Climbing the property ladder - how do people afford it?

[Rorysmum7]

Our house is valued at more than we bought it for 4 years ago but I’m sure the houses in this area have all gone up too.

my question is, unless we had substantial income increases since 4 years ago, how do people afford to move UP the property ladder?

We can still only afford the same amount of mortgage as we took out 4 years ago, yes the house has increased in value now but surely thats only helpful when the next house you buy isn’t the same price or cheaper. If all houses in the area increase too, i can’t see a way to do it unless you just save up the difference or use pay-rises for a bigger mortgage?

And for those of us who are recently divorced or just never quite made it onto "the ladder" before the insane property price rises....stay in depressing rental paying off someone else's mortgage until you die 😆

Another factor is that most people work for roughly 50 years, so it is possible to have two 25 year mortgages in that time. Ok most don’t get a mortgage straight away and want it paid off before they reach 70. It still means you can buy a second house using a big chunk of equity from your first as a deposit and still have a 25 year term.

For us, it was a combination of buying a fixer-upper and improving it substantially so it increased in value, prices increasing generally but we moved areas so got more bang for buck in the new area, both had pay rises, more equity in the house than when we bought so could afford to increase the mortgage by a big chunk without increasing payments as we got a good fix.

I doubt we’ll ever be able to trade up again; perhaps sideways.

We moved up by overpaying the mortgage like mad and then buying a bigger house but in much worse condition- a doer-upper. This was ten years ago though, I don’t think these are at all easy to find now. We also didn’t have kids in school at the time so could move area to get a cheaper but bigger house

I think the ladder existed when people were able to but their houses earlier. So the first house might have been a flat, then a two or three bed, then a four bed detached etc. nowadays people are often only doing one or two moves in their lifetimes.

Our personal circumstances is that our first move onto the ladder 11 years ago has ended up being a house we’re somewhat trapped in as there’s no reason to move but equally we never planned to stay in this area. Now we’ve missed the boat in terms of catchment and schooling we’re going to have to stay put until DP either gets a huge pay rise (possible) or a large inheritance (almost a certainty within 10 years).

Ours is mostly as we now have a significantly bigger deposit since selling our flat - combination of original deposit, the amount we paid off the mortgage, and the difference between what we paid for the flat, and what we’re selling for (we did significant renovation). Plus earning a bit more so can afford to borrow more

I think its definitely true that you can get two 25 year mortgages. But day in London most people don't get on the property ladder till they are 30 and already take out a 35 year mortgage in order to afford the current prices. This makes moving up the ladder without downsizing to pay off the mortgage in later years harder

When we sold, we had the amount between what we owed the bank and what we sold it for as the next deposit. So we had lived there 10 years so had paid off nearly 40% of the mortgage.

This meant we could move and take out a mortgage with the same repayments as before, but could afford a more expensive house as we had a much bigger lump sum to add to it.

We bought a tiny home that went up by 20k in 2 years. We also had small pay rises - about £5k a year but that was enough.

We bought our second home when mortgage was 5.7% fixed for 5 years. After 5 years we went to variable that was 2.75%.

we knew we could afford more per month having done so for 5 years and in the 11 years we lived in house number 2 we’d built up equity in what we’d paid off and the value had increased (for a couple of years we were in negative equity but didn’t move in that time).

By House 3 (current home) we were able to put down a 200k deposit from that equity and use savings to fund the move. When we moved here 5 years ago we earned 32k (dh) and 17k (me). Now dh is on 58k and I’m on 44k. We’ve decided to stay here long term, pay off the mortgage before we’re 60 (hopefully around 55) as I don’t think we will be able to work at the level we’re heading in our 60s. I’d happily still work but not in the high pressure environments we are currently in.

Another factor is that most people work for roughly 50 years, so it is possible to have two 25 year mortgages in that time.

But FTBs are in their 30s now & already taking on 35 yr mortgages to increase affordability

The house we bought also needed work doing to it which has increased its value as and when we've been able to get things done

There is no ladder. This best described as a pyramid scheme where you need an ever growing amount of debt to support the higher level. This only works when interest rate are getting lower to allow FTB to borrow more each time, passing equity to the next level which passes on to the one above and so forth. The only winner are the one exiting the market, typically people retiring and downsizing or moving to costa del sol (pre Brexit).

We moved 200 miles away to a cheaper area, like you say house prices for a nicer/bigger house just increased too. We already lived in a horrible area so the only option was to buy a smaller house eg 2 bed in a nicer area which would still have cost more than what we were selling. We don't work in sectors where you really get promotions or wage increases so it was the only way for us.

Well, often the first flat is in a city, and bought as a single person, and then you get married, you sell two boxy flats in parts of London/other big city which, if you are lucky have become gentrified since you bought 8 years ago, and with the combined equity plus pay increases you get a combined higher mortgage so you can now buy that 4 bedroom detached in the homecounties/1hr commute from your city office, or you are able to work mostly from home and buy that 5 bedroom former rectory/farmhouse 3 hrs away (and thus cheaper) from your office. We'll, that's obviously a bit ideal world, but several of my friends have done it like that.

Most people cannot buy a London flat as a single person. They buy with a partner, family or friends. That's been the case for a quite a few years. Plus loads of London flats have seen hardly any price growth since Brexit.

By all means if you can buy a flat at 22 go for it, but that's not the average FTB in London.

When did your friends do it like that?

i am in my third and hopefully last house.

i have been lucky and been promoted quite a few times since I first bought. I bought my first flat when I was 24 - it has taken nearly twenty years to buy my forever home.

moving is expensive - thousands and thousands each time. I don’t ever want to do it again and if I am lucky enough to get another promotion I will upgrade a few things in this house rather than move!

I bought a one bedroom through luck, good wage and timing, and then met DP. We then combined incomes, his savings and my equity to buy a two bed in a slightly cheaper area. No kids. Makes it financially easier.

No idea how families manage it without moving to progressively cheaper areas to be honest, unless they inherit.

Salary increases meant we could borrow 100k more when we moved, which was the gap between what we sold for and what we purchased at. House price increases helped build equity so it meant our loan to value was also lower.

Salaries have increased again so could probably go for a larger house again but our home is big enough for our needs.

Combination of buying a do-er upper, overpaying the mortgage when possible then a 3 year stint in a low tax county to save.

Overpaying the mortgage, renovating and saving for the first three houses achieved our forever home when OH was Forty five, final renovation. Lived there for 20 years in the country. Downsized to a dormer bungalow which was cheap as chips to run but the purchase price was eye watering because it was a sought after area in the burbs in a naice cul de sac. We miss the acreage and the peace sometimes though.

We waited 15 years before having our DD and moving on to the house we really wanted.

During that time, original house had quadrupled in value and we had both had several promotions/pay increases.

However, this was 1994 and North Midlands. Not so easy these days and especially in the south.🙁

Ssme here. We bought this house for £150k - £15k deposit & mortgage for £135k. We’ve been here a few years and now owe £110k on the mortgage, while the house has increased to probably £200k. So we’d have £90k for our deposit for the next house, meaning we could borrow a larger amount for a bigger house, or buy a similar sized house but with smaller mortgage payments.

We moved from a 2-bed terrace to a 3-bed semi. In our case we both had slight salary increases (before inflation reached stupid levels) and we added 4 years to our remaining term. So in total our mortgage paying years will be 29 rather than 25.

First house was £75k out of London bought with £15k deposit partly gift from DPs and partly savings. Then both got jobs in London and it was cheaper to pay the mortgage on a second flat than the train fares to commute so bought flat in Putney for £125k. Had an interest free mortgage, rented out the first house, did a lot of side hustles, had a lodger in London and saved like mad. Paid off both mortgages in full and sold both properties at the end of the 5 years. That plus a couple of significant promotions meant that we were able to buy the current house for £430K with a £200k mortgage. MIL died a few years later which meant that we could pay the mortgage off (just as well as we had huge school fees and childcare costs). Toyed with moving out to a big house in the country but decided it was better to be in a fairly central London location.

Yes. These days people want the 4 bed detached straight away (and more than a few did so with low interest rates), then after a few years think "well, everyone else used to move up the ladder, so I should too"

No, people used to buy something small and a bit rubbish at the start of their career and moved up as they get promoted.