Does the ‘housing ladder’ concept work nowadays?

[MidnightPatrol]

Does the concept of the ‘housing ladder’ really work nowadays?

I own a property, in London. It took me until my mid-30s to buy it. It’s fairly small, meets our needs for now.

To ‘move up the ladder’ would cost huge amounts. To buy a slightly bigger house would cost another £3-400k I think.

Plus of course stamp duty (which might be 25% again on top of that).

In five years years we have paid off maybe 10% of our mortgage… but even with a hefty mortgage, it doesn’t add that much to our equity component. Any price increase in our house is offset by the increase in bigger properties.

And of course because of our age, we already really into our ‘peak earning’ years.

Having spoken to my friends, most seem to be expecting to stay in their current property for the same reason. It’s so expensive to upgrade - and you can’t really do that more than once because the tax implications are so massive.

This may be exclusively a London / South East issue, but I often see reference to the ‘housing ladder’ and the maths just don’t work IMO.

I agree. We are still in our first property in our late thirties. Trying to move now but it's extortionate even for a small 3 bed terrace in the north. By the time we've built up enough equity we will be nearly retired and looking to downsize!

We are a family of 5, with 3 disabled (my middle DS can't share due to his issues and legally my teen DS and toddler DD can't either) and we also WFH and we have been struggling to find a 4 bed for years.

The house we are suppose to be buying (everything delayed) is a 3 bed and we will have builders split one decent sized bedroom into 2 box rooms which is the best option we could find.

Its obviously nice to have lots of rooms but very few people get 4 bed houses even those with larger families (I know families much bigger than ours in 3 beds). There are next to no 4 or more bed houses on the market and it honestly a bit annoying that people who don't even need them grab for them when they do become available leaving those with actual need for them with no options.

If you wfh why can't you broaden your search? There's plenty of 4 beds around. It's a free market, anyone can buy whichever house they like.

The housing ladder existed when inflation and interest rates were high, the large yearly increases in wages meant that the value of your mortgage decreased quickly. Low inflation and low interest rates mean your mortgage remaibs a significant proportion of your income for longer.

But also, some of the increases in value that the Londoners on here are talking about are insane. The average house price in the UK is £282K. Houses over a million mean you are much richer than 95% of the population so maybe stop complaining or think about why you are choosing to live somewhere that means you have to live like a poor person when you could half your salary, move out of London and buy a nice house outright.

Because family live here (and are our support network) and school (where DS is settled and finally has SEN support from a specialist SEN teacher that took years to set up).

You can't just drag ND kids off at the drop of a hat and upturn everything in their lives, there is logistics to consider. Moving house itself is a big enough issue without moving town, away from family, away from their school, their friend, their medical center and their education support.

Working has little to do with house location really, I know people who live nowhere near and commute over an hour to their work.

the top 20% in the UK pay 80% of the taxes. If we all did that (halved our salaries in the interests of getting a large property), we probably wouldn't have nhs or state pensions as a country, you know, the things that allow people on 30k in the regions to live decent dignified lives without dying on the streets or prostituting themselves for medication for their children. Cos in what world can the average person on 30k pay for 100% private medical care or live out their old age without free healthcare and pensions.

People with expensive properties in London (even for not quite a million) would probably qualify for retirement schemes in other hotter countries and could live life there quite nicely in their old age and have private healthcare through work during their working lives. Average people in the UK probably couldn't.

Been said many times, London and the south are the only net contributers to the UK budget. the UK is a poor country attached to a world class city.

The ladder is only dead if you are relying on profit to pay for your next home. The reality is that it will need to be a combination of equity built through paying your mortgage, pay rises, and additional savings. But the idea that you might need to save anything for a home beyond an initial deposit to "get on the ladder" seems unfathomable to some people.

You see this in all the comments from people that need to sell for X amount to buy the property they want. It never occurs to them that they may need to accept a lower offer and make up the difference themselves. It's always "well I need this price or I can't move". There seems to be a common belief that saving for a deposit is a one off and your current house will always make a profit and pay for the next, but that can't go on forever.

The ladder is also now fueled by inheritance. I know 3 youngish couples who were able to move upwards due to grandparents inheritance. There is a big divide between those who rely on earnings only and those with help from previous generations.

No the housing ladder doesn't exist as it once did. We had to move further out when we moved from a flat to a 3b ed house to be able to afford it, but then everyone does the same so prices go up there as well so people have to move further and further out. We live in a very expensive area compared to wages (I think we are 2nd or 3rd excluding london) and it is causing real issues in businesses as no one can afford to rent or buy locally anymore, they can't afford the commuting costs so end up moving area to live and work.

I bought my first house in 2016 with a 5% deposit - my mortgage payment was £750 for the first 2 years, then down to a 1.8% mortgage which brought payments down to £500-odd. It was a 6 bed end-terrace in a bit of a shitty area of a northern city.

I sold that house late last year and "made" 100k from the sale (not including fees, moving costs, etc) which I put straight into our deposit for this house (still up north, more in the countryside in a naice area with big garden etc). My mortgage payments have now more than doubled, and I'll be paying it off for the rest of my working life if not longer. My partner added money into the pot for our deposit as well, but it is still a big mortgage.

The costs of moving are so eye-wateringly high, the "profit" from a house sale needs to be even higher to enable moving up the rungs. The numbers just don't add up for most people.

We moved "up" the ladder but only by doubling our mortgage and moving to a cheaper area but the numbers weren't quite as extreme as yours!

Our 3 bed, end of terrace sold for £290k and adding £100k to the mortgage would have got us a semi-detached with a bigger third bedroom and a bigger kitchen, unless we moved to one of the rougher areas of the same town. It didn't feel like it was worth it. We ended up buying a 4 bed detached house 30 minutes away for £400k. The houses are cheaper here because there's no train station to get to London but we don't commute to London anyway. It's also on a much busier road (most people would hate that but I grew up thinking those big houses on main roads were very grand).

It is broken, and will get worse I think.

House prices are high so young people can't get on the ladder.

Buy To Let hoovered up all the starter homes (flats and cheaper houses) inflating the bottom end of the market.

Student debt increases are making starting out in life worse for graduates.

High rents mean people are renting for longer whilst they try to save to buy.

High house prices make high moving costs (stamp duty primarily, but also estate agent percentages), and when moving costs are more than a years salary it is not necessarily moving 'up'.

Net result is older first time buyers, already near the peak of their earning potential, and likely at child birthing age. So disposable income doesn't increase until children are out of nursery, then primary. University years then hit like a sledgehammer.

So there isn't the ability to trade up due to more money in the household. This is very different to the 80s and 90s when inflation helped salary growth and made the capital debt relatively smaller.

If a 'normal' 25 year mortgage then it is possible to trade up when some has been paid off and by extending the term. But I was a FTB in my mid 30s just before children, so mortgage term clear at 60. I could probably afford to take on more mortgage when the children are in secondary due to paying off the capital. But there is only an additional 7 years payback time until retirement (and some people take out 30 or 35 year term mortgages so don't have that). So people either don't bother, or trade up not expecting to ever clear the debt but rely on downsizing.

So it seems the ladder these days is:

• Rent
• Buy a small place that is just about enough for a family
• Possibly upsize once
• Downsize for retirement.

tbh this is the case for many (not well off) older people I know in London, they live in 3 bed small homes and they have 3+ children. it was either their first home or second home. One lady i know (older academic) owns a 3 bed flat, she has 2 daughters.

the people I know who downsize tend to be people with 4 plus bedrooms (and relatively well off) or simply just well off people who want somewhere more comfortable for their twilight years (underground parking, lift, everything on one level) and don't mind paying a premium.

I think the age group of people who will never pay off their mortgages haven't hit retirement yet. Another 15 to 20 years and that will hit.