How can you save enough for a house when house prices keep getting higher?

[grannyinapram]

when I moved out, house prices near my parents house were 90-100k
now those houses are £160-200k
I can't afford to live there anymore.

I live in a really horrible area, ex council houses are 130-140k We can almost afford it. BUT every time we get to that magic number, suddenly house prices go up and we have to save more. By the time we have saved more, we look again and house prices are up again.

Well our savings are worth less now than they were when I started saving.
When I started saving I needed £5000 (plus fees) to get a mortgage.
now I have 10k behind me but we still need £5000 to afford smaller houses than when we first started.

And our savings are just sat there losing money.
The interest paid this year is half of what was paid in last year, despite the amount doubling.
I don't know what to do! I don't know how to get there.

How do you get on the housing ladder when the ladder has been put on the back of a truck and is driving away from you?

any advice?
we are saving as much as we can. A third of our income goes into the savings.

@species5618 moi aussi! With favourites being TNG, ENT, VOY.

Working my way though DS9 atm

Loved LD and PIC.

🖖

OP, everyone makes their own life choices. I'm not criticising yours but I will say it would be absolutely impossible for me and DH to buy a first house now with 4 kids and we're on decent salaries. I don't think this would be easy for most people tbh. So I'm not sure what your expectation is/was. We decided to buy first and then TTC, I suppose it's also doable with one child but definitely not 4. You're overstretching massively and no wonder it's never enough.

I disagree with the comments that 95% mortgages will inflate the market. We bought 4 years ago with a 95% mortgage, struggled to get the deposit together at the time simultaneously saving for our wedding, basic furniture, paying for post graduate qualifications whilst on entry salaries/climbing the ladder. It wasn't easy. We used the Help to Buy ISA too. Anyway, 95% mortgages were easily available for a few years then and prices were lower than they are now and not increasing as fast as they have over the last 4 years. I believe it's the fact that we're further away from the previous market crash that increased buyers' confidence in combination with improving economy that boosted the prices. Current SDLT exemption didn't help last year that's for sure, in has inflated the prices. We actually sold and bought recently again and we did not offer what the seller wanted because any half reasonable buyer monitoring the market would have known which prices are artificially inflated. It wasn't a cheap house to buy to begin with which helped with negotiations. We'd never buy this one had we not bought the first one 4 years ago.

I feel very sorry for those coming to the market now, you are absolutely right in saying you need even more than 4-5 years ago and the rents have increased dramatically so you're squeezed. The only realistic way out IMO is to bring more income in, better jobs, better qualifications, looking to buy further away (could wfh make it doable?) or a fixer upper first and make money on that.

I don't think there will be a dramatic market crash like some are predicting either. There are always people hoping for it who done understand long term implications of it on everyone. The reality is there may be a crash of up to 10-15% and that's why on expensive properties it makes sense to purchase for longer term. It won't be a make it or break it for FTB though.

For most people the time to get on the property ladder is pre children when there are far fewer outgoings, moving areas is easier and not limited in work hours so can take overtime, second jobs etc.

@MayYouLiveInInterestingTimes

But one thing is for sure once you buy your property no doubt you'll be on the side of wanting prices to rise

Hi, as I said upthread we finally managed to buy a few years ago. Do I want prices to rise? Hell no.

I expect my generation, having been screwed over all our lives, will have to take the hit for the next. As long as they don’t fall too fast we should manage. Things cannot carry on like this.

I remember the real estate office where I worked saying the same. In 2001.

It’s hard but possible. You can’t expect to buy a family house straight off unless your wealthy. You need to buy a small starter house or flat. Difficult if you have children but that’s why lots of people buy first. You buy small then keep trading up until you have the house you want. I bought a small starter house in the expensive south east a few years ago in my twenties. I’m now early thirties and we now have a four bed house still in the same area. We don’t earn huge amounts of money but saved like crazy and bought small to start with. All my friends did the same. It’s possible.

As other posters have said, buying when you already have children is difficult. Not only are they a drain on your income, but what you require is different, ie more than one bedroom, a garden, near to good schools.

When DH and I bought our first flat it was before children and it was the tiniest of flats. Our only criteria really was that it was within easy travelling distance to work. We both were working full time, but I took on a Saturday job to bring in extra money, and we furnished it with cast-off furniture from family and stuff that other people were throwing away! So our needs were far less than a family with children, but it was our first step on the property ladder.

So if buying somewhere is a priority, then I think you will need to look for a doer-upper and smaller than you want. You may want to consider moving to a cheaper part of the country. It is possible, but so much harder with a family and I think you will have to drastically lower your expectations and be prepared to sink money and time into getting that first property.

Every single person I know bought property before having children.

Then didn’t move from tiny flats for at least five years and in that time got at least one or two steps up the career ladder.

Everyone who now has children would never have been able to afford to buy a family property after having more than one child.

There is a fundamental problem with lack of decent housing stock and the associated high prices of property in this country.

However, in this particular op certain life choices were made. The consequence of those life choices meant that buying property is very difficult . That in and of itself is not a constant of the national housing picture

We had the same issue and had to get a 95% LTV mortgage, as once we had bought we could overpay to get to 90% LTV (and below) without getting hit by the house prices increasing.

We were buying a home rather than an investment and planned to be here for a long time so house price crash/negative equity also wasn't a concern

Yes, buy before you breed was what my parents did and waited 10 years to have children !!, we did, my child did and in all 6 cases we all had a full time professional salary when we bought the first place and no children. In fact even with my grandfather born 1880 he had my father aged 49 and other children only a bit younger than that because he could not afford it before then even in Bishop Auckland, County Durham.

The 95% mortgage for may in the last 40 years has always been really helpful eg if you are both on £20k and have no children and can borrow £120k you then just need to save up about £3k each to buy the £130k place in those areas where there are places for £130k like my native North East.

@TinyGlassOwl

One thing that the govt could do to help people like the OP is allow the regular payment of rent to be taken into account, maybe even offset against a deposit, when applying for a mortgage.

It's absolute insanity that renters shell out 1000s per year paying someone else's mortgage off, often paying far more monthly than they would if they had a mortgage, but none of this is ever considered when affordability checks etc are done.

I am 47 and an FTBer. A quick calculation suggests I have spent close to £200,000 on rent over my adult life. I've never missed a payment, ever. And yet, house-buying has been out of reach for me until now, and I can only now do it because of a significant gift.

The extension to SDLT is just another clear illustration of why the housing system in this country is fucked. Propping up the market, pushing prices up, pricing ordinary people out.

Completely agree with this, I could have cried when I worked out I'd paid £75k in rent to my landlord.

We bought in 2014 and our starting mortgage was £50 a month less than we paid on rent and still had to jump through all of the affordability hoops. All those years of stable payments were completely disregarded, yet if someone had given me a lump sum as a deposit it was fine.

I know banks like big deposits as there is something for them to take if things go wrong, but surely from a risk perspective they are looking for someone that will pay the mortgage every month. If you can afford to pay higher rent you can afford the mortgage

It's a bit like those mortgage prisoners that can't get a better deal because they now can't get through the affordability checks (even though they have been paying their mortgages for years)

Yep, I definitely think the easiest way (other than lotto win/inheritance) to afford a family house is to have bought somewhere smaller and built up equity rather than paying for rent, which then means you have a bigger deposit when trading up. Which doesn’t help you OP, I’m afraid.
We own a house and bought a 2 bedroom so that we would still be able to live here with 1-2 DC if we couldn’t afford to move somewhere bigger. We wouldn’t be able to afford 4 DC though.

I am reading a book called Home Truths which is about the current housing crisis.

It is absolutely appalling that this problem has been building up for so long and the government still refuses to get to grips with the underlying cause - ie the stranglehold that the handful of big development companies have over the whole housing market.

This doesn't only affect people who cannot afford to buy their own home, it has a massive knock on effect throughout the whole economy, and risks causing another financial crash like 2008.

You should all lobby your MPs and encourage them to force the government to take action. Just making it easier for the big developers to get planning permission is not going to help, they are already refusing to build all the houses they have permission for, it is in their interest to keep house prices high. They also benefit most from the help to buy schemes, and they benefit from the massive increases in land value that planning permission causes. All this money goes into their massive profits and massive bonuses.

There needs to be thorough change of the whole system to let local councils and smaller house builders have a chance to compete.

YANBU.

Also, to previous posters, Help to Buy ISAs are not allowed to be used as a deposit. They can only be used after the deposit, as in the OP.

In fairness to the posters getting dismissed, saving for a property with 4 kids is hard! It may well have been a lot easier before having 4 children and the costs they entail, and easier to afford something when you don't need space for that number of children.

That's not to say they should be sold on eBay or anything, but choosing that number of children comes at a price.

As in,buy cheap when you have flexibility pre children then trade up.

@NoIDontWatchLoveIsland

The only answer is for more housing to be built, so that supply exceeds demand, and no government will ever do it because they are too short sighted about house prices. They fail to see that high house prices tie up a lot of wealth that people could be spending/recirculating in the economy if their mortgages and rents were a lower proportion of their income.

That would mean housing being built at a loss to the construction firm. That's not going to happen. Houses cost a certain amount to build, because land has a price, materials have a price and labour cost has a price.

To be fair to the OP, I think she was asking for tips to get on the property ladder or save more, rather than commentary on her choices of when to have children. The children are here, so she can't go back and have them later!

Saving a third of your income OP - that's brilliant and something to be applauded. Its tough, I don't really have any useful advice, I bought a small flat and the next rung up (London) is looking out of reach for me too. I did read Mr Money Mustache - he's an American financial independence blogger and has some hardcore ways to earn more and spend less. Helped get my savings rate up higher - don't know if it would be any good for you.

Help to Buy ISAs were definitely ok to use with the govt bonus on exchange, we did this 4 years ago. Check with your bank to confirm if this remains the case.

I can see why you're having problems. I only got on the housing market because I had an inheritance. I've been living in my house for 4yrs and the average house price on my road has gone from 165K to 200K in that time.

I also wish they would take rent reliability into account.
I have been in current rented house for 20 years and the amount I have paid is over 150,000.
But as a single parent working full time plus a small evening contract I wouldn't get a mortgage - 4 times my wage would be 100,000 and would not even get a studio flat in my area.
So my children have the bedrooms and I sleep downstairs.

This country's relationship with property is a massive problem. I was lucky and moved and bought my first house in 2001 in a large northern city- not a highly hugely desirable area but fine. That same house is now worth x5 the price but would still be much cheaper to mortgage than rent. Property has been treated as a financial investment for far too long. Buy to let became huge with tax benefits for those able to invest which screwed over loads of people trying to get on the ladder. Local authorities property sold cheaply and eventually they were sold on to investors who now rent to people on housing benefit at a far greater cost than when it was LA owned. The rental market is not properly regulated and how any couple, let alone single people, on average salaries save for a deposit since raises in salary have not matched raise increases for several years is a real concern. Those of us who got onto the property ladder have been lucky. We bought before prices sky rocketed or had help with deposits or not too long ago people could get a 100% (or even 110%) mortgage. I remember people be I knew being in negative equity in the 90s and huge interest rates. Governments now seem to interfere with the housing market to an extent it continues to fuel huge house price increased which really only benefit certain generations, developers or investors.

When I got married in 1974 my husbands wage was £40 per week. We bought our first house for £5000 . So that means that it would take 125 weeks wages to pay for the house (if just paying without interest) The same house is now £250.000 . They reckon the average wage now is £742 per week so if I multiply that by 125 the house should cost £92,750. We would never have been able to afford to buy that house now. I feel so sorry for the young people who cannot get on the ladder. My parents bought their first house a nice semi detached for £750 in 1950 my dad earned £10 per week so he could have paid it off with 75 weeks wages.

@TonTonMacoute
You should all lobby your MPs and encourage them to force the government to take
Nearly half of MPs are landlords themselves...
And regarding fear of another 2008 financial crash, it was mostly just average Joes who lost their savings. The Big Guys who caused it were bailed out.

@Xenia They are obviously very very lucky their mother has worked full time without a break since 1983 not even for maternity leaves it wasn’t luck it was compensation for them hardly having their mother around from age 6 weeks.

Myself and my partner spent over 4 years saving and renting. While saving the house prices kept going up and up. We bought our house last May for 355k plus an extra 7k in stamp duty, solicitor fees etc. We had 86k saved at the time. I don't know if it's an option in the UK but in Ireland banks can look at your salaries/savings/rent and how good you are with the rest of your bills and finances and they can grant an exception which means they lend you more than usual. It's rare to get it but we were lucky enough that we sacrificed nights out and holidays and things like that and it worked out for us in the end.
You could check with banks to see if that's an option.
Or we had friends move back in with parents and save every penny until they had enough to buy their dream home.