£32k deposit, £35k salary...can't afford to buy. Am I missing an option?

[Cronx]

In London, of course. No one needs to tell me to get over it, I tell myself the same every day, and at least I have a roof over my head and a job, etc. I am truly appreciative of this. So this is less a whinge, more asking if anyone has any bright ideas? If I had been in this position 5-10 years ago I would have been laughing, but the timing has been terrible for me, with house prices increasing exponentially and interest rates being virtually nothing, therefore leaving me with virtually no returns on my savings.

I'm single, 32 and have no children. It's not feasible for me to move to Grimsby or something at the moment, though I would definitely be open to it under different circumstances*

But my current living situation is a bit difficult. I live with my mum and pay rent to her, but way less than I would be paying if I were renting on my own. We share housework, bills, food etc but I just want my own space and to live like an adult. I've had enough of house shares, my current situation is better than that, and at least I get to keep saving this way. Renting would eat up my income and put my savings back so I would be in worse position in the long term.

But it feels like my saving is completely futile.

Without wanting to sound like an entitled whiner, I am so frustrated. I have been working and saving like mad, and I lead a really modest lifestyle (I'm quite boring and frugal anyway so this wasn't too hard, and I am happy to continue doing this). But it's getting me nowhere, especially with interest rates through the floor and no sign of them going up.

I know the answer is "too bad, suck it up, that's how cookie crumbles sometimes, no one deserves to own a house flat..." but surely it shouldn't be this difficult? I'm looking in the crappest, least glamorous part of outer London, not Hampstead or anything. The prices are going up faster than I can save, and I'm a bloody good saver.

I've spoken to a few lenders and they say they can lend me between £160k and £175k, which would buy me a property of up to around £200k, taking into account stamp duty and other fees. There is hardly anything on the market at this level - there are a number of "in need of TLC" derelict hovels on RightMove, between £150k and £200k. I'd be open to this in my desperation, but I'm doubtful they actually exist, because the estate agents never return my calls or emails about them. Even when I go in to their offices to enquire it's just "sorry, that's not on the market anymore". A lot of the properties at this level specify cash buyers or investors only, which rules me out.

There are a few properties a little above this, around the £210k upwards mark. In my cute naivety, I thought maybe I could look at these and make an offer 10-20% below asking price. Ha. Ha. Dream on. I've been to numerous viewings, all of these are hideous stampede-like open house affairs, where you get 2 minutes to look around. It's mostly young couples struggling to find a home (but probably on 2 incomes so they're more likely to succeed than I am), plus the odd single loser like me, and then an investment buyer turns up knowing they will be able to outbid everyone and offer at least asking price, and make a tidy profit. So I have no hope on these flats, which aren't even that nice.

I've been looking at the Help to Buy Equity Loans but it's all so mysterious, there seem to be hardly any properties around under this scheme, and describing them as "affordable" seems a bit generous to me. There's one down the road from me, but the 1 bed flats start at £350k! It's on a horrible roundabout in a crap part of a crap borough. And the affordability criteria seem to make it impossible for people of average or even slightly above average incomes to afford a very average home. Are they advertised elsewhere? Or are you supposed to just pick any new build and get a Help to Buy loan/mortgage for it? I made an appointment with my bank, which proudly declares they take part in the Help to Buy scheme, but the mortgage advisor did not have a single clue about it, I seemed to know more than she did. She had to look it up on the computer as she didn't believe that they offered such a scheme, even though I told her I was reading it on their website that very morning. The Help to Buy website is hopeless, it doesn't actually give any helpful, practical information.

I've thought about shared ownership, even though it seems like a massive rip off. But even then I sometimes don't even meet the income thresholds. I've contacted Housing Associations in my borough about new builds but I'm low on the priority list, understandably.

I honestly thought I'd be able to buy a house at 32, given that I've been nothing but sensible and taught myself about the market and followed all advice. I thought I had done all the right things but I am royally screwed. Lord knows what I will do if I ever want a family, there's no chance I can afford anywhere suitable for a child.

I have no hope, right? Should I give up and blow my deposit at the bingo or something?

I suppose I'm just wondering if anyone has any stories of eternal perseverance finally paying off!

*everyone has their reasons for wanting to live in a particular area. Mine are mainly: I'm having long term counselling and probably won't survive without it, and my mental state will deteriorate if I have to go through the mill of trying to find a new one. I'm not going to be able to move on from some of the issues that caused my problems by staying in my family home (I'm living in the house I was abused in, for one). Plus, I have a stable, good job (the salary is ok if not stellar, but the pension and other benefits are very, very good. Plus I like my work and colleagues, and don't think I can cope with the upheaval of looking for a new job and establishing myself elsewhere at the moment, especially as I will have no partner, no family and no friends around).

www.rightmove.co.uk/property-for-sale/property-51082150.html

Looks interesting; shared ownership, that one. I have started to consider this and have been reading some SO threads on here to weigh up the pros and cons. That area would be fine, it would be easy for me to get to where I need to go.

Definitely think a Financial Advisor is the next step. I'll find out the best way to look for one.

Just saw that you'd rather not move miles away, but for what it's worth, you can get a flat in St Neots in Cambridgeshire for under 80k. It's on the train line to Kings Cross and takes about an hour. Those flats at the too are close to the station too.

www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION^1254&sortType=1&googleAnalyticsChannel=buying

thanks cosmicglittergirl. That;s another Shared Ownership, and an annual train ticket would be just under £4800 (and bound to go up in January, naturally), so I'd really have to consider whether it's better to get a SO place where my mortgage would be low, but I'd have to pay rent plus all the other service charges and Housing Association fees, and a massive, massive travel cost. Or whether I should try to stretch to a SO place in London, where my travel is currently £1800 (that is a zone 1-4 travel card so I use it for commuting to work, plus all my leisure, supermarket trips, etc). If I lived somewhere I would need a car I'd need to consider all this. But it's something to think about, definitely.

Honestly it can be quicker to travel into london from North Essex than from some outer boroughs. 1 hour from Colchester and that's almost in Suffolk. So work wise that would be easy, but maybe not for your treatment. A yearly season ticket on the train is about £4500 though. But you'd get a 2-3 bed house for £200,000 no bother.

the thing that worries me most about SO (besides it being a bit of a rip off) is the difficulties some people have had moving on from them, trying to sell has been a nightmare. But I have recently heard some more optimistic stories as well (there's a thread at the moment asking about Lewisham, and a couple of people said SO worked well for them)

SO can work for some. My friend had a SO in Clapton which they recently sold and bought a house in Northamptonshire from which they commute to London. They were lucky the area went up in value after they bought. The train ticket cost is obviously an issue also.

FWIW I think a more expensive house in a closer location, with lower commuting costs, is better than a cheaper house in a more distant location, with higher commuting costs. Because money spent on the house is money you should recoup if you sell, whereas money spent on commuting is just spent. Of course this is just a theory and in reality you have to get whatever house you can afford, which might have to be further away.

Just read your last post. I could have guessed your mum is not financially literate. It's not an insult, but I found one of the big differences between middle and working class is the knowledge of financial products. My DH is from a poor family and he would never have invested in equity. He didn't even understand pensions! We came from NZ and when he arrived here for his postdoc, he didn't even sign up to the university final salary pensions. His reasoning was that he needed to pay off his student loan first. I arrived a year after him and I gave him a right telling off for being so stupid.

Anyway, you are right that if you are buying very soon, you should not be putting the money in shares. And if you go and see a IFA, be mindful they might push products where they get a large commission. That's why I suggested you have a look at index trackers before seeing a IFA. I think money saving expert has links to discount brokers where you can open an account to hold these trackers for you.

As for Everyone I know who has investments does it as a bit on the side for amusement, and when I ask what would happen if they lose the money they're a bit blase about it, as they have parents other funds to bail them out when they want to buy a property or whatever

We put aside money for our second house in shares. It was on a 5-6 year time frame. (We bought our first in 2009, and moved this year). The difference in our situation is that if the shares aren't doing well, we won't cash it in to buy a house. We will just sit tight in our first house. That way we can ride out the bad times. I just took the risk that I'm most likely to get better return than 2% which is the mortgage and savings rate.

I could have guessed your mum is not financially literate. It's not an insult, but I found one of the big differences between middle and working class is the knowledge of financial products.

We live in the information age Head.

Regardless of the norms we grew up with, some people are naturally predisposed to investigate products, read the financial pages, track rates closely; some people won't listen no matter how many times you tell them what their overdraft is supposed to be for and most people are in between.

People find information when they need it, as OP is doing.

Sorry - so astonished I missed off my central question - do you really think that's a class thing Head?

I would put £20k of the £35k into premium bonds, capital is safe, easy to get the money out and possibility of a decent return but no loss* if you don't 'win' anything.

• some loss of 'buying power' as inflation eats away at the money but this is no more than the c1% you'd get in a savings account at the moment (3% Santander...?) and actually inflation was negative last month.

Can you get any other income? Second job?

When I was saving for my first flat, many years ago, I did three jobs at one point. I know it's hard, near impossible, but as your outgoings are low the only thing you have open to you is to increase incomings.

I also know circumstances look really bad right now, but to be honest they did when I first bought too, nearly 20 years ago. I took a loan for part of my deposit! I also had a large sal multiplier and interest rates were going up and up so every month the mortgage cost increased but of course my salary didn't.
I bought on my own the first time, in an expensive area of the country (but not London). It really was hard but it was worth it.

I had no family help and no partner. And everyone said housing was in a bubble and about to crash. They said the same again when I bought my next house....
If you actually think of it as a home and you intend to live there then in fact negative equity doesn't matter, you just plod on through the economic turmoil and it will sort itself out around you. You only 'lose' if you need/want to move and that involves selling.

I also did LOADS of rate tarting/stoozing. I probably made several thousand pounds doing that. It's not as lucrative now with low interest rates but if you use that £35k in several current accounts you may find you can get more interest. Look at TSB, Lloyds and Santander. They all have min funding requirements and max you can put in, but for the interest it could be worth it.

You've done really well to save £35k.

I really wouldn't put any of it in equities right now, not unless you decide not to buy for 5 years (can your mum move, you stay with her, but somewhere more healthy for you [both, presumably] which might mean you are more comfortable for now and the pressure to get out isn't so huge?).

Have you thought about peer-to-peer lending via a platform such as Funding Circle. Returns are far better than savings at the moment.

I also agree that Premium Bonds are a good idea for some of your savings.

I live in North Essex and was going to say it isn't too bad commuting in if you really like London/working there/have ties etc. I don't, so I prefer not to work there, but I could if I wanted to. Being further back you usually get a seat when you hop on.

Hopefully you can find some middle ground.

Re councillor, if you can brave it, I wonder if it could be worth researching other kinds of help/councillors. Whilst unlikely, your councillor could emigrate, or become very ill and have lots of time off work. It would be awful to be forced to look for something else ASAP, if you haven't already, perhaps you could have a backup list at the ready just in case

Thanks again all. I am really interested in all views.

I don't think it's a class thing, I've known plenty of irresponsible spenders who are middle class, they are just lucky to get away with it because they happen to have a safety net. But I do think that financial literacy and responsibility are among the most important things one can teach their offspring, along with getting the best education you can. When I have my imaginary child, in the imaginary world where I can afford an family home, I will encourage them to be financially savvy as much as possible, and I will lead by example.

I've been risk averse but I've managed to break the cycle of poverty in my family, I got a degree with no support and no history of HE in my family, I tried to get a good job rather than the menial one I was destined for, I'm paying into a final salary pension...I did what I could, all the while struggling with normal life rubbish and some pretty abnormal stuff too (paying a small fortune for counselling is probably my biggest extravagance, sadly). So I try not to pity myself but I also try to cut myself some slack, I did try what I could.

I totally understand that risks are there to be taken and whatnot but risking my money on stocks instead of isas is not stupid, it was just the option that suited me most at the time. I followed all expert advice (bearing in mind I've always been careful, even saving when I was on a crap temp wage, I haven't had £30k this whole time). I don't know anyone who has had to play risky games with the stock market to be in a position to buy their first home so I don't think I've done anything different from most people, I'm just in a bit of a pickle timing-wise. Most of my friends had deposits ready years ago, because their parents supported them through uni and gave them an allowance, so they could put their loans in high interest isas (when rates were 6%+). They'd then graduate, go travelling and then get a big wad of cash from their parents to match their isa, so they could easily buy somewhere with a small mortgage. They haven't been any more financially intelligent than me, or more deserving because they took more risks, they were just luckier. That's fine, we all start at different points, but I don't think it's fair to say someone in my position (perhaps it is a working class thing) stupid because they didn't take risks. I know there are self made people who took risks that paid off, and I admire them, but I've known enough failures to put me off. I needed something stable.

If I had put my cash into shares and at this point had £50000, awesome. But there was a very real chance I'd only have a couple of thousand more, which is a drop in the ocean. There's also a chance I could have had less, leaving me in an even worse position.

The problem is not just the low interest rates, it's that that has coincided with prices getting absolutely off the scale in a short period, just as I was hoping to buy; plus lending criteria getting really strict making it nigh on impossible for a single, average person; plus the powers that be merrily saying low interest and low inflation are what we need. So while my wage has doubled in 5 years, and I have made lifestyle sacrifices to save up, it's still pocket money in relation to the cost of buying a home.

With hindsight I can definitely say "well, you did wrong to follow all sensible advice and common wisdom, you should have gone for higher risks. Of course prices were going to skyrocket; of course there was going to be an unprecedented period of low interest and stagnant wages across most careers within your reach; of course banks were going to stop lending to sensible people altogether, because they screwed up lending to irresponsible people who have pulled up the ladder behind them bitterly looking at you, older brother who has never saved a penny but has a nice two bed bought with wife who had a modest deposit from parents ; of course it's going to be unreasonable to expect to be able to buy in a traditionally poor, cheap part of London by the time you grow up", but you don't have hindsight at the time.

I know it's just unfortunate and, really, worse things happen at sea. There are people in worse positions, I know.

Oops, that looks a bit like a rant, it's not! I don't want to have a pop at anyone, I really appreciate all input; it's helping me with wisdom to pass onto my daughter that I may have. Or more likely niece, because I can't see myself having kids, and her spendthrift parents won't teach her!

Having said all that, Headdreamer you were definitely right to ca your husband an idiot for not signing up for a final salary pension! That is easily the best benefit of my job. At least when I am an old lady who never managed to get on the housing ladder, I'll still be able to go on cruises.

If you're saving 1k a month can you wait another year or two? Your savings should increase more than property prices will, and then you won't have to compromise as much on location. You may even get a small pay rise too, which would enable you to borrow a bit more.

"Your savings should increase more than property prices will"

REALLY?! Have you SEEN the housing market lately?!

Have you looked at Leatherhead and Dorking in Surrey?

Outtogetyou, thanks for your post, it's interesting to hear how you managed it. I know things weren't always dandy. I have an aunt who consoles me with the fact that interest rates were 15% when she first bought her house (let's gloss over the fact that her 4 bed house was about 2 times her husbands' young graduate salary, enabling her to be a SAHM and the same house being worth over a million thirty years later - a one bed flat in those days would have been about 20 quid). So it's encouraging to hear people can manage it in the end.

I have a Santander account (but they're putting the fees up in January, and as I don't have my own place I'm not the main named bill payer, while I contribute to them, the bills don't come out of my account so I don't get the cashback benefits on DDs etc, so it's barely worth it for me now). There's also the TSB account which has a 5% rate I think, but only up to £2000 or something, so it won't make me all that much better off, it's a drop in the ocean again, rather than "pennies make pounds".

A second job isn't something I've considered seriously (I already work long hours), but it's something to think about.

As you say, negative equity only matters if you want to move. I don't plan to, unless I get married (fat chance, this is the only thing more deluded than my house buying attempts ha) and have a child - obviously a one bed hovel would be fine for me, but not a family. I have also tentatively considered adopting or fostering, so would need to get a bigger home if I went down that road. But I'm not looking at it as a moneyspinner, so if I did stay a single non parent, negative equity wouldn't be a huge bother.

My mum can't/won't move (she wants to be near her son, who may soon give her the grandchildren she craves), and I kind of want to get away from her and her insistence on making me eat her poor cooking, I ain't taking her with me! The one other thing I have considered is getting on the mortgage for her house - it would help her out because she's on an interest only timebomb at the moment, and it's worth at least £200k more than what her mortgage is. But, this would still mean staying in this house, which isn't what I want. It would get me on the ladder, and probably open up things like second mortgages to me. But, I don't think it's a solution, unless I eventually boot my mother out and sell up if and when I want to move somewhere else and be a grown up, which I don't have it in me to do. So I think that would leave me stuck here forever.

I've looked at credit unions and premium bonds but they didn't seem all that lucrative or applicable to me - I'll certainly look again and weigh them up against investments.

Jevoudrais, it's getting back out to Liverpool St and getting a train home that would worry me - the Central line is my nemesis! But I'm open to Essex, I'll definitely keep it in mind. You make a good point about making contingency plans as well, I haven;t really thought about this to be frank...

Lots of sympathy - I was where you were a few years ago, and well remember the trudge of being frugal and saving every month for 12 years, while watching prices getting away from me and realising that if I'd maxed myself out on a 90% mortgage in my mid-20s I'd actually have been in a much better place. It feels like being punished for being sensible, eh?

However - you are getting there. Prices tend to drop a little over December/January so you might find some more properties in your price range then.

I have a First Direct monthly saver which pays 6% on up to £300 a month - worth checking out? Plus any extra sources of income (an evening/weekend job, casual work, market research etc) really make a difference.

Be really careful about checking service charges - I know people who bought a cheap flat but then saw their service charge increase exponentially every year until they were paying out £150/£200 a month and getting nothing back for it. If you can get an older conversion/ex-council flat you'll be able to put much more money towards your mortgage.

Good luck - you'll make it.

I'm with AnotherEmma - I used to be optimistic that £1000 a month should easily outstrip increasing prices and eventually I'd be able to get to the LTV level required, but I have been proven wrong thus far to my optimism is on the wane!

AppleCider Dorking yes, I've investigated it relatively recently (I know someone who lives there and it's nice, and it's on the same train line as me at the moment so would be great); not looked at Leatherhead but I will now.

Thanks Irene - yes that's exactly how I feel, punished for being sensible! I'm the most boring person and don't spend money on booze or expensive clothes or fancy holidays. I hate being bitter and jealous but when I see people like my brother waltz into home ownership having not ever tried to do the right thing, then have the gall to smirk at me for not being as lucky as them, I feel like having a massive bitter, jealous screaming tantrum!

I think I will wait another few months - the Help to Buy ISA comes in soon so I may be able to get an extra 50 quid from George Osborne, and I suppose you are about prices falling in bleak midwinter... in the meantime I will see an IFA and get my ducks in a row, then decide perhaps in a few months.