To wonder where the money is coming from to buy houses?

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So, if houses used to be (say) 4-5x average annual salary back in the olden days of the boomers.

And now house prices are 10 X average salary... Bit they're still being bought, and people want to buy...

Where is this money coming from?

Are boomer parents artificially inflating house prices by giving huge sums of money by releasing equity etc?

Who is buying the expensive houses??

Haha.

My partner worked for a building society back in the 70s. The mortgage market was tightly controlled, 10% deposit, and the amount you could borrow was 3x the main earners salary, plus once times the secondary salary. Mortgage rates were around 8%, and were decided at monthly meetings within the upper echelons of the mortgage providers. Fixed rate deals were rare. This kept a lid on house prices. As the mortgage market was opened up, interest rates fell to where they are today, and increased competition for loans made the money supply easier, result - house price inflation. It was particularly out of control in the noughties - watch The Big Short to get an insight into the madness in the mortgage market that led to the 2008 crash. I think there is a good chance that prices will start to ease, if not fall as interest rates start to rise to combat inflation. If mortgage rates go to 5%, which is historically low, that will add £4,000 per year on a £200k mortgage, on top of rising energy and food costs. It will be a hard time for a lot of people.

@Dmsandfloatydress

It's utterly shit for millenials. I'm generation x and bought a flat with a 100% mortgage in 2006. That mortgage was so much cheaper than renting it was a no brainer. 10 years later it provided the deposit for my milenial husband and my first house which is a decent family home in a good area. My husband is a higher rate tax payer so would have eventually been able to save a deposit to buy a small flat but he would have been in his mid thirties before that happened. I am an average earner but it was easy for me to get on the first rung of the ladder. My parents did scrimp and save to buy , but they bought a three bed semi as their first house at 22 which was twice my dad's income!!

This is the cause of the misery for first time buyers today. 100% mortgages, I remember 125% mortgages so you could furnish the house and buy a car on the mortgage. House prices were rising fast so very soon your mortgage debt would be less than the house value. Lots of easy loans available to everyone, result, house price increase, everyone feels well off, the economy booms, the government claim that they have ended the boom and bust cycle, so everyone feels confident and borrows more money, so house prices continue to rise then..... An almighty crash. We were outside the S E and we had our house valued in 2007 just before the crash. When the next house like it was sold, several years later, the price was 25% lowers than that 2007 valuation, and it is only with the mad increase over the last couple of years that the value has exceeded that valuation. The government in the noughties should have clamped down on the money supply to keep house price increases reasonable, but when everyone feels wealthy they take the credit and get voted back in again. And by the time the crash came, the man at the top had left, and someone else took the blame. Mind you,he was chancellor through the boom, and did nothing to control it.

We saved, with the help of matched betting.
Govt help to buy.
Husband is military so also forces help to buy.
New build property - developer offered 5% nhs discount.

Wouldn't have been able to afford the house we have without those schemes/offers

Yep.... if i could move in somewhere for practically free bet i could save up 70k too

Wouldn't have been able to afford the house we have without those schemes/offers

Actually, without those schemes (help to buy, etc) inflating prices you probably would have been able to buy at a lower cost.

Also, why should people be forced to buy "fixer uppers" because the good properties are so very expensive (which might be partly due to Bank of Mum and Dad) when they just shouldn't be

Because that’s what the boomers of whom there’s such envy did. A lot of us bought houses that needed huge amounts of work and did them up gradually as we could afford it. We put up with living in sub optimal conditions because that’s what it took to buy a house. Nobody bought a four bed detached house as their first property.

@Blossomtoes

Also, why should people be forced to buy "fixer uppers" because the good properties are so very expensive (which might be partly due to Bank of Mum and Dad) when they just shouldn't be

Because that’s what the boomers of whom there’s such envy did. A lot of us bought houses that needed huge amounts of work and did them up gradually as we could afford it. We put up with living in sub optimal conditions because that’s what it took to buy a house. Nobody bought a four bed detached house as their first property.

Generalising much?

Some did, some didn't.

You realise that the "fixer uppers" have gone up in price as much as everything else?

Anyone who has owned a property for 20 or 30 years as I have will have known all kinds of different situations from 14% interest rates to crashes and massive price rises up. Lincslady reminds me of when we started. My husband needed a relationship with a building society for many years before they would consider you for a loan and you could borrow 3x one salary or 2.5x joint salaries. You needed a sizeable deposit and it was not very easy for a woman on her own to buy due to sexism never mind lower pay for women. I certainly remember the days of 100% mortgages too although they have often come and then quickly gone rather than that they were a thing for decades. My parents could not have one. I don't think we ever could get one when we happened to be wanting to buy either.

I agree that state market interference has made things worse, not better. Eg the state introduced after the 2008 credit crunch much tighter requirements for lending, new stress tests etc so fewer could borrow. Interest rates have been kept right down so house prices have shot up. The days when I thought our 10 year fix at 13% was good are long gone. I pay 1.44% on my interest only mortgage currently.

This is the cause of the misery for first time buyers today. 100% mortgages, I remember 125% mortgages so you could furnish the house and buy a car on the mortgage

Yes, you are absolutely right. Northern Rock were the worst offenders. It was they who offered the 125% ‘together’ mortgage in the early 2000s.

Remember those queues outside Northern Rock branches in 2007, when everyone’s grandma wanted to get their money out? The first run on a British bank in decades? Thank reckless mortgage lending for that.

Until that point, the idiots who ran Northern Rock had been showing off about democratising home ownership and enabling young people to ‘get on the ladder’ etc. Magazines aimed at twenty and thirty something women were full of articles praising the ‘together’ mortgage and encouraging readers to take one out.

Look how that has ended up, 15 years later! Young people locked out of home ownership unless they have substantial parental help. No wonder they are angry and disenfranchised.

Really, the government should have allowed interest rates to do their thing naturally, even if it meant that some people lost their houses or went into negative equity, as happened in the early nineties. Short term pain for long term gain. But no, QE happened and it’s long term pain instead, and it does nobody any good. If you already own a house you’re no richer. If you want to move to a bigger house you’re saddled with a massive mortgage that saps your future wealth. The economy has adapted to lower disposable incomes, so there are fewer nice shops and fewer nice things to buy. All because of stupid, reckless lending. But The Big Short tells that story better than me.

@Blossomtoes

Also, why should people be forced to buy "fixer uppers" because the good properties are so very expensive (which might be partly due to Bank of Mum and Dad) when they just shouldn't be

Because that’s what the boomers of whom there’s such envy did. A lot of us bought houses that needed huge amounts of work and did them up gradually as we could afford it. We put up with living in sub optimal conditions because that’s what it took to buy a house. Nobody bought a four bed detached house as their first property.

I agree with this.

I am a “Boomer” and the way people blame us for how “lucky” we were. Yet living through it and actually being there you didn’t feel lucky.
Everyone posts about average incomes and average house prices which is what you can see on the internet.

The reality as ftb’s you weren’t on an average salary. In fact as a woman you weren’t on anywhere near the same salary as a man in the same job.
Food, clothing, public transport, utilities etc were eye wateringly expensive because there was no choice.

Information was limited to what you could read in a library or what friends and family knew.

University might have been free but very few people went because
A) very few people actually gained the required A levels to go

B) A lot who would have gone on to do A levels had to go to work at 16 as it was pointless staying on for A levels as they wouldn’t have been able to afford the living expenses and books etc. Even just to start off with

Housing might look cheap but multiples of 1.5 times the higher salary and 1x the lower with a 100% mortgage meant depending where you lived unless you had a really well paying job you still had to save up as those multiples might not get you the cheapest place on the market
There might have been higher multiples but unless someone told you about them then you had to go with the single local building society.

Personally I think making small studio flats unmortgageable created the biggest problem for first time buyers.

It meant that instead of scraping together a much smaller deposit and having much smaller mortgage payments and getting out of rented very quickly. When that first step was taken away. It meant more time in rented and the studio flats that would have been bought ended up as btl places

My first place I bought with dh was the tiniest studio flat that someone had painted the whole of the bathroom in black gloss
I mean the “whole” of the bathroom. Spent many hours peeling black gloss paint off the toilet, wash basin and shower. It was pretty grim but it did allow us a breather from the £170 per month rent we were paying.

In fact as a woman you weren’t on anywhere near the same salary as a man in the same job.

Come off it. The youngest baby boomers were born in 1964 and entered the workforce in the early 1980s. The equal pay act was passed in 1970. You weren’t living through the 1930s when women were paid less as standard.

Information was limited to what you could read in a library or what friends and family knew.

Er, newspapers? The Money Programme on BBC? It wouldn’t have taken much gumption to find out about mortgages, now, would it? Plenty of people did during the 1970s and 1980s!

University might have been free but very few people went because

A) very few people actually gained the required A levels to go

Well yes, that is why it was free! I went in 1989, when only 10-15% of school leavers went to university. But what has that to do with mortgages? There were more jobs available for school leavers then, who could start earning straight away.

B) A lot who would have gone on to do A levels had to go to work at 16 as it was pointless staying on for A levels as they wouldn’t have been able to afford the living expenses and books etc. Even just to start off with

What living expenses? Most kids doing A levels lived with their parents, then as now. Are you suggesting that the 1970s and 1980s were like a Victorian novel, with parents sending their children to work in the mill or sweep chimneys?

Or do you mean university living expenses? That’s what student grants were for, and they were very much available during the 1970s and 1980s.

It’s not an inter-generational struggle. It’s an economic problem. However, it’s irritating to read these ‘four yorkshiremen’ inspired hard luck stories from people who can’t see why the young have a right to be annoyed at the situation they find themselves in.

Come off it. The youngest baby boomers were born in 1964 and entered the workforce in the early 1980s. The equal pay act was passed in 1970. You weren’t living through the 1930s when women were paid less as standard.

Yes. My mum was 26 when she had me in 1984 and had been in the workforce for 10 years. She was head of accounts by then! They easily bought their first £9k bungalow in 1978.

@Iamthewombat

In fact as a woman you weren’t on anywhere near the same salary as a man in the same job.

Come off it. The youngest baby boomers were born in 1964 and entered the workforce in the early 1980s. The equal pay act was passed in 1970. You weren’t living through the 1930s when women were paid less as standard.

Information was limited to what you could read in a library or what friends and family knew.

Er, newspapers? The Money Programme on BBC? It wouldn’t have taken much gumption to find out about mortgages, now, would it? Plenty of people did during the 1970s and 1980s!

University might have been free but very few people went because

A) very few people actually gained the required A levels to go

Well yes, that is why it was free! I went in 1989, when only 10-15% of school leavers went to university. But what has that to do with mortgages? There were more jobs available for school leavers then, who could start earning straight away.

B) A lot who would have gone on to do A levels had to go to work at 16 as it was pointless staying on for A levels as they wouldn’t have been able to afford the living expenses and books etc. Even just to start off with

What living expenses? Most kids doing A levels lived with their parents, then as now. Are you suggesting that the 1970s and 1980s were like a Victorian novel, with parents sending their children to work in the mill or sweep chimneys?

Or do you mean university living expenses? That’s what student grants were for, and they were very much available during the 1970s and 1980s.

It’s not an inter-generational struggle. It’s an economic problem. However, it’s irritating to read these ‘four yorkshiremen’ inspired hard luck stories from people who can’t see why the young have a right to be annoyed at the situation they find themselves in.

If you believe that the equal pay act suddenly meant in 1970 every woman was suddenly on the same salary as a man in the same job then you really are not getting the reality.

I do think there was definitely a class divide. Or even a race divide.

Even when I left school I knew girls who didn’t go on to do A levels as the family needed them to help out with money.
There was no sitting at home studying.
A few girls I know went back to their home country and returned with a husband.
Those that did go to work handed over their pay packet to their dad and were given back a bit of pocket money. My mother charged me so much that I moved out as I wasn’t able to pay the keep
I do laugh at the idea of people where I grew up pouring over the newspaper or watching the Money Programme. Most couldn’t speak English. Let alone have any money to invest.

Not 4 Yorkshire men that would indicate we were from the U.K.

I couldn't do A levels, I left school at 16 and got a job and paid board, my parents wouldn't have supported me to do A levels, this was mid 70s

@User639710

I couldn't do A levels, I left school at 16 and got a job and paid board, my parents wouldn't have supported me to do A levels, this was mid 70s

That's not allowed though, despite the fact that many 16 year olds would probably be better off doing that and would like to have that option. There's also no way that someone on minimum wage for a 16 year old could afford to live. They'd get £4.62 an hour.

Now, every young person has to remain in education or training or find work until they are 18. It doesn't change much for the clever, committed academic on target for A* A levels. The concept of sending 50% to get a university level education has turned out to be a pig in a poke. All it has meant is the proliferation of worthless degrees, and still only being able to find barista or supermarket jobs at the end, plus at least 27K debt. That's assuming the student lived at home and went to the local university. And meanwhile, you can't get a plumber or an electrician. I don't know about any other part of the country, but my very unreliable/busy plumber wants the customer to source and pay for all the parts needed so he can keep his turnover beneath the VAT threshold (IIRC it's £87,000) so only his labour cost counts. I completely understand why a sole trader would want to avoid the admin. But it suggests that his hourly rate and number of jobs are already taking him close to £85k annually. Which is fairly solid earnings.

@XingMing

Now, every young person has to remain in education or training or find work until they are 18. It doesn't change much for the clever, committed academic on target for A* A levels. The concept of sending 50% to get a university level education has turned out to be a pig in a poke. All it has meant is the proliferation of worthless degrees, and still only being able to find barista or supermarket jobs at the end, plus at least 27K debt. That's assuming the student lived at home and went to the local university. And meanwhile, you can't get a plumber or an electrician. I don't know about any other part of the country, but my very unreliable/busy plumber wants the customer to source and pay for all the parts needed so he can keep his turnover beneath the VAT threshold (IIRC it's £87,000) so only his labour cost counts. I completely understand why a sole trader would want to avoid the admin. But it suggests that his hourly rate and number of jobs are already taking him close to £85k annually. Which is fairly solid earnings.

You do realise that they if they go into any further education whatsoever they have to pay for it nowadays right ? So your Plumber will be in debt from day one

Come off it. The youngest baby boomers were born in 1964 and entered the workforce in the early 1980s. The equal pay act was passed in 1970. You weren’t living through the 1930s when women were paid less as standard.

You come off it. Women are still paid less than men.

www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2021

@Iamthewombat

Wouldn't have been able to afford the house we have without those schemes/offers

Actually, without those schemes (help to buy, etc) inflating prices you probably would have been able to buy at a lower cost.

This. The (taxpayer funded) Help to Buy schemes inflate the bubble.

Those concerned about younger vs older might be interested to know that the fastest growing group of private renters are the over 40s. Relationship breakdowns, and then there's those who never earned enough to buy when younger (including people too ill or disabled to work).

These people are in a quite dreadful predicament - given their age. It's a ticking time bomb actually. A potentially massive housing benefit bill when this group retires. And no, inheritance isn't the answer. Care home fees will see to that.

One growing but often overlooked problem nowadays is mortgage affordability criteria. Most of the government and media focus has been on deposits. A big issue, yes, but for an increasing number of would be FTB the main barrier is actually income requirements. Of course we don't want to see another subprime crisis but the pendulum has swung too far the other way. There's an almost farcical system now where FTB are being turned away by mortgage lenders or Help To Buy schemes on income criteria - yet many are paying private rents that are much higher than they would in mortgages. People have posted about their experiences of this on other threads, and recent research suggested this was a problem for at least 40% of FTB.

We need two things. A) Slight relaxation of lender criteria, and b) Buy and build a lot more social housing (saving the taxpayer in the long-term).

@Tealightsandd

One growing but often overlooked problem nowadays is mortgage affordability criteria. Most of the government and media focus has been on deposits. A big issue, yes, but for an increasing number of would be FTB the main barrier is actually income requirements. Of course we don't want to see another subprime crisis but the pendulum has swung too far the other way. There's an almost farcical system now where FTB are being turned away by mortgage lenders or Help To Buy schemes on income criteria - yet many are paying private rents that are much higher than they would in mortgages. People have posted about their experiences of this on other threads, and recent research suggested this was a problem for at least 40% of FTB.

We need two things. A) Slight relaxation of lender criteria, and b) Buy and build a lot more social housing (saving the taxpayer in the long-term).

You do realise that what you are asking for, I.e. relaxation of lending criteria, would inflate prices further, right?

It doesn’t matter that you can afford £x per month in rent when a mortgage would cost less at the current rock bottom interest rates. Lenders want to know that you can pay your mortgage if interest rates rise. Plus, if you own a house you have the cost of maintaining it.

Do you think that lenders are just being big old spoilsports for fun? No. They may lend recklessly (e.g. 35 and 40 year mortgages, which increase the amount of money chasing assets and hence inflate prices) but they aren’t going to risk default. They are businesses after all.

@EmmaH2022 sorry I just saw this. My DH and I bought a house a couple of years ago and we paid over home report but we’re selling a house. Our lender wanted proof of where the money was coming from over the value of the home report and the mortgage advisor at the time was saying that the lenders weren’t keen on people receiving money from parents etc because it didn’t show an ability to pay/afford the mortgage.

I didn’t question it much more tbh because we weren’t in that situation

If you believe that the equal pay act suddenly meant in 1970 every woman was suddenly on the same salary as a man in the same job then you really are not getting the reality.

Who said that it did? You claimed that all women in the baby boomer generation were routinely and habitually ‘not being paid anywhere near the same salary as men doing the same job’. For women entering the workforce from the mid-1970s onwards, that is simply not true.

I do think there was definitely a class divide. Or even a race divide.

What has that to do with the price of houses relative to average incomes?

Even when I left school I knew girls who didn’t go on to do A levels as the family needed them to help out with money. There was no sitting at home studying.

I don’t know what point you are trying to make. Yes, some girls, and boys, didn’t stay in education as long as they wanted, and that is probably still the case now for a small minority, but trying to argue that this was the case for a significant number of teenagers in the 1970s and 1980s is just silly.

A few girls I know went back to their home country and returned with a husband.

And? How does that anecdote bolster your argument that the baby boomers had it harder?

Those that did go to work handed over their pay packet to their dad and were given back a bit of pocket money. My mother charged me so much that I moved out as I wasn’t able to pay the keep

Here we go again. The four yorkshiremen. Do you think that because your mother charged you more than you earned for board and lodging that it was the same for everybody in your generation?

I do laugh at the idea of people where I grew up pouring over the newspaper…

What were they pouring over the newspaper?

…or watching the Money Programme. Most couldn’t speak English. Let alone have any money to invest.

So you knew a bunch of people of your own age, when you were young, who couldn’t speak English. Why are you attempting to argue that this particular group represents and typifies everyone born between 1945 and 1965?

You do realise that what you are asking for, I.e. relaxation of lending criteria, would inflate prices further, right?

Because they're not being inflated now? Help to Buy? Investors snapping up multiple properties?

Far better a slight relaxation (perhaps strictly for FTB only) - that takes into account for example a history of (high) rental payments, than taxpayer funded inflation of schemes like Help to Buy and investors buying multiple properties.

And like I say, we also need a mass social housing build. Not only the morally right thing to do, but also cheaper in the long run for taxpayers. The public health housing and homelessness emergency costs the taxpayer many many billions in direct and indirect consequences.