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.

Exactly. It would be ridiculous to pay stamp duty every few years.

1n 1979, we were paying 17% interest on our mortgage.
Cost of living inflation was running at 13 % (petrol and heating oil had gone up over 50%)
The average houseprice was 20,000
The average annual wage was under 5K for men, under 3K for women.
You could only borrow a max of 2.5 x income and required a high deposit, which had been saved with the lender.

Few lenders would even consider a married couples joint income.

Also at 15% how long were the mortgage loans for?

ours was 25 years. Our lender (Building Society) required a 25% deposit (saved by us, with them, to prove we'd be able to make regular payments.)

As for rent; when we first married out JOINT income (both working full time) was £16 a week, and we paid £4 a week rent for a couple of rooms in our landlady's attic. You couldn't call it a flat because it hadn't got a door or a bathroom. We shared the (only) bathroom, 2 floors below, with all the other occupants of the building. The bathroom, like our attic, was unheated and we were allowed 1 bath per person per week.

very reluctant to slum it in a basement flat or a studio over a chicken shop at 23 /24 then move every few years slowly edging their way up the ladder They prefer to rent for another 10 years in a nicer area

Most of those sort of properties have been snapped up as buy to lets.

I think young people today are in a much more difficult position than preceeding generations. I am a late boomer/ early gen x (depending on which definition you use). The opportunities I had just don't exist now. My first flat in London, which I bought age 27 in 1994, was 3 x joint income of around £16K. To buy that same flat now at 3 x income , you would need a joint income or single income of around £125K. How many people earn that sort of money at age 27?

Also we bought that flat on a 100% mortgage. No deposit required. We were so lucky.

Why is it not a realistic option? You can’t just move to the best, biggest or dream house surely? (Well, you can, but then you risk not being able to afford it like is happening now). There’s also a big difference between a crap house in a crap area & a 4 bed detached in a lovely area. Unfortunately some will only accept the latter.

My friend bought a lovely big house (dream house) 4 beds & it’s her, her DP & 1 child, had loads of work done to it, got a nice car to park on the drive & now can’t afford it.

I bought a mobile home to live in, then I bought a flat, then I bought a terrace in a not so nice area, now I’ve bought a small house in a lovely area. Each sale, I’ve made a bit. I also don’t buy anything at all before I’ve saved up all the money for it, not even my car. And I have a crap paid job.

Everyone is different of course but the sense of entitlement these days.

I bought a 2 bed flat in London at 27 too in 2019 with combined income of £75k. We did have 3 years of living with family thought! Now 31 and 33, our combined income is £120k.

I think it is harder in the sense that if you want to buy a home, you need to really structure your life around it (or get money from parents). Live at home as long as possible or in a cheaper flat share. Chase every job opportunity to maximize earnings. Not have a car (we still don't have one and the main reason is to allow us to overpay as much as possible ). Delay children. I get the impressive previous generations did this less.

Why is it not a realistic option? You can’t just move to the best, biggest or dream house surely? (Well, you can, but then you risk not being able to afford it like is happening now). There’s also a big difference between a crap house in a crap area & a 4 bed detached in a lovely area. Unfortunately some will only accept the latter.

It's not a realistic option because buying small in not a great area is still often very expensive! FTBs are much older than in the past so obviously an early 30s buyer is going to have different requirements to an early 20s buyer. The only person I know who bought a 4 bed detached as a first time buyer chose that option because it was still better value than than the flat in a crappy area.

hannahcolobus As someone who has bought and sold many properties I think it isn’t BTL that has necessarily raised the price of property but FTBs inability to commit.
The properties for sake aren’t Ona secret website just for landlords. They are offered to everyone but FTBs don’t seem to want to commit.

As an example, I had a 1 bed flat in a nice part of London
I came to sell it and got a buyer immediately.
The FTB took 3 months to do all the paperwork to get a mortgage, survey, solicitors etc 2 weeks before exchange they pulled out so the property was put back on the market
I had a repeat of Ftb 1. 3 months later the day before exchange they pulled out.

Repeat for FTB3 except they pulled out on day of exchange, the excuses ranged from Cold feet to I can afford better.
The latter thought he could afford better if he saved more.

At this point 9 months of my life had passed waiting for 1 of 3 people to actually commit,

I raised the price by £20k and put it back on the market.
Along comes a BTL landlord who paid cash and was exchanged by the following week.

3 FTBs had the opportunity to buy a place but because they couldn’t commit the place is now a rental.

Not to such an extreme example but over the years I have had FTBs view make offers, get to exchange and pull out and apart from 2 houses I have sold everything has eventually gone to a btl landlord.

FTBs do have the opportunity to buy. They just choose not to.

FTB generally aren’t 21 anymore which means they come from a different stage at life. Of course landlords are less picky. They haven’t got to live there and then try and sell it at the end. The FTb have obviously seen something better or decided to save up more.

I think what you have experienced has clouded your view of FTBs.

Sure they can be a bit nervous about committing. But we were all FTBs once and bought properties. So they're not all flaky.

Not to such an extreme example but over the years I have had FTBs view make offers, get to exchange and pull out and apart from 2 houses I have sold everything has eventually gone to a btl landlord.

FTBs do have the opportunity to buy. They just choose not to

How do you know those FTBs haven't bought a different property?

I also think a landlord & someone who wants to live in the actual property have different standards.

They probably did eventually but why waste so much money and time, not just their own but everyone else’s time if you aren’t going to commit to buying.

The flat was a really lovely flat that had its own private garden that didn’t back on to anyone else and the views were amazing. If anything it was a FTBs place not a rental. Each ftb had paid a mortgage arrangement fee, solicitors, surveyors etc probably around £2.500 which they lost when they pulled out.

It was the fact the last ftb actually came back to proceed with the purchase after I had sold it and was surprised someone could move that fast.

Yes there are rental properties that are kitted out with B&Q kitchens and laminate work tops. This wasn’t like that.

It was high end, oak and limestone flooring not cheap laminate or ceramic tiles and ready to move into and start living in

I don’t know what more you could have asked for if you wanted to live there

Are you seriously suggesting that it is FTB's inability to commit rather than BTL mortgages and a whole host of financial, political and economic factors (active choice made by politicians and bankers) which have raised the price of properties?!

I think the question is why are those sort of properties not snapped up by FTBs. It isn’t rocket science. If you want to buy a place you buy what you can afford where you can afford. Those properties came on the open market. They aren’t on some secret website that only landlords can buy

Re your question of who earns a joint income of £125,000 at 27

I actually know a few young people who are early 20s who earn more than £60,000 each.

I know quite a few who have already bought.
They are all qualified in a trade rather than going down the Uni route.
And one works on commission and is out earning the rest of the department, including their boss

It is a combination of inability to commit and having unrealistic ideas

My last house was a 4/5 bed detached. Very commutable to London and was fairly priced at highish 6 figures.

I still got a couple who were FTB who complained that they didn’t know why the EA had sent them round as they were looking for something that had 10 bedrooms and at least 5 or 10 acres for the price of my 4/5 bed detached.

They were describing the huge mansion that was just up the road. Which the last time it was sold was snapped up for well over £20million. They thought they could buy something similar for 6 figures

**
They probably did eventually but why waste so much money and time, not just their own but everyone else’s time if you aren’t going to commit to buying.

Who knows now how much they saved long term. Nothing wrong with taking time, it's a huge expensive purchase.

The flat was a really lovely flat that had its own private garden that didn’t back on to anyone else and the views were amazing. If anything it was a FTBs place not a rental. Each ftb had paid a mortgage arrangement fee, solicitors, surveyors etc probably around £2.500 which they lost when they pulled out.

It's really not normal to spend money & then walk away no matter how flighty you are. They will invariably have had their own reasons.

Nah. If 3 buyers walked away, the flat wasn't as nice as you think.

I think what you have experienced has clouded your view of FTBs

Maybe I just seem to attract the flakey kind.

Yes we were all FTBs but I know I didn’t look at places and dismiss thenm because they weren’t in the right area or didn’t have an extra bedroom or the bathroom and everything in it was painted in black gloss paint.
I looked at places I could afford and then bought.I think the whole process took about 10 minutes because the place we bought was the only thing we could afford.

Actually only 2 buyers walked away. The 3rd returned and found it was already properly sold.
The other 2 could have come back like the 3rd one but found it sold STC to the next “buyer” as it went within the first lot of viewings.

I have seen this happen over and over. And not just involving me. Friends have had the same thing happen.
Always with FTBs

Well if we want to do anecdotes, I don't know anyone who has had a FTB walk away after spending money either as a FTB or when selling to one 🤷🏻‍♀️

.I think the whole process took about 10 minutes because the place we bought was the only thing we could afford.

Perhaps your FTBs had more options though.

Out of touch of any form of reality.

There are 2.74 million landlords in this country. 55% own more than one rental property. The average age of landlords in this country is 58 years old.

BTL is entirely the issue of why we are here today, nothing to do with FTB, hesitancy to commit or rubbish like that.

The landlord demographic out powers the FTB. They could leverage against their existing portfolio pushing prices up.

They are also generally older, so have the likes of paid off houses and index linked final salary pensions to support themselves financially. Inflation has hardly effected them like it does the younger generation.

Also as explained above they are less picky (as long as it returns a profit) as they don’t have to live in the properties.

Well the tide has turned in the country and the government finally had started to recognise the problem some years ago, hence putting policies like s24 and energy regulations.

Now interest rates will do the rest and revert the 10x earning multiple back to historical mean in line with affordability levels.