortunate Postchildren that you are so kind.

Bought first flat with a mortgage and some inheritance money.

Bought second home - 4 bed house - in 2009, with hefty chunk from parents (which we're paying back). Interest-only mortgage for first few years.

Could never have done it without the financial crises/housing slump etc. Is now worth nearly 3 times what we paid!

Good luck OP, hope you find a solution.

We had a slightly different approach to most of our contemporaries.

Started worked in central London at the end of the 80s housing boom. Buying was completely unaffordable, so we just rented. As prices dropped significantly and then stagnated throughout the 90s we probably "won" financially because we didn't have buying and selling costs and rented somewhere smaller and cheaper to maintain than we would have bought - when our salaries went from graduate entry to managerial we didn't rent bigger we just stuck the money in the bank. I am glad we did buy after having DC in 2000 as it does give more security but although prices rose massively where we are between 2000-2006 they have been stagnant since and with rents below ownership costs our money could be invested as productively elsewhere and we would have far more flexibility. However having been mortgage / rent free for 15 years we would be in a position to move up if we wanted to. We have taken the decision that we are happy with our lifestyle and so would rather encourage our DC to become independent. We have 3 DC in a 2 bedroom flat.

When we bought, a normal first time buyer deposit was 25% and joint salary multiplier was x 2.5. The end of MIRAS and the exit from ERM predicated the end of 80s market change and I see a lot of parallels with tightening mortgage conditions, changes to BTL taxation, restrictions on HB, curbs on overseas investors and the EU referendum. Also there is a limit to how long exponential price rises can continue and I believe rental yields in London are 2.5% ish which do not in themselves provide a positive return to landlords. I believe the spiral will inevitably unwind - i.e. I agree with the analysis of pp on the economics.

Where I live (urban West of Scotland) a lot of renters also own a house which they do not want to / or cannot afford to crystallise a loss on at current market rates. The market generally is stuck around the 2008 peak but there are definitely winners and losers. BTL calculations do not work for the landlord here either and so with significant housebuilding all around me I think prices will be static or will fall for the forseeable.

In direct response to the Op my recipe for being able to move upwards is to live somewhere smaller and cheaper than you can afford so that you can save whether by overpaying the mortgage or using an ISA.

I think most people can only move up if they inherit/earn a lot more money.

You cannot expect to move up the property ladder just because the value of your house has gone up. I have friends who can't get their head around this, their 2 bed has gone up yet a 3 bed is even more out of reach now than it was before.

Will house prices really crash?! Our whole economy is built on a property bubble.

We first bought in our early twenties. Went without holidays and extras for a year or so. House prices went up.
We stayed in houses for at least 7 years though not a chance of moving up in 3 years.
We also overpaid while we had two decent full time wages coming in, pre DC.
We paid off chunks of mortgage whenever we had extras e.g. bonus, small inheritance. We had good payrises then and quite a few promotions over the years. Now we are late 40's we have a big family dream home, a rental property and atm looking for a holiday home to use in retirement.

A fair number of people here saying it was possible to ftb or move up, only because of inheritance or Help from parents. I'm not a fan of Help to Buy, as overall it must put prices up, but i do see the logic that it may be one way to level the playing field for those who don't have inheritance or bank of mum and dad.

if you think about it there have been two quite significant changes recently - the announcement of reduction in buy to let tax relief, and second homes capital gains surcharge (and some other changes last year). And costs of buy to let have increased in some areas with selective licensing schemes. It will be interesting to see if prices stabilise or even fall slightly over the next 6 months - though not that much sign of it in london and south east yet!

A lot of it is down to luck or timing (which can also be luck)

At 46 we will not move again unless its to down size, for anything better (bigger or better road or bigger garden or better layout) will cost us an extra 100k minimum

Luckily for us we live in a house which is more than adequate for our needs

A freind went to the bank to get a new mortgage to move from a terraced to a semi (or equivalent detached in a cheaper town) wages haven't changed but the bank has tightened up and now they wouldnt be able to get a mortgage to buy their current house!!!!

It was definitely luck for me. I was able to borrow loads more 10 years ago than someone on a similar wage would be able to borrow now. Also, I then benefitted from many years of very low interest rates (I was on a lifetime tracker also more luck than judgment).

Oh, also, this time round when we needed more room we didn't move - got a loft extension instead.

We were able to borrow more from the bank because the value of the house went up, so could still stay under the 60% LTV.

Increased salaries - between our first and second home, both DH and I more than doubled our salaries, and between second and third, we more than quadrupled. So that allows you to both borrow more, but also save more in the interim periods to put large deposits down.

I bought my first flat in 1997 for £40,000. My father gave me £4K for the deposit. I sold it just under 2 years later for £60K. My husband meanwhile had bought a flat for £50K and sold it for about £43K (in the 90s it was possible to lose a lot of money on houses - he had saved a £10K deposit which was why he wasn't in negative equity).

We bought a house together for £128K which we sold 4 years later for £192 and bought our current house in 2003 for £282K. It's probably worth around £400K now and the mortgage ends in just over 5 years (sooner if I can manage it). We have stayed in a smaller house than we can afford in order to get rid of the mortgage asap. Once you have a paid-for roof over your head you have a lot more freedom and have to worry much less if you lose your job. My husband is in his early 50s and I can see the next time a redundancy round comes around he'll be made redundant because of his age.

Oh never compare with your parents. It was a different world back then.
My family always had three bedroom detached houses with large back gardens. It was possible then. What changed was the level of comfort: house 1, garden became allotment to feed us, decor wasn't great tbh, we were skint. House 2: still skint, but garden was for play. House 3: not skint, house in great shape. House 4: converted an extra 'wing' that used to be an outhouse, added conservatory etc.

We moved up because our income went up and we overpaid on the last mortgage. Will probably never own a detached house, though.

My parents had a council house, so we are better off. It is a different world for us, mum and dad struggled to pay rent all their lives and one day we'll be mortgage free. Most of their peer group had council houses. They have passed away now.

Certainly a lot has changed in the past 30 years or so, but when I overhear younger (late 20s) colleagues talking about it, and how difficult it is to save I silently thank my younger self and DP for not:

1. expecting to have at least two holidays a year
2. owning a flash car
3. spending £10Ks on weddings
4. having the latest 'smart' phone, tv, sky package etc.
5. never cooking, despite a kitchen full of expensive gadgets and top of the range appliances.
6. going out every weekend to expensive venues.

As others have said, unless you inherit, the only way you can get the cash together for a larger deposit is not to fritter money away on transient luxuries.

Agree not to compare to our parents generation - they were rather a 'blip' - the generation before is more like this one - most working class people never expected to own and rented long term - pre-war most from private landlords, not council (the move into council housing was only from the late 40s/50s onwards). There weren't lots of spare money, posh holidays and cars or other consumer goods. They didn't have big generous pensions expecting to live 20+ years after retirement, 'lunching' and enjoying decades of leisure time.

My parents started married life in a rented bedsit back in 1967, then bought a three bed terrace in 1970, before moving to a three bed semi in 1980, and finally a two bedroom "retirement" bungalow in 1999. By comparison DH and I have done rented two bed tenement, rented two bed flat, bought three bed cottage flat, and now bought (mortgage fully paid) three bed semi. The semi was FP £90k in 2003; I think they go for around £150k now.

Everybody seems to extend around here. We decided against it despite having three children ( we sleep in the living room to give them a bedroom each). A back of house extension wasn't possible as we're too close to the hedge boundary at the corner. Loft conversion would mean losing the front bedroom to stairs so no point. Instead we had a small (8ft by 6ft) summerhouse put in at the bottom of the garden as a bolt hole. Two two seat sofas, TV with DVD player and tea and coffee making facilities. Fully heated for winter too. Very comfy it is.

I do wonder people need all the extra space, though. There's families with one or two kids, and in three bedroom houses with loft conversion, extension at back, conservatory at side, summerhouse in garden, I mean, bloody hell, all that cleaning! Couldn't be doing with it myself.

We're using the equity from our current house. We had a Help to Buy mortgage wit a 6% to buy this - 94% loan to value. Now, thanks to the equity, we'll have a 75% loan to value. We can't afford a bigger amount on the mortgage as pay hasn't increased and now we have a child, but the far better rate plus the deposit from the equity means we can take the step.

We also managed to buy just before the market picked up, so our equity increase has been quite good.

I don't think people are expecting too much.

My parents first house cost £6k. Twice their combined income. You're now looking at 4 times your combined income just to get on the bloody ladder.

I got screwed in the housing crash back in 07 so hate talking about mortgages etc!!

BUT my first house cost £120k. At the time, me and DP were earning £50k combined. So totally doable. Split with DP, he's still living there. House is now worth £400k. Me and DH now earn £50k combined. There isn't anywhere to buy for £120k, never mind a lovely 4 bed/3bath forever house like me and DP had!!! The only thing on the market here for £120k is a 2 bed top floor flat.

It's a totally different game now. If i'd have stayed with DP I'd have been sitting pretty. As it is, I'm off the ladder and no chance in the foreseable future of getting back on it. However, DH is lovely (I do miss my gorgeous old house though!!)

at least it is a house op and you own it. some of us only manage to own flats with young children, some do not even manage owning at all and are paying stupid amounts in rent. (far more than mortgages)

yes it is bloody annoying not to have got on the housing ladder earlier. yes the prices are far too high for the average worker/couple to buy and in your case the jump to the next level is a silly amount to pay. but you are on the bloody ladder.