The reason young people can't afford to buy houses

[GrabtharsHammer]

Is because they all have iPhones and Sky telly.

So sayeth my mother.

Nothing at all to do with the ridiculous house prices then? They are baby boomers and bought their first house for a few thousand quid on my dads modest salary.

Apparently the youth of today just need to get rid of their gadgets and telly subscriptions and then they will easily afford a deposit and mortgage.

Are everyone's parents this judgemental and out of touch or am I just particularly lucky?

(Fairly lighthearted) AIBU?

I agree about 10-20k cheaper six, there's something to that. It's just that when people are talking about doer uppers as a solution to people being completely priced out in whole regions, kind of by definition the properties they mention need to be more than a few grand cheaper than the price for an immediately liveable home, iyswim. Either that or what they're saying is completely useless as a solution also a possibility.

If we were in a position where FTBs could feasibly access a small but suitable property at an age where it has some chance of meeting their needs (so eg telling people in their late 30s with a baby that they should be satisfied with a studio as a starter property is stupid) and the only problem was that it was a bit dated, that would be a huge improvement.

Quite a lot of cheap properties would fail a basic survey so impossible to get a mortgage on. Thinking mining areas, coastal erosion, subsidence etc. So they look cheap but you have to be able to risk losing the lot - assuming you have the full asking price in cash.

We bought what we thought was a cosmetic doer upper but the faff caused by the level of bodging once we scraped the surface was extreme. With a doer upper you need to have a lot more than just deposit/fees saved - rewiring and other basic safety/keep the place standing works cost a lot of money!

So if ther real reason is that house inflation has outpaced wage inflation over decades, then we have to examine why. Presumably the cost is following the law of supply and demand and there must be enough people who can afford high prices to keep the prices at that level. People who can;t are then forced out of the market altogether. In other words, there is not enough housing. The only medium or long term solution is for more house-building and/or less population growth and/or better use of housing stock that exists ( brought about by some kind of penalty on under-occupation).

I think it's definitely a supply issue in our area. There is land and plans to build but people keep opposing it.

Spot on notgettingyounger. Inflation is only caused by too much money chasing too few goods.

The problem is not that there are enough people who can afford the prices, but there are enough banks willing to lend those sums. House prices are coupled to bank capital availability, not individual earnings. The massive increases are only maintained at the illusion of repayment affordability because of low interest rates and a marked shift to interest-only mortgages. I bet when you scratch beneath the surface a substantial proportion of those borrowers have no capital repayment plan in place, which is a whole other unexploded bomb.

Interestingly, historically rents were coupled to earnings because that's where the money came from (i.e. people didn't borrow to rent), but prices are now so high that landlords in places like London need to pass costs on beyond affordability levels.

More efficient use of current housing stock would help, but it is not sufficient to keep price inflation in check. That would require surplus stock of all types of housing, in all areas. Massive building of every type of property is the only way forward.

Which when you consider the banks are lending money they don't actually have - fiscal lending I think it's called - you or I would go to prison for fraud if we did that ... The system is rotten to the core and yet given the opportunity to address it WE did nothing. Where were the marches in 2008 against the bankers ?

The banks will lend. My postman son eg can get £100k or possibly a bit more. So the problem for most people and it is a problem only in the few expensive areas such as London and outer London/ SE, is there are no or few properties in the £100k to £200k band in some areas.

30 years ago this was a major issue which is why I have slummed it out in zone 5 in areas many won't live in for 30 years as we couldn't afford. I remember we had a choice of tiny flat in Acton (hardly zone 1) or tiny terraced house a bit further out. We went for the latter.

So the state is trying to solve this. Then new 3% extra stamp duty for second home owners will help. The taxing 40% tax payer landlords with mortgages on income they don't make from letting the property (the interest rate tax changes) will help. Brexit will help as it has already stopped some people buying (and what happens at the £1m luxury flat market bought by foreigners in London is utterly irrelevant to our mythical couple both earning £25k a year so we can ignore that end of the market with 12% stamp duty on +£2m places).

When companies cannot get workers then they relocate (or offer staff accommodation in some sectors - the old nurses homes, the teachers' houses I lived in etc) where they can do. That always has an impact.

Look at a £300k property in Chesham say with a 90% mortgage ( £270k 3% repayment mortgage) £8100 interest at year, £10,800 capital a year = £1575 repayments a month. Our couple need to raise £15k each as their half of the 10% deposit which is the hard bit. IF ( a very big if) they can raise it and pay the stamp duty (£6k or so) they then need to pay £787 each a month mortgage. If they earn £22k each and each work full time (no babies for them yet) they have £1833 a month each out of which to pay the £787 mortgage which leaves them £1k a month each.

So affording their loan is not the problem in my view. It is getting a deposit together.

Take us back to 1984 when I bought at £40k. Say £36k loan. Our wages were each £7500 a year. (33% basic rate tax, 12% interest rate, tax relief on mortgage not worth very much by then due to high London prices)
So we borrowed 2.5x the joint wage.
Our Chesham couple borrow 6.25x the joint wage.
Looks like a massive difference but the interest rate now is 3% not 12% so it is not quite as simple as that and the tax rates are lower now.

However it is very hard and I am not saying it isn't. I suspect now our Chesham couple have a bit more after tax and our 1984 couple have BUT the biggest problem of all is how to raise that massive £15k each person deposit. If our couple live at home and save £1k a month of their £1800 a month net salaries each that is £24k saved in a year. However as people say above not that many people have parents who allow them to stay at home rent free for a year.

. I bet when you scratch beneath the surface a substantial proportion of those borrowers have no capital repayment plan in place, which is a whole other unexploded bomb

Do people still take out interest only loans without a proper saving package? I thought that interest only mortgages had more or less ceased when people got their fingers burnt a decade or so ago when it came to light that lots of endowments would never cover the amount borrowed.
Surely buying a house on a repayment only mortgage and without an assured concrete plan of paying off the capital you are really just renting the property on a long term basis.

Six - I know three people personally who've taken out interest only mortgages with no capital repayment plan. They've lived for a decade paying a few hundred a month, rather than a thousand. They might make some equity but they will have to move eventually. It's like renting but without having to move at a landlord's whim and without inspections. I can see the appeal. Our standard of living would have been very different with that extra £700 or so pcm. One of them had absolutely no idea that when the mortgage term expired, the bank would be asking them to repay the capital. They thought they could pay £300pcm to stay there until they died. I think it's a sort of hidden issue.

Not sure whether people are still able to buy IO without a repayment vehicle, but there are definitely still lots of people who did so in the past few years, haven't started paying back capital and still don't have a repayment vehicle.

Looks like a massive difference but the interest rate now is 3% not 12% so it is not quite as simple as that and the tax rates are lower now.

It pretty much is, though. The higher interest rates don't come anywhere close to narrowing the gap because people now are having to borrow so much more. So yes, still a significant difference. This is before we even start to consider the eventual positive impact of high inflation for people who had taken out mortgages.

Now I understand why people's repayments very so enormously on the 'how much is your monthly mortgage threads'. I'm very anti risk so I have always opted for repayment mortgages and as long a fixed rate as possible (even though we have been paying 1% over SVR for the past few years). I'm sure we would feel much more financially comfortable on a day to day basis if we were interest only but I don't think I would be able to sleep at night.

Although it's been hard, I'm very glad we opted for a repayment mortgage. We do have to move, because we will never pay it off, but we at least have some equity for our efforts.

No I don't think you can get them now, the interest only mortgages, but ten years ago they were easily obtainable without any proof of an equity repayment plan.

I just went onto a mortgage calculator and apparently our mortgage would be £550 per month less if we were interest only. I'm not surprised that people are tempted by IO but it would never be for me.

The people with interest only morgages are possibly hoping that some form of scandal emerges where "they didn't know" they were only renting from the bank.
Could be a big bailout again down the line, like Ppi on steroids.

Enormous I was playing around with zooplas mortgage tool and if you put the loan amount down to what the price down to 90's level and the interest up the payments aren't that far apart (considering it's London and 20 years ago).

Even if I could live rent free in London (commuting is the really expensive part for me atm). I'd still need to meet (and marry - that's just me) someone with similar savings to buy something small.

My last boyfriend had £20k in savings but he dumped me should have just refused to be dumped

I'm currently watching an old episode of location location and there is a couple looking for a 3 bed basement flat in Edinburgh for £600,000

And this episode is from 2008 I think.

This thread has made me reevaluate how I see my mortage. Me and my husband spoke last night and we're going to overpay on our mortage as much as we can while we don't have kids and both have an good income. We've always been very careful with money but since getting the house and getting married we've had a year of enjoying ourselves and it's probably time to be sensible again. It's so much easier to do when you have a tangible goal in mind rather the gap between the haves and have nots is insane.

WRT doing places up, I am shocked at what people think they should be paying for work. I am lucky that I have enough experience in this area and help my friends out. It also shocks me that so many people hire people to do basic work such as putting up curtains, baby gates, shelves etc. DH, bless him, has been forced by me before now to use youtube to fix stuff while I watch the kids. I offer to do the work but he feels all manly. Putting up a light fixture is not something you need to hire someone for. It is really not hard and its all on youtube. Shocked when a friend told me she paid GBP60 for someone to do it for her.

I will say that living standards have changed a lot. I am mid 30s and we entertain at home, not in restaurants. We don't have a fancy home, in fact we have 3 kids in one bedroom. We had a friend over last night for dinner and the cost was minimal compared to going out. Ironically DH earns silly money and to keep our feet on the ground our spending money is my gross income. I started to eat out quite a bit during my leave and I bought coffee and my goodness I burned through the bank account (and gained weight!). I have gone back to lunch boxes and drinking hot drinks at home or made at work. Christmas is another area where you can easily overspend. Budget this year is $75 per child and $20 for the baby. Kids toys were purchased discounted or 2nd hand.

Another thing is gym memberships and exercise classes. I go to my class which is $15 per hour. It is a lot of money, so I only go once a week and this will be reduced to 1-2 times a month when I am in better shape. I run/walk 2-3 times during the week and that doesn't cost much (running shoes were purchased on amazon for $40 reduced from $120). It is so easy to say its only a pound. Those pounds add up really quickly.

Putting up a light fixture is not something you need to hire someone for.

It is if you want it done legally. Non-qualified individuals carrying out even basic electric works has been banned in the UK for some years.

I am mid 30s and we entertain at home, not in restaurants.
That's nice for you, most new build flats however don't have room for a dining table,

It's also a condition of many leasehold properties that repairs etc are done by professionals.

The truth is supermum that it's easier to "save" money from a comfortable position like yours, with space to do things at home (like kids parties, people with own houses can do them at home, families in 1 bed flats need to hire a hall)

It's easier to be all "make do and mend" and be all homesteady and frugle when you have space to store empty jam jars and have a freezer that's more than one shelf!

You seem to be in the states, one of the big benefits for friends who've lived in the states is the amount of living space you can expect (outside of major cities).

I don't live in a major city, a lot of flats round the £750/month rent mark (around £170 to buy) where I live have a single living room where the "kitchen" is units along one wall of the sitting room - no utility room, no dining area etc. And people can expect to have to move regularly so saving up a cupboard of jam jars to make cheap christmas gifts next year is just not workable because a. there's only 3 cupboards in total, and b. they'll probably have to move by then anyway.

It takes money to make money, people with space to entertain and space to store and repair stuff and space to preserve stuff and freeze stuff, telling people in your average rental how they save money by staying in and storing things to re-use in the future is pretty much what this thread is all about.

It's FUN to entertain in your own HOME, it's not fun to sit in in a dingy rental that you can't make your own!

supermum I would pay somebody to put a light fitting up because there are rules nowadays around fitting new electrical things but I'm not afraid of a bit of DIY and fully fitted a kitchen myself in my first house as money was tight (although I did pay a professional to connect the gas cooker). I'm happy doing most DIY jobs myself (not DH as he is useless at diy) but I just won't touch electrics with the exception of changing a light switch or plug socket on a like for like basis.

I totally agree Tinseltown, it's just a sad fact of life that the money you have the cheaper things are so the easier it is to save.

Tinsel you have spoken so much sense in this thread. I thought it was well known that being poor is more expensive than being rich.

And living frugally is good, almost fun when you have chosen to do so and have a nice buffer of money just in case. When it's been forced on you, not so much.

As for doing stuff around the house. After discovering that our living room light fixture wasn't earthed and needed the upstairs floor boards pulling up to do the work I will be getting professionals in in future. Luckily we have very tall ceilings because one touch of the light whilst it was on would have given someone a shock.

I have changed a few light fixtures (new builds are easy as pie), my dad has done loads and he's who I ask when I need help. If he's not sure then we ask a profession, who happens to be a friend. Never occurred to me it was illegal... Oh well.