5% mortgage rates

[SaturdayGiraffe]

Just read this article saying to expect 5%+ rates shortly.

https://www.theguardian.com/business/2023/may/25/uk-homeowners-and-first-time-buyers-warned-to-brace-for-5-plus-mortgage-rates

UK homeowners and first-time buyers warned to brace for 5%-plus mortgage rates

I just don’t know how people are going to cope, and it could go even higher.

People aren't climbing the ladder because the ladder broke long ago unless you are one of the fortunate minority who is gifted large amounts of money or who is in a job with very good income progression.
This article is a few years old and I haven't read it again but I seem to remember that it makes the point: https://www.ft.com/content/5c49931e-9ddd-3db3-8a67-3fc2bc18f0d2
Young people are buying at older ages, nearly mid mid 30s often. By that age, a lot of them will have children or want children as soon as they have their own home. Obviously, in this situation a tiny flat won't be suitable anymore in the way that it was when people could afford to buy at much younger ages. They are also needing to take longer mortgage terms in order to afford anything, nearly up to or sometimes even past retirement age.
There is no greater entitlement amongst young people compared to old people. That's a grossly unfair assertion with no basis at all but one which older people seem to make all the time with little real understanding. I can see why younger people feel angry and frustrated as they have been systematically disadvantaged by government policy and ZIRP and are now likely to suffer even more.

Firstly councils moving tenants to cheaper areas as far as I am aware this has been stopped

As for the rest
Firstly people whether they were in rented or mortgaged or owned were not really moving. There was an air of wait and see what Brexit would look like.
We had Brexit properly completed and I thought in spring 2020 property prices would rise quickly as everyone would be on the move
But then we had Covid and everything stopped for 2 years so come 2022 the property market went up like I suspected it would in 2020 but more crazily as it has been on hold for 2 years.

Couple this with the Governments legislation that has been introduced over several years in the guise of trying to stop the slum landlords and the predominance of btl landlords and making sure that everyone renting has a home up to a certain standard
The slum landlords have never taken notice of legislation so for them it is business as usual.

The btl landlords who do follow the legislation, where it became unprofitable for them to carry on they stopped their btl business.
But instead of the flood of rental properties hitting the market a lot were turned into short term rental places and taken out of the long term rental market.

With each piece of legislation this has meant the the supply of rental properties went down and rents went up

More and more legislation meant less and less rentals and higher and higher rents.
Until people were put in a position that they had to buy or face being homeless.
But because more and more people were looking to buy the price of houses coupled with people waiting to move after Brexit and Covid made the perfect storm of crazy house prices.

Remember not everyone had years of low interest rates. That only affected those who had bought.

Overall property prices do increase and renting is dead money. At least with a mortgage those mortgage payments do come to an end.

You do realise that renting is about paying someone else’s mortgage and making them a profit for the rest of your life not just 25 years of bank interest payments

@Kennykenkencat they do realise this because theyve been renting for almost 25 years no doubt 🤣 waiting for the big drops from 2001 prices

But for many they don’t have the money to service those needs

What I think is happening is a lot of people don’t look at things objectively and look at their own circumstances.

The biggest inference I see is the people I know through dc who have gone the trade route/business route and the people who have gone the university route after school

I can see by the age of 25 most of those that went the trade route have already bought a first place, even 2nd place.
They are married/living with someone and have started a family whilst those that went the university route still think they are too young to buy as they are “just starting”their career and look down on where people have bought

Not all young people wait till they are in their 30s to buy. There are people coming to this country unable to speak the language and working minimum wage jobs buying a place to live so we have to ask why the 30+ year olds who are in good jobs and do speak the language have such difficulty.

i know if I hadn’t bought a tiny studio flat as a 1st place and waited and tried to save as much as I could for my forever home I would never have bought.

My daughter is 31 & desperately wanted to buy in London. She wanted a 2 bed flat as more future proof plus she works from home so a study would have been nice. However, she had to settle for a 1 bed.
She will have to wait to move up the ladder until she meets someone to share costs with/ gets promoted/ family dies & leaves her money.
That’s the reality of the situation. But I do see FTBs on Mumsnet & other places complaining they can’t afford the house they want straight away. I already acknowledged this is not every FTB of course. But you do feel a sense of entitlement from some of them.

You're still not quite recognizing the problem though. Firstly she hasn't stepped onto the "ladder" until 31, much older than in the past. And secondly that she's statistically unusual in being able to afford to buy anything in London on one income.

There have always been people in the world who want more they can afford. I don’t think this is a problem unique to the current times.

@Twiglets1 I agree with your points. I don't think it's wrong for FTBs to want a certain type of house. As PPs have said, FTBs come in all forms nowadays. But you need to be willing to move to a cheaper area if you do want that 3 bedroom house.

There are a lot of instances of people saying they didn't have choices, but most people do. DP and I moved away from London a few years ago for work. Our salaries were roughly the same but our cost of living was much lower. We had many friends in the SE that would point out we had a great quality of life (short commute, city centre living, access to great amenities) but when asked if they would ever consider a move they would immediately say no. Just as there are people who make the choice to move to a rundown area and kick off gentrification, there are many who prefer to go for the more established, safe choice. There is nothing wrong with either option, but saying people didn't have choices isn't true. You have the choice to buy a smaller house or in a cheaper area, you have the choice to sell up and rent or downsize. Some of these may not be choices we like, but they are still choices. Those who genuinely don't have choices are the ones who end up homeless or in social housing.

I think of lot of the responses come down to the fact that people think they've signed a social contract and it's been broken. ("I've done everything right to get on the ladder and now it's not turning out how I was told it would") I have been baffled by the number of people who genuinely don't understand how you move up the ladder without house prices increasing. You pay off your mortgage, you get a better paying job, and you SAVE MORE to add to the equity, giving yourself a bigger deposit. I get the impression a lot of people my age (mid-30s and younger) think that saving for your first house deposit is the one big item in life you need to save for and then you can relax. Contribute to your company pension, save a bit for an emergency fund, maybe the occasional saving up for small renovations, but everything else will be funded by your increasing house equity, and so the rest of your money is free to spend as you wish. Unfortunately a lot of people are now learning the hard way that this isn't the case and we all can afford less than we thought. Is it upsetting? Absolutely. But it's reality. If we want to use the ladder analogy, you have to put some effort in to actually climb it and sometimes you might miss a step and fall down a rung. It's not a lift or an escalator that, once you step on, takes you on a smooth ride upwards with little effort.

I have already acknowledged that people are getting onto the ladder later these days? Have evidence in my own family plus I see it from others.

And she is lucky indeed to be able to afford London.
My original point was that I believe there is still a ladder but it takes longer to climb it now & compromises will have to be made.
I was lucky to buy in the late 80s. Though still had to move from London to Norfolk to move up from a 1 bed flat to 2 bed house.

She has a better chance than most as she is likely to meet someone in the future and could afford to buy by herself so presumably has a well above average income +/- parental money.

'She will have to wait to move up the ladder until she meets someone to share costs with/ gets promoted/ family dies & leaves her money.'
This was one of my points. The ladder is broken unless you do get large salaries rises in your job or a fortunate enough to be gifted money. This didn't apply in the same way for people of 60+.

I'm sure there are some entitled FTB who choose to over leverage, buy everything on credit rather than wait, etc. However, there are just as many entitled middle aged and older people. This is not specific to any one age group. If younger people appear more entitled it is only because the world of credit and debt has been created since the 90s and this is all they know plus the awful social media influence which previous generations have not had to suffer!

I don’t know - I’m 57 and husband slightly older but we had to wait for significant salary rises before we could afford bigger mortgages, nothing new about that. We also had to wait to afford our forever home until we got an inheritance.
I do feel sorry for young people re the influence of social media. Agree that is an added pressure that people of my generation didn’t have.

@Sarah1217 younger people have had more limited and worse choices compared to the previous generation. This is the first time that the younger generation have been poorer with less good choices than the previous one for hundreds of years. Younger people have also been positively encouraged to take on more and more debt by the government and banks in order to keep the huge debt bubble afloat. The constant messaging has got through. In fact, overall the prudent savers have done badly more recently. Now, of course, they will be the ones doing better relatively!
This is a very good explanation by Lord Willetts who is a Tory in his 60s not a young activist!

I can't comment on your individual situation nor your daughters. The Willetts presentation explains what I am trying to say very well. Bear in mind it is several years old and things have got rapidly worse since then.

Base rate increased to 5%

Nevertheless I contest your assertion that people over 60 could move up the property ladder without salary rises or family help.

They want to & some seem rather upset that they aren’t able to, which is where I feel there is a sense of entitlement as they question why they should have to move away from the area they grew up in or why they shouldn’t be able to buy a bigger home straight away.

You got your forever home because of inheritance? I can see why others who don't have that option & have only income to rely on get annoyed about it tbh.

I wonder how many of the current generation would opt to jump back and grow up the 1950s or 60s if they were given the chance.

You pay off your mortgage, you get a better paying job, and you SAVE MORE to add to the equity, giving yourself a bigger deposit. I get the impression a lot of people my age (mid-30s and younger) think that saving for your first house deposit is the one big item in life you need to save for and then you can relax.

But many of those people have been hit by wage stagnation &/or higher taxes. Plus plenty will start having dc in their 30s so even if salaries do increase it goes on childcare.

Pointless question, as it’s not possible.

I wonder how many of the current generation would opt to jump back and grow up the 1950s or 60s if they were given the chance.

I'd happily be a 70s kid

My brother bought last yr. He chose a house in z4 for 650k. He doesn't plan to move again but may do it once more. If so similar if I was in his situation.

But I had a good enough home without the inheritance. Had I not had the inheritance I would have stuck with what I could afford as we all have to do.

It’s a shame if people get annoyed by other people inheriting money. It generally only happens in your 50s or later after the death of a parent.

Of course lots of people loads parents and don’t inherit though. Everyone loses loved ones. Not everyone gets an inheritance.

@rainingsnoring Absolutely. I'm a millennial and am well aware I'm worse off than my parents. I have definitely struggled with the thought of I've worked hard to get a good job, I earn an above average wage, I shouldn't have to settle for a small house in a not great area, but that's the way it is. I don't blame anyone for thinking it's unfair. I think it's unfair. But I've had to get over it and move somewhere I didn't think I would ever live so that I'm not spending most of my pay on bills.

@groupery Yes, I think one of the consequences of rapid house price inflation is that it's tricked people into thinking they're much more well off than they are and they haven't noticed the wage stagnation. It obviously can't be fixed now with the current inflation levels, but I'm hoping when things stabilise it's something that can start to be addressed.

Childcare is a tricky one. I know quite a few people in the SE that borrowed the max mortgage knowing they would be having children in the next few years and they would have to pay for childcare. Their thought process was that the house would be worth more by then and it would work itself out. Or they fix for awhile knowing they can just about afford it on one income as long as they cut back and don't have any unexpected expenses. It's a risky strategy but unfortunately one I think a lot of people have taken.

True, but is that a reason to get annoyed by people who do inherit a share of a property from their parents?

(feel like this debate is getting a bit silly now)