AIBU to wonder how people afford huge mortgages and we’re struggling to make ends meet?

[Beanbag12]

AIBU to wonder how people afford huge mortgages and we’re struggling to make ends meet?

We live in a very affluent area in rural Oxfordshire. We rent. The idea of saving for a 10% mortgage is so completely unrealistic as the cheapest 2 beds around here are £220k. We currently spend more than our wages every month (high cost of living, childcare costs). Everyone, and I mean everyone that I work with either already owns or are buying hugely expensive houses. They’re on similar wages to me. AIBU to wonder how the divide between us is so big?

I know this probably has obvious answers; we should have been more sensible when we were younger, inheritance etc. but I’m interested in other’s experiences in this.
I don't really want to divulge any more information about our situation and I don't want advice (I know people will say it's our fault we're in our situation, which I am willing to accept, so no critisism please)

It’s shit for young people now. I bought a house for 140k with 10k deposit aged 27 then sold a few years later for 190k. Mortgage felt tough (was 1/3 income) for a while but then met DH who moved in. Then had some inheritance and DH also had some and I became pregnant so we upgraded to 390k home (mortgage was about 220k). Had short mat leave then back to work. Is easier now as DH earns a lot more although my wages (nhs) have stagnated for 10 years. Although we now have school fees for another 4 years and mortgage should be paid off in about 7. House value is crazy, about 800k. No way would we have been able to afford the same now.

Before we married my dh and I worked abroad for a year and saved the deposit for a small 80k 2 bed house. It was the best house we could afford in the best area but it wasn't great to be honest. However it enabled me to have 2 long maternity leaves with no real money worries. Then we wanted to be in a good catchment area for schools. We were time constrained so we made no profit on that sale but we were in better jobs by then.

We are now in a 3 bed house worth 200k by a good school and we technically could afford to live in a bigger house (double), but at the moment we want more disposable income for holidays, I want to stay part time and I don't want a double the size mortgage --- I'd rather build equity over the next few years and meet the shortfall that way.

I half resent having to work abroad. I enjoyed it immensely, but the fact that we had no choice but to go to save a deposit asap. We wanted to do house, marriage, kids and this was the only way of achieving it.

I don't believe you cant save £22'000. If one works full time, they can pay all bills and all household expenses/ food etc. Cut everything single thing you can to reduce costs. No sky/ extras. Then the other can do night shifts and weekends so no child care and you can save all of that wage. So if you earn min wage in a care home in second job. 3 nights plus all weekend that's 60 hrs. You will be able to bank at least 1700 a month. That's 13 months and you have your 22 grand. It's what I did. Depends how much you want it.

We also spent most of our 20's partying and going on luxury holidays. When we bought, years ago we saved the deposit in a year and made a good decision to go straight for a 3 bed as the difference between that and a 2 bed starter home was only a couple of grand. We overpaid so by the time DC came along years later we'd almost paid it off and could easily afford to move up to a big 4 bed detached in a nice area. Then we both received inheritances from gp's and bought our holiday cottage.

coco just giving my experience. I only bought a few years ago, also in my twenties, so have recent experience of buying in the south. My family has two fairly average salaries for the area, less when we bought.

Not everyone wants to buy and that's fine, nothing wrong with renting. But if you do want to buy you have to prioritise. Buying before having children is easier, that might mean having children a bit later. not going on holidays every year, not having cars on credit/hire purchase, renting small flats rather than houses. Working two jobs if your salary from one isn't enough. Unfortunately those of us who don't have massive inheritances or parents who can afford to pay deposits have to make sacrifices. But it definitely is doable.

We also live in Oxfordshire. Saved our backsides off in our 20's and got a 5% deposit on a shared ownership 2 bed house before having children (no childcare costs). We did get married first but had a very low cost wedding and honeymoon (probably £3k all in). Then had baby 1 after buying house. Made £40k in equity in 5 years and moved to (tiny) 3 bed (non shared ownership property) in a slightly cheaper area of Oxon when pregnant with baby 2. Went back to work part time which made childcare costs easier. Oldest now at school and childcare costs greatly reduced. It's about timing and planning in my opinion. I have always had a 5 year financial planning with spreadsheets. It's like running a business.

I got my first house in my early/mid 20's.

In the SE (not far from you). I was single, no parents, no inheritance. I worked 2 jobs most of the time, sometimes did 3 if I could find a 4.30-6.30am cleaning job. Saved, saved, saved. Got house before I met DH and had kids. Didn't got on holidays or nights out like friends.

I really feel for those not on the property ladder and wanting to buy.

For us, the answer is that we didn’t get a huge mortgage. Instead we opted to move to an area of the U.K. where terraced, comfortable 3 bed homes regularly come in at £110,000 or even less. Thanks to a good income we were able to save a reasonable deposit and went for a spacious, detached family home at less than £250,000.

I know it’s not a solution for everyone, but it’s one way of doing it.

Always worked FT, when we all started proper jobs friends were buying ted baker clothes I was makings do (this was 15 years ago) to save a deposit and as soon as we could we bought, market was rocketing and rent was about to go up so took plunge. Then sold and moved a few times making 5-10% profit each time, continuing to work FT when all friends don't, and now we have 15 years left which when we stop paying as much on childcare we will overpay on. We also increased mortgage back to 25 years from about 17 at one point as te new house was bigger and we needed to make payments more affordable.
It's not rocket science tho, we spent less on fun to have a house. Different priorities for all.
Fwiw I would never buy a house that wasn't in some was future proofed, I have friends in Tiny houses with kids and it's too small, no room, because they were desperate to buy ... If they had stayed renting they would have had far more options.

I'm not sure about the 36 age, But DH is 37 so close to that.

When was the last crash? 2011? My flat in SE27 went down to £110k and so did DH house in MK till 2013, then it all rocketed up again. So i suppose if you had £15k in savings you could have still bought up to 5-6 years ago. But after that it has become insane.

I bought my first house 20 years ago just before the boom in prices.

Then I had an inheritance.

Therefore I have a small salary, but no mortgage.

We had no parental help with our mortgage. But we both have good jobs, live in the north and bought our house before having kids. The downside is living in the north we have made no money on our first house, we're selling it for just £10k more than we bought it for 15 years ago. I really hope that doesn't happen with our new house.

Some maths for people.

Say you were going to buy a £220k property on a standard 3.5 multiple mortgage.

You would need a household income of £63k.

Mortgage companies have become a lot stricter on what they will lend, and whilst 100% mortgages have made a return they are HARD to get. Mortgage companies need you to show what your disposable income after your expenses. So if you have children, its not just the expense of having children its also that the amount a mortgage company will lend you that's affected. So you are much less likely to be able to get a mortgage multiplier higher than the standard if you have kids. The interest rates on 100% mortgages are high, so again if you had two kids, you'd find it harder to get approval on one because of affordability criteria.

Its possible but everything is working against you.

£63,000 as a household income is WAY above the average income. A lot of couples without children will struggle to hit that. Throw in child care and that's even more difficult.

So say you had a household income of £50,000 which is still above average (especially with kids) but for two professionals is achievable (average income is about £20k. That would give you a mortgage of around £175,000

That still leaves you with £45,000 to find. Say you manage to save £10,000 per year, thats STILL 4 and a half years. And in that time you might find the house has increased in value by £15,000 (if not more). So 6 years of saving very hard indeed, to buy a house thats probably smaller than you need if you have two kids.

The reality is that even if you save, really really hard and don't go out, or have holidays and budget your food, chances are you will never ever manage it.

I've pointed out the figures to people before and every time I do it, it shocks people to silence when they think about what their own household income is and where they are now in the housing ladder.

I know numerous people who went confronted by actual figures, go silent and then say they could not afford to buy a house now.

The 'well I saved hard' mantra just doesn't stack up.

Unless you have assistance to bridge that gap, you can not do it. Its just not possible.

We bought our first house in 96 for £68k for 3 bed semi, sold it 7 years later for £168k. The next house we bought was in 2003 for £278k it nearly killed us finding the mortgage payments, I was then made redundant with a big pay off and payed a chunk off the mortgage. Now we have a house that's worth nearly £600k with a £60k mortgage, so ours was complete luck with a bit hardship on the way but my son is 27 and can't afford his own place so it's not a win win situation. I would be quite happy for property prices to drop

Oh wow, feel proper depressed now! 🙈 thank you all for your replies, I guess I thought there would be more people in the same boat as me. A lot of people have pointed out the kids thing. I do wish we had been more sensible before having them, I think we were both very naive and made bad decisions. Funnily enough a few people mentioned the age 36, which is my age, which could be a factor? Thank you @redtoothbrush you have summed up the struggle perfectly! I guess I have considered moving to a more affordable area of the country, but my ds’s are happy and settled here and we have family here. Good shout whoever it was that mentioned getting on the housing list. I tried to put our names on it before we moved to this house and was told we had ‘no hope’ of ever getting anywhere, but there are 100’s of house being built soon, so I guess there may be hope of social housing?

We have just got a 95% mortgage on a £185k property. Manchester though.

Mortgage was hard to get, we’ve had to spend 14 months getting our (my OH) credit up to excellent, as there can be no blemishes really on a 95% ltv mortgage.

As I said previously we managed to save 10k by moving in with my parents rent free for 6 months. They have also gifted us 5k. We wouldn’t have been buying for a few more years without their generosity.

I got my house in a cheap area with a 100% mortgage. I made a lot in just a couple of years and was able to buy a bigger house that needed a lot of work. I now let that house as I moved away to get married and live with DH. I don't make any money on the rental but longer term it will top up my pathetic pension pot.

I was very lucky to buy when 100 % mortgages were available as prices were going up faster than I could have saved. It helped that I had a secure job and very low outgoings. Was also single and childfree!

Home ownership is much higher now than historically in the UK (other than in more recent years). In 1900 it was about 10%. End of WWI 80% rented mostly from private landlords so we certainly have an awful lot more home ownership now than before.

So how did my family manage it? My grandfather waited until near 40 before marrying (and his brother was nearly 50!) so they could afford it. They both bought before children came.

My parents were married and both working full time for almost 01 years before I was born and again bought before we were born and with 2 full time wages coming in.

We bought in the 80s again before we had children.

Ditto my children.

That is 4 generations who all followed the rule - buy before you have babies.

We also had weekend jobs as well as full time jobs and stuff like that but it certainly wasn't easy particularly moving from the North to the SE where property prices even then were 4x the level in the North we bought and I sitll live in an area of London many people aren't prepared to and there is an hour's commute in.

Bought house with boyfriend (now dh) in 2006 after my dad offered to pay deposit. Boyfriend's family wanted us to use the money to get married (weren't keen on the idea of living in sin!) but we ignored them and am glad we did. We knew we were going to get married and have kids so stretched mortgage to get 3 bed 1960s house, in case we couldn't move up the ladder. Stayed there for 8 years (refurbished the house, got married and had our first child there) and sold it in 2014 and used equity to buy a bigger 3 bed that needed work but had potential to extend if necessary. Did as much renovation work as we could afford before baby no 2 arrived last year, as money would be tight after baby's arrival, but fortunately we can extend the property if we decide to have a third child. Not sure if we would be where we are if we had used my dad's gift to pay for our wedding instead of putting it towards our first house.

Say you were going to buy a £220k property on a standard 3.5 multiple mortgage.

3.5x is not standard. Most people are lent at least 4.5x. I was lent 5.5x!

20k deposit then a 200k mortgage at 4.5s is a joint income of 45k - which is totaly average for two healthy adult full time workers.

We share ownership our house. It's total is £225,000. Rent and mortgage is £835 a month. Then other bills on top. Our monthly combined income is £2800. I think we do ok. No childcare costs though as we get 30 hours free

Xenia

For 25- to 34-year-olds earning between £22,200 and £30,600 per year, home ownership fell to just 27% in 2016 from 65% two decades ago.

And the problem is getting worse. It is very possible that in two decades time we could be looking at 1900 levels of ownership.

As a general rule in 1900 though, I believe that rents were low in terms of percentage of income and people's biggest expense was actually food.

Today if you live in London its around half your income on accommodation. (It ranges from 27% to 50% depending on your location).

That's the big difference.

In going backwards in terms of home ownership, standards in accommodation are also declining. Especially with current laws not really reflecting the needs of renters because house ownership has been so high for so long.

Renting in the UK is no where near as good as it should be, compared with other countries in Europe where it is normal. The rights and security for renters are indeed positively Edwardian.

Did everything wrong. Got pregnant during uni so saved all my student loan/salary/maternity allowance and then three years of child tax credit and CB while DH was studying. Probably around 15k. Bearing in mind I would walk five miles to the cheapest supermarket with baby in a sling and a shopping trolley in all weathers to save the £4 bus fare...

Got pregnant again - another 5ish k maternity allowance straight in the bank.

Took a PGCE and got 30k tax free as well as around 14k student finance (and 85% funded childcare) which we saved while DH worked.

So not the ‘proper’ way to do it but it got us a house with reasonable mortgage repayments...

No inheritance or financial help from parents, and we paid our way through uni and most of our wedding. I took a job that gave us accommodation and bills in exchange for working about a 70 hr week. From getting together it took us 10 years (three of those living in accommodation) to save 100k for a deposit - bought our house last year, now pregnant.

None of it was easy but I am glad we did it.

3.5x is not standard. Most people are lent at least 4.5x. I was lent 5.5x!

I was looking at a parliamentary report on affordability two or three weeks ago.

researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7747
You can download it from the bottom of this page.

On page 15 of this report it references lending multiples as a measure of affordability. It gives the mortgage ratio given to first time buyers in 2016. The standard was x3.5. For movers it was x3.3.

There will be people who are higher than that and people lower than that, but as a rule first time buyers (in particular) tend to borrow as much as they can to purchase a property regardless of where they live in the country.

Mortgage lenders only give higher multiples to people they deem lower risk and have more disposal income and will be related to what type of occupation you have.

The report is a dream to my nerdy brain (im trying to do some research into affordability for the local community atm).

The report also states that since 1969 the cost of a first time house has gone up by 48 times but wages have only gone up by 29 times.

Its very sobering reading.

I get very annoyed at the 'just save' crowd who don't appreciate these issues.