How do people afford nice houses?!

[Dededot]

We have always been extremely careful with money. Bought our first home 4 years ago in quite a cheap area that isn't very nice. It has no communal parking and we never get a space and with number 2 on the way I am desperate to move closer to my parents. We paid £250k for our house, and it's worth £290k now. We still owe £263k.

Between me and DH, we earn £96k a year, but we just cannot afford a nice house in the south. Maximum we could go to is £420k, and then I'd worry about whether it'd be affordable should interests rise to, say, 5%. For that, nowadays you can get very small houses with tiny gardens in the area I want to move to. Have looked at other areas too but seems everywhere is around the same.

I could wait another 5 years when my kids are all at school and I don't have to think about paying £800 a month on childcare, but by then maybe the houses that are 500k now will be 1000k?! Ours is in a bad area so its price isn't increasing in proportion to the nicer areas.

How do normal people afford nice houses when we're in the top 10% earners according to gov stats and can't? Seems everyone I meet has a huge house in a nice area!

We borrowed the maximum amount we could which was 4.5 time our salary and we were gifted a large deposit by family.
On your incomes you could borrow 420kish plus the equity you have would take you up to close to 600k. We were happy to stretch ourselves and we are fixed for 10 years. We could still afford the mortgage repayments even if interest rates did rise.

Very interesting to hear this! Sounds like you have a really lovely home and Wales is so beautiful!! Wish I could move there but DH needs to be within 2 hrs of London as may need to occasionally go to the office. Maybe when we retire!

@Gooseysgirl I think you're probably right and that's what we should do. Thank you!

You're saving my entire monthly salary so you can easily afford a bigger mortgage if you wanted one.

We went big on our mortgage as knew salaries would go up as well as house/prices equity by the time we needed to remortgage

Generally speaking, another reason people aren’t properly touching on is that some people get on the housing ladder earlier and therefore profit earlier from rising equity. If you were able to buy, say, a flat in London zone 3 before the financial crash in 2007/2008 and the post-Olympics price rises, the rise in equity will probably have funded your next move even if pay rises haven’t been commensurate, and you won’t have needed as big a mortgage for the next leg up.

Which parts of the SE are you interested in and what do you class as a “nice house”?

One you missed off:

• did not have kids before moving to the house big enough to accommodate kids

We're lower salary than all our neighbours but much older parents.

You are saving more than my salary each month! Why? How long have you been saving £2500 for and how much do you have in savings? Why don’t you just use that and move?!

We live on the S.E/S.W border and bought 5 years ago using govt HTB. We're now remortgaging to borrow the money to repay our HTB loan.

When we were looking at houses, I kind of coerced my then-boyfriend-now- husband to stretch ourselves to a bigger 3 bed, as we knew we'd want to get married start a family etc. and I wanted a home we could grow into and not worry about having to move when kids came along.

Our house is modest, but our mortgage is affordable, we enjoy our socialising and we have our first baby on the way. We're not rich but we're comfortable, and we have made our new build box look 'nice' in our own way.

I don't understand how you can say you save essentially my monthly salary, and not be able to afford to move?!

You say you're saving £2500 per month. What return are you getting on that? If its more than the interest rate on your current mortgage, great. If its less then that's a terrible investment overall for such a large amount and you would be wiser overpaying your current mortgage or taking on a bigger (but still affordable) new mortgage when you move. Unless you're savings are going into stock market then your money is going to be seriously eroded by inflation this year.

However, house prices are peaking already and likely to decline later this year so personally I'd wait 6 months before looking to move. You might get a bargain.

Whatever you do, please don't waste your hard earned money putting it into savings with a tiny interest rate like 1% when your money could be working much harder for your elsewhere.

The general wisdom on savings is to have 3-6months worth of your salary in cash in case of major emergency. Anything above this should be invested e.g. into property, shares ISA, pension etc to get a better long term return.

Honestly - buy somewhere scruffy and do it up. Move up and do it again. Avoid new builds because they are 10% overpriced.

Or accept a huge mortgage.

Or work 75 hours a week and earn more

You are saving £2500 a month so you could definitely afford a nice house

In my other half’s experience of owning an estate agents, it’s usually because of one of two reasons.
They either got on the housing ladder years ago back when properties were cheaper, or they’re young and have bank of mum and dad who helped them onto the ladder.
most people I know who have big detached houses are overstretching themselves on the mortgage and live a champagne lifestyle on beer money.
if you can afford to save £2500 a month (an astronomical amount!!) then you could definitely afford a bigger house in a nicer area.
not everywhere is ridiculously priced in the south.
portsmouth is cheaper then Southampton for example but there are cheaper little Areas that are slightly less desirable but close to the new forest and the sea.

Family help.

If you're saving that much a month, have you looked at an offset mortgage? The savings would be offset against the interest payable on the mortgage, but you're not using them to actually pay off the mortgage, so you can still withdraw money if you want to. We have substantial savings that just sit in the account and offset our mortgage interest, and given how low interest rates on savings have been until recently, it seems a good way of doing things for us, for now - it was recommended by a financial adviser.

Thank you for all the responses! Gave me a lot to think about. Seems if we were 5 years older then probably we could have bought a much nicer house 5 years ago! (Since we started earning well only recently). Makes me very sad for those who are just finishing uni now, so obviously should be grateful we're in a position to own at all.

It's true we can pay another 1000 and still be fine and able to have a cushion if situation changes. We atm do spend some of our savings on flights visiting a relative in a country that is very expensive to travel to, and one holiday a year too, but we can do without those until kids are in school.

Reading more of the responses - thank you sooo much, guys! Some excellent advice here. Clearly need to become more savvy with finances!

In my experience those in the nicer houses are likely to be a few generations above you, 40-50 at least, and probably made money from a previous home sale.

My DH bought his first home at 23 and thanks to a job in IT that saw him away from home 6 days a week a (that included paid hotels and food) he could use the majority of his wage to pay off the mortgage. We didn't meet or have kids until after this. In that time the house value tripled as the area was somewhat regenerated.

We moved out of that two bed victorian terrace in a city suburb to a grade 2 listed manor house in a lovely village with a minimal mortgage and although we put in savings there's no way we could have done that without the sale of that house. We have a few friends in their early 40's who are in the same position due to selling their starter home at profit.

House prices are just bonkers now BUT there are lovely big houses available for around 400k IF you are prepares to move further north and commute. You can get to London in under an hour on the train from as far north as the south midlands & lots of lovely villages around Leamington (south Warwickshire) and Market Harborough (south Leicestershire) where you can buy a lovely property with a garden for that.

Worth a look, OP.

I pay for it. I don't save 2.5k a month I have a massive mortgage. You want a lovely house but aren't prepared to pay the "lovely" (!) mortgage these usually come with even though you could afford to.

OP, you said you couldn’t move to Wales because DH needs to be within 2 hours commute of London.
Fastest direct flight time Cardiff airport to London Heathrow is 32 minutes. Probably faster than driving in from Surrey?

It really is area dependent.

I live in a 5 bed detached house in the north that e bought 2 years ago for £320k. That would get us nothing further south. The downside is that our income is much lower. Dh could earn far more in London.

Utterly depressing to see people advocating internal flights in 2022.

There is going to be no planet for our kids to live on.

And it’s just under 2 hours Cardiff - Paddington too, but I suppose it depends which side of London they need to get to.

You are saving more than my family of 5 live off each month. What are you saving for? I appreciate the need for a ‘cushion’ as we never know what’s round the corner and it is obviously sensible to have some money Saved to fall back on, but Saving 2.5k each month Is a lot if you haven’t got the lifestyle you want. What are you saving for?

Live in the North! 5 bed detached, detached garage, 2 car driveway, garden (not huge, but big enough) - £310k as a new build 3 years ago. On the edge of a country park that is protected land. 20 minutes into the city centre on public transport, same time in opposite direction to the beach. The S.E. is just ridiculous in terms of prices, and I know you earn more there, but not enough to justify property prices.