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??

Id love to know jow it all works too. I know someone who's a self employed unskilled (as in no qualifications needed) tradesman, his accounts state he makes about 13k pa, his wife works 2 days a week in admin, they have a 90% mortgage on a 300k house (semi) which they've spent about 150k on extending/ remodelling (massive ground floor build involving lots of structural alterations, w marble floors, granite worktops, bifolds, new bathrooms x3, loft extension). Hes told me all of its remortgaged. Plus a new ££££ car, gardener every week, cleaner x2 a week. How do they do all that on so little earnings? Their parents live in social housing so no inheritance🤔

If years ago a house was 4/5x your salary and now it's 10x, then for couples it is possible but they both have to work full time and both each contribute what one person buying a house years ago would have.

DH bought his first house through a co-ownership scheme then bought them out. I saved up and had a 5% deposit (not sure of they're still available) but neither of us had help

@Iamthewombat

There’s no way that any party will make over 70s pay for their healthcare. It would be political suicide. Not happening. So no need for anyone to sell their house to pay for it.

The only reason people have to sell their house is to pay for residential care, which only a small proportion needs.

I’m with @nightwakingmoon on this (and, in fact, on everything else she has posted).

Do you genuinely think that as a huge number of people born after 1945 become elderly, in an era when people are living longer than ever, that they won’t be asked to meet some of their own care costs? I’m not talking about visits to A&E. It’s home visits from carers, home helps for cleaning and housework, elective care and yes, residential care, which more than a small minority will need.

No flipping way is all that going to be met from general taxation. So anyone expecting a nice windfall from baby boomer mums & dads is in for a shock. I’m certainly not expecting anything from my elderly parents: I’d sooner that they spent it all on making their own lives comfortable, and they may not get a choice about that anyway.

I think Healthcare and Social care are being used interchangeably here and at cross purposes. Healthcare is free Social care -if you have less than £23500 is paid for by LA. Otherwise self funded. A tiny amount with very complex health needs get CHC funding.

The vast majority do not go into care homes.

I bought my first house 6 years ago on a 95% mortgage. Apparently it's gone up 27% in value but I don't believe it - it's a nice house in a down at heel area, there's just no way it would sell for the price stated. Not that I'm selling.

I managed to buy it by the skin of my teeth, too. 5% deposit was still a lot of money for me at the time, and I couldn't possibly manage the high deposits required these days.

I doubt my dc will ever manage to buy something unless it's a dodgy area or something run-down.

@torquewench

Id love to know jow it all works too. I know someone who's a self employed unskilled (as in no qualifications needed) tradesman, his accounts state he makes about 13k pa, his wife works 2 days a week in admin, they have a 90% mortgage on a 300k house (semi) which they've spent about 150k on extending/ remodelling (massive ground floor build involving lots of structural alterations, w marble floors, granite worktops, bifolds, new bathrooms x3, loft extension). Hes told me all of its remortgaged. Plus a new ££££ car, gardener every week, cleaner x2 a week. How do they do all that on so little earnings? Their parents live in social housing so no inheritance🤔

How do you know so much about his accounts, mortgage, parents, schedule of cleaner, etc, etc?

If he’s told you all this, well. It’s like NCT groups when they all tell you their babies sleep through, or MN threads where everyone shares their salary and it’s 6 figures for 2 days a week. Take it all with an enormous pinch of salt.

@iamthewombat We got a 40 year mortgage at age 31 because it was the only way the bank would lend us the money for a house. If I'd posted on mumsnet about it I expect everyone would have told me to run for the hills, but actually it was the best thing we ever did. When we got pay rises and our childcare costs reduced we put all of that extra money on the mortgage, and we've now reduced the term to 25 years. I expect we'll reduce it further over the next decade. Meanwhile we've moved again to a better house, making a 100k profit on the last one.

The younger generations (who are lucky enough to buy) engage differently with the house buying process than their parents and grandparents. Overpaying the mortgage is a thing amongst my peers, everyone knows about the MSE calculator and people will often prioritise it over savings, especially with interest rates so low. My in laws can't get their heads round it, for them overpaying the mortgage wasn't an option it was just a set bill and that was that.

So 40 year mortgages aren't necessarily a terrible option, and some people are able to make them work to their advantage.

@Iamthewombat I was merely responding to the poster who said she thought terms has gone past 25 years, to confirm it. Yes I know how compound interest works. I'm a financial adviser.

When we bought our first house a mortgage was three times your wage, and people usually went on the DH’s wage due to probably having kids.

Either people are being given the money by someone, or a lot of people are dealing on the side. I just don't understand how people are managing it now. Also, if a house has been valued at a price, why would anyone pay tens of thousands more than that price. Its madness.

We are probably the kind of people you are wondering about OP. We are on pretty average salaries (for London) but we live in a £900k house, however our mortgage is only £275k. The rest of the money came from good luck and bad - our first house had almost tripled in value when we sold a couple of years ago, and the bad luck was that by the time we were in our very early 40s we had lost all of our parents so inherited - although I suppose that could be seen as good luck in some way as not everyone’s parents are in the position to leave them mortgage free houses.

Most other people I know who live in houses disproportionate to their salaries have also made a lot of money from their starter homes or had parental help. Although I do know someone who won £500k on the lottery when we were in our 20s and so was able to skip a few rungs of the housing ladder!

My parents had unbeknownst to me been gifting my brother tens of thousands.
So in the interest of fairness, they gifted us ten thousand, we provide the rest and bought a cottage which needs extensive renovations. The caveat is we've moved 50 miles away from where we were.
We do have a tiny mortgage, and outgoings, we can manage on one salary if need be.

People always mention negative equity, if the house is viewed as home. a permanent place of residence then it's a red herring. It's only when viewed as a future saleable asset that equity is important.

What boomers fail to understand is, that generation saw incredible wage inflation from the 50's right through to the early '90s. This then slowed and we've just had a decade of wage deflation.

Money is cheap and easy to borrow.

My husband got his flat in the days of 110% mortgages and when you could have a loan from parents to pay the deposit. Neither would be allowed now. He also had a 0.3% interest only mortgage and a lodger under the rent a room scheme.

Our cost of living was so low we were able to save hard. Also graduates doing the same grad scheme I did are actually paid a lower starting salary than when I joined over a decade ago.

So… while saving hard for our house, I had coffee and lunch out everyday I still had coffee everyday though because it made bugger all difference to be the bigger structural factors which enabled us to buy that are not available to people in their 20s now.

@Thatsplentyjack

Either people are being given the money by someone, or a lot of people are dealing on the side. I just don't understand how people are managing it now. Also, if a house has been valued at a price, why would anyone pay tens of thousands more than that price. Its madness.

Im not sure why anyone would be surprised if house deposits are being given?

No one has mentioned Help to Buy either
and imo is why a large amount of FTB are buying the new houses with all the bells and whistles.
Now with the cost of living shooting up we might see issues when the repayments kick in.

Some of the buyers will be older like ourselves who have just retired and thinking of moving to another area but house will be the same price or less so no mortgage. House is worth about £300k-£350k

When my husband and I bought our first one bedroom flat in 1986, interest rates were at around 12 to 13%. Half of our joint income went on the mortgage and I had sleepless nights that one of us would lose our jobs, as we would have lost the flat. So it has never been easy to buy and I get fed up with the suggestion we had it easier.

What is different now is you need a much larger deposit before you can buy. Otherwise with interest rates so low, it is actually cheaper to fund the mortgage.

I see a lot of houses being flipped by builders these days, whereas years ago a newly married couple bought a doer-upper, worked hard on it then sold it for a profit to go towards a forever home.

DS earns about £40k, we could probably help him out with some towards the deposit, he is in Leeds so could probably buy something on that salary there but it wouldn't be that salubrious.

My house was sold and paid for when it was built, and 3 times since. I've still got a mortgage. Wher is all the money going?

Yeah. The trade guy may earn 100k in cash or off the books

My friends who are self employed like this only declare a small amount to HMRC

Prices are crazy because borrowing is so cheap

I wonder what will happen if interest rates go up, or will we never see that happen again ?

Our entire economy is propped up by people overspending borrowed money

It’s one big bubble

Inheritances- more people who had life insurance etc passing away
More savvy house buyers
People releasing money from existing homes where they had equity
Couple - double incomes

No help here but fortunately to be early 40s and have managed to ride property price increases over past decade. Bought in slightly less desirable areas which are now massively sought after.

Also didn’t over extend which meant we overpaid mortgage which means significantly more equity. It’s also loads cheaper as you don’t pay all the interest over the term.

So short answer was had very good jobs and were not greedy initial which allowed us to play the long game.

Yeah, but they had help being able to stay at home to save the 70k deposit

Only on mn is helping your kids seen as a bad thing. Meanwhile in the rest of the world it’s just what parents do

We used help to buy on a tiny house 6 years ago, only needed 6k deposit which we were able to save as didn't have a child. Then when we had a child, the house was too small so we sold it and did another h2b on a larger property using the modest equity we had. We will remortgage in 3 years and absorb the h2b loan.

I don't know why more people don't use this scheme, it's enabled us to get on the property ladder, sure we have had to live I'm new builds but beggars can't be choosers!