What housing crisis?

[Curious Orange]

My main gripe about the whole thing is the tediously long amount of time it actually takes to save up the MASSIVE deposit you need in order to make it worthwhile even looking at getting a mortgage. I doubt I'll have enough until my mid thirties at the earliest.

 

[Hatterlovesbrighton]

If you are talking about someone on their own with a salary of £20,000 then no I wouldn't. I would suggest looking for a cheaper property. You can buy a flat for that in some parts of London (the average house is £200,000). There is no need for a two bedroom house if you are on your todd and are simply looking to get on the ladder. If stamp was abolished more of your saving would be put towards lowering your mortgage. If you had a flate for £120,000 you would need to save £12,000 for the deposit. That would leave you with a 108,000 mortgage.

If you are talking about a joint income of £20,000 then that is what council houses are for. They would also be eligable for substantial benefits being a low income family.

How would you get a £108,000 mortgage with £20,000. Most you can get is 5x isn't it?

 

[The Great Cornholio]

If you are talking about someone on their own with a salary of £20,000 then no I wouldn't. I would suggest looking for a cheaper property. You can buy a flat for that in some parts of London (the average house is £200,000). There is no need for a two bedroom house if you are on your todd and are simply looking to get on the ladder. If stamp was abolished more of your saving would be put towards lowering your mortgage. If you had a flate for £120,000 you would need to save £12,000 for the deposit. That would leave you with a 108,000 mortgage.

If you are talking about a joint income of £20,000 then that is what council houses are for. They would also be eligable for substantial benefits being a low income family.

You are happy for someone to pay £700 a month for 25 years for a flat?

 

[perseus]

Slightly different. Wrexham are a business who can only run their business from one place in Wrexham.

Here we are talking about people, who have a wider choice of where they are based

Its about power. A landlord can and often does exercise his power and the tenant has little or no control over it. Councils can be as bad as wicked landlords.

Try and get any repairs done by any landlord.

 

[Lammy]

You are happy for someone to pay £700 a month for 25 years for a flat?

Yes because in 5 - 10 years time the £700 will not be as bad!

FFS mortgage repayments are only harsh for the first few years!


You have a choice.

MORTGAGE - ball bustingly expensive for the first few years. Yes you will have to make sacrifices like quit smoking and no Sky TV but in the long term you will be paying a tiny fraction of your salary in later life!

RENT - Still not cheap but rises according to what you can afford for the rest of your life. Not just 25 years.

 

[Wilts]

Ever heard the expression "As safe as houses" ?

Even if I purchased my house just before the price crash of the 80s I would STILL be better off than you now from renting.

House prices are not tied to income. If the price of my house falls then I simply don't move. I've only owned my house 1 year and it has already earned more than I do by working! It would have to fall at least that before I'm even negative.

At the end of the day, all you are doing is making a landlord a lot of money. The place you are renting he/she probably bought ages ago and has a £300 mortgage. Trust me he/she is laughing all the way to the bank!

Ok, but say you owned your place for 1 year and then got a family (I don't know your family situation so it would be unfair for me to presume), and wanted to move 5 years down the line. A house is only worth as much as the next one you move into!

If you bought a 2 bed place for £150,000 and earned £40,000 per year, then when you want to move into a 3 bed place to accommodate the new kids, the value of your property is only £120,000 and your income is around the same. What do you do? You have a £30,000 deficit and need a bigger home than the one you already !

If landlords are buying to let and saturating the market, price competition brings rent prices down and down until the market is ready for a housing crash as they find that all properties are empty and simply draining away money paid in mortgage payments by the landlord. In the meantime, the extra money (around £250 pcm) that I'm saving on rent, I will put into property-based investment trusts to earn money (at a lower risk, lower premium rate) ready for an investment in my own property when the market is more stable.... which at the moment nobody seems to know whether it is coming or going!

(interesting discussion btw!)

 

[The Great Cornholio]

What happens when interest rates go up to 9%?

 

[Simster]

You are happy for someone to pay £700 a month for 25 years for a flat?

Yes, because as Lammy explains, that £700 will be mere BUTTONS in 20 years time.

 

[Wilts]

Yes because in 5 - 10 years time the £700 will not be as bad!

FFS mortgage repayments are only harsh for the first few years!


You have a choice.

MORTGAGE - ball bustingly expensive for the first few years. Yes you will have to make sacrifices like quit smoking and no Sky TV but in the long term you will be paying a tiny fraction of your salary in later life!

RENT - Still not cheap but rises according to what you can afford for the rest of your life. Not just 25 years.

Finally we agree on something (ish!) - Hence invest in hedging instruments with rent money saved from not having a mortgage while saving up for a property! Then you are mitigating market risk, and it is flexible depending upon whether you are doing well or not with regard to your income

 

[Simster]

Ok, but say you owned your place for 1 year and then got a family (I don't know your family situation so it would be unfair for me to presume), and wanted to move 5 years down the line. A house is only worth as much as the next one you move into!

If you bought a 2 bed place for £150,000 and earned £40,000 per year, then when you want to move into a 3 bed place to accommodate the new kids, the value of your property is only £120,000 and your income is around the same. What do you do? You have a £30,000 deficit and need a bigger home than the one you already !

This is all ifs and buts! More likely is that you bought at the market rate, then over the next 5 years you get a pay rise in accordance with your increased experience and worth, house prices will have risen in accordance with the market (inflation and wages always drive prices upwards to a certain degree) and you buy in accordance with your new earning power and equity that the upwardly mobile market has generated in your current house.

 

[The Great Cornholio]

House prices are not tied to income. If the price of my house falls then I simply don't move. I've only owned my house 1 year and it has already earned more than I do by working! It would have to fall at least that before I'm even negative.

And what do you plan to do with that equity? If you have a 3 bed house that has gone up £50000, you can guarantee that a 4 bed house has gone up £70000. How are you better off? Unless you like Spain, it is useless. Do you put the equity towards buying another house, increasing your debt and decreasing your equity? What happens if the bottom does drop because interest rates go high? You have increased debt and are unable to move.

And, to top it all, the equity you have has come about due to massive increases in prices that mean that someone who is now trying to get on the ladder can't do so unless they want a studio flat in Whitehawk.

As I said at the beginning, I'm alright, Jack. Nothing wrong with that - I am the same as I got in just in time. I have £70000 outstanding for 17 years. But, 3 years on, myself and my girlfriend on a combined income of £40000 couldn't afford our current house without making huge sacrifices to our (rather meagre) lifestyle. Whichever way you look at it, that can't be right. We would have to settle for a grubby little house or a half decent flat in a not very nice area or commit to a very large mortgage, praying that I, as the chief wage earner, don't get laid off. Can you, hand on heart, say that is progress from 50 years ago?

 

[Lammy]

How would you get a £108,000 mortgage with £20,000. Most you can get is 5x isn't it?

Then you would need to save another £8000. I had to sell my car to get on the property ladder.

Some people seem to think it is their god given right to have a house. I'm not saying it is easy but you do have to live like a monk for a while in order to do it. personally I think it is worth it and have made many sacrifices. If you feel that you are unable to live with your parents whislt you save or sell you car or cut down (give up) on going out, take aways ets then you can rent. But don't moan about not being able to buy a place.

My gripe is that after making all these sacrifices you have to pay 1% stamp duty!! PLUS lining the pockets of rich lawyers that not sweet FA!

 

[Wilts]

This is all ifs and buts! More likely is that you bought at the market rate, then over the next 5 years you get a pay rise in accordance with your increased experience and worth, house prices will have risen in accordance with the market (inflation and wages always drive prices upwards to a certain degree) and you buy in accordance with your new earning power and equity that the upwardly mobile market has generated in your current house.

If and buts indeed! My scenario is as likely as any other scenario (good or bad), hence its all taking on the risk of the market that so many do but are not well-informed enough to take on! If my pay goes up then yes, I can afford a better house, but only if the prices remain constant. If the price of a property goes up at a rate 5% greater than my pay increases, how can I afford a better property?! If I sell my property for x% higher than I bought it for, then its almost certain that the better property I wanted has also increased by x%!

If I want to buy a house with my girlfriend, say... and then she gives up work to mother a child... what then? Our income is halved all of a sudden... (minus maternity leave benefits). Then we're into a whole new debate about the fact that mothers cannot afford to give up work anymore to look after their kids, and instead have to go to work and pay a nanny to do the job.

Note: In the interests of the loony PC brigade, paternity can be interchanged with maternity...

 

[The Great Cornholio]

Yes, because as Lammy explains, that £700 will be mere BUTTONS in 20 years time.

Let's hope this person doesn't lose their job in between, eh? That argument is irrelevant. Chances are that in 20 years time, their salary will have increased dramtically. You are talking about committing well over 50% of net monthly income to a mortgage. Add in council tax, utilities etc - there is not much left.

Are you all telling me you are happy for people to live like that so a few people have loads of equity? You wouldn't rather that homes were affordable for all and no profits were made? Utopian vision I know but that is the feeling that is coming across - you are happy with the current situation.

 

[The Great Cornholio]

Some people seem to think it is their god given right to have a house.

Too damn right I do. Not to be given a house but an acceptable level of comfort and shelter at an affordable rate. Why should so many people profit out of what is the most vital neccesity there is - a roof over your head. This is not a socialist/communist/leftie view - I'm not talking about any other commodity here. Free markets work for 99.9% of things. But not everything. Would you take the same view if we were talking about healthcare?

 

[Lammy]

Let's put this in perspective.

About 30 years ago my parents bought their first house for £5000. Hyper inflation hit and 9 months later his friend purchased a similar sized house for £10,000.

That's a price rise of %100 in 9 months!!!! People cope.

People now are still spending a smaller percentage of their income on their mortgage than they were back then. Hence why interest rates have been increased to stop everyone waxing all their spare cash! A lot more people now are buying second homes as investments rather than trust their pensions. The sort of houses that are being invested in are at the lower end of the market. Hence first time buyers are having the houses taken off the market by people that already have a home.

Rather than simply build more homes let try and use the homes we have more effectively.

 

[beorhthelm]

Finally we agree on something (ish!) - Hence invest in hedging instruments with rent money saved from not having a mortgage while saving up for a property! Then you are mitigating market risk, and it is flexible depending upon whether you are doing well or not with regard to your income

ah, now your tallking about a different proposition. If you invest the difference between a mortgage and rent then you gain both flexiblity and also build up some capital.

But most people who rent spend the difference or use it to fund expensive loans/HP.

A mortage should be viewed as savings. Even if one experinces say a 20% drop in value of the property verses the mortgage then you still have retained 70% odd of your money (taking into account interest, maintenance etc). Negative equity doesnt really exist until you attempt to liquidate your property. Renting is 0 equity whatever way you cut it.

The issue is really one of Flexiblity verses Security. It is the British way to prefer the latter.

 

[Simster]

Let's hope this person doesn't lose their job in between, eh? That argument is irrelevant. Chances are that in 20 years time, their salary will have increased dramtically. You are talking about committing well over 50% of net monthly income to a mortgage. Add in council tax, utilities etc - there is not much left.

Are you all telling me you are happy for people to live like that so a few people have loads of equity? You wouldn't rather that homes were affordable for all and no profits were made? Utopian vision I know but that is the feeling that is coming across - you are happy with the current situation.

It's not irrelevent! Have a look at how the value of money decreases over time! And yes, you're right about the commitment of net income, but it's always been that way. The real cost of your mortgage decreases over time.

 

[Lammy]

Too damn right I do. Not to be given a house but an acceptable level of comfort and shelter at an affordable rate. Why should so many people profit out of what is the most vital neccesity there is - a roof over your head. This is not a socialist/communist/leftie view - I'm not talking about any other commodity here. Free markets work for 99.9% of things. But not everything. Would you take the same view if we were talking about healthcare?

It is no different to heath care. A more accurate analogy woudl be to say that everyone wants to have private health care (owning a home) as opposed to the NHS (council house, rented accomodation).

 

[pasty]

At the end of the day, all you are doing is making a landlord a lot of money. The place you are renting he/she probably bought ages ago and has a £300 mortgage. Trust me he/she is laughing all the way to the bank!

Absolutely correct. I bought my flat in the mid-nineties for £40K and my mortgage was £225 pm. When I moved into my girlfriends house, I rented out my flat for £650 pm. Net profit £425pcm. Thanks very much Mr & Mrs Tennant.

NB - No "evil landlord" abuse please, sold flat now to by 50% of girlfriends house.