To wonder how people are going to actually buy houses?

(391 Posts)
slatternlymother Tue 29-Jan-13 09:08:56

There's going to be a whole generation that can't, isn't there?

What about those people who rented due to circumstances/not knowing if they wanted to live there long term/work commitments etc, and then hit the wrong end of the financial crisis?

We rent, and have (luckily) really well paid jobs for our age. We are 25, and between running a car, putting DS through nursery, and just living, I doubt we'll have enough of a deposit to buy anything reasonable before we're 30. 28/29 at an absolute push. And that will be pressuring us to make a choice on where we're going to be living, but we won't be able to leave it much later because otherwise we'll be tied up in a mortgage forever.

But we are so, so lucky. Actually, it was blind luck that got us here.

And if we're struggling, how the hell is everyone else coping? Tbh, I'd happily rent all my life, but I worry about retirement age and no longer being able to pull in a decent wage.

AIBU to think that long term, more and more elderly people will have been in rented accommodation their whole lives, so when they do retire; they're going to have to fall back on the state, aren't they? To put them up in council accommodation?

Isn't this just a massive time bomb for the future?

Sorry for rambling thoughts, I just have been thinking about this quite a lot recently blush

MoodyDidIt Tue 29-Jan-13 16:50:06

yanbu i really worry about my dc sad

RedToothBrush Tue 29-Jan-13 16:50:21

Some lenders ARE doing 5% first time buyer special rates. They are rare, but there were quite a few about last year at 10% rates. Obviously that does depend on your credit history, but they are available. We managed to get a 15% rate last year as a second time buyer - from a high street name.

Re Why: Because more deposit = less risk to the lender. Its basically a consequence of Northern Rock doing too many 100% mortgages to risky borrowers. There were too many people who couldn't afford repayment and when the price of property started to drop, if they defaulted there wasn't enough money in the property to repay the loan to the bank. Northern Rock ended up in a situation where it was owed more then it could get back so was insolvent.

Now lenders are only allowed to lend so much for every pound they have in savings. So that if the worst should happen, the banks won't collapse and will stay solvent.

So they are more strict on who they lend to, and need mortgage borrowers to have a certain amount of equity in the property, so if prices drop they can still recoup the amount they lent if you default.

Its a good idea as it protects everyone from an unstable market and it means you have more security yourself as, you gradually always are paying off your loan so in a stable or gradually increasing market gain equity. And even in a slightly declining market you should still maintain the equity you already had in the property - thus making you much more unlikely to become in negative equity.

The trouble is, it will take several more years for the new system to catch up with the drop in house prices and the introduction of minimum deposits, so its leaving people who bought most recently in a situation where they are in negative equity and prevented from remortgaging. It will catch up, but it will take time for people to save (or in fact repay) enough to get to that point.

When we do, the market should be a safer all round and not likely to have a repeat of what happened in 2008.

A few 100% mortgages are starting to reappear for a very select number of first time buyers because its cut so many people out; but I personally don't think this is really a good idea especially since the rates are at least 6/7%+ so are very expensive compared to 20% deposits which start at closer to 3% and because its going back to exactly the same problem which caused the issue in the first place.

There does have to be some room in the system to allow for a negative market rather than a positive market. We all sat pretty in the expectation that house prices would always continue to increase at a steady rate which was totally ridiculous given average incomes and thats why no one planned on a crash.

LayMizzRarb Tue 29-Jan-13 16:51:40

To get something you really want, you have to make sacrifices. My DP's moved an hour out of London where house prices were cheaper. My dad had 20 hours of commuting We didn't have a forgein in holiday until I was 14.
We didn't have lavish Christmas and birthday gifts.
When DH and I saved to buy we lived in a crummy flat, did not have a holiday in 3 years. We had friends round once A month and would buy a couple of bottles of wine and had a home cooked casserole. They would do the same in turn.
It would have been so easy to say oh sod it, lets just have one takeaway/day out, but we had to keep up taking packed lunches etc to work etc for a couple of years.
I was talking to some of the younger people at work who moaned about renting. I told them how they could do it, but they were aghast at the idea of not on going on holiday for a few years, and when I said have have your friends round instead of blowing £100 on a Friday night they thought I was prehistoric.
To suggest they move out London and add 30 minutes to their commute was met with laughter.
I know everyone's situation is different, but to younger people like those I work with - you make choices, and you alone are responsible for your choices. You can do it, but you have to sacrifice somewhere along he line...

noddyholder Tue 29-Jan-13 16:58:34

If the bank demands a high deposit it means they are covered by any downturn up to the value of the deposit.If you buy for 100k and they have 25% deposit it means if you default and they have t0 sell it they only need to get 75k to cover their costs

noddyholder Tue 29-Jan-13 16:59:57

Most 5% mortgages require a guarantor. Post uni students are mostly living at home I know quite a few and most of my friends are expecting this and adapting their homes accordingly.

crypes Tue 29-Jan-13 17:00:56

I really feel the economy wont take off again until people are able to get mortgages much more easily i.e a lower deposit. I really feel that the government cant side step this issue because its part of our culture to own our own homes and it gives the feelgood factor and people like working hard to pay for their own home. Also there are so many industries that benefit like d.i.y and home furnishing and extensions which keep the economy going. So people will continue to feel gloomy about the economy and wont be able to spend money on home ownership.

noddyholder Tue 29-Jan-13 17:08:13

If prices fall deposits will be lower. This is really the only way as the credit crunch and all that implied is still very fresh in the banks minds and loose lending is over

amillionyears Tue 29-Jan-13 17:11:14

That is one of the advantages that I can see, noddyholder of living in the expensive SE. You can, if you want to, have your offspring still living at home to cut down on expenses, and they can still commute to the London area, for the higher paid jobs.

RedToothBrush Tue 29-Jan-13 17:14:00

Theres certainly a few new builds that also offer deals at 5% noddy - I don't think all these require a guarantor.

And a quick google tells me there are a few none high street lenders who are advertising 100% mortgages (and over 100% mortgages which include stamp duty and legal fees) seemingly without a guarantor to people with less than perfect credit ratings. I wouldn't touch any of them with a barge pole. I can only assume they are managing to do it, by charging huge fees and interest. They give me the same feeling as pay day lenders give me.

Much much safer and financially sound to save for longer to go with a bank or building society who are familiar than get take one out if you ask me.

ComposHat Tue 29-Jan-13 17:14:53

I was talking to some of the younger people at work who moaned about renting. I told them how they could do it, but they were aghast at the idea of not on going on holiday for a few years, and when I said have have your friends round instead of blowing £100 on a Friday night they thought I was prehistoric.To suggest they move out London and add 30 minutes to their commute was met with laughter. I know everyone's situation is different, but to younger people like those I work with - you make choices, and you alone are responsible for your choices.

I hate to say it, but that is typical of the complacancy of the older home owning generation - 'we did it, you should do the same.'

Utterly neglecting the fact that when they bought, property prices weren't completely out of sync with earnings.

Ignoring the fact that on top of the astronomic asking prices, the deposit required is huge, so even a lifetime of homemade casaroles and thriftiness will never be enough)

Didn't have to pay sky high rents thanks to succesive governments deregualting the rental sector. So every penny was sucked into keeping (some else's) roof over their head.

Even if they were prepared to move 30 minutes out, they would have to meet the increased transport costs which have gone up and up over the last few years.

And you wondered why they laughed LayMizz?

Those born after the war and before the mid 1970s won a genetic lottery and have benefitted at the expense of those younger than them. I don't resent that particualrly, but do when you get ill-informed comments like this.

Realisitically the only chance I will get to own a home of my own is when my baby-boomer parents die, which I hope won't be for many years yet and I count myself one of the lucky ones, whose parents have a house to leave.

noddyholder Tue 29-Jan-13 17:16:16

I agree my ds is hopefully going to university this year but a lot of my friends already have some dcs back after degrees and not one has left home and there seems to be no sign of them doing so. The one I know in London is the only one to have had a job straight out of uni and it was in central london and not badly paid but he was 'let go' at xmas (that was the deal) and even though at a push and with no other life he could have afforded a room somewhere none of his friends could join him!

MoodyDidIt Tue 29-Jan-13 17:19:53

*I hate to say it, but that is typical of the complacancy of the older home owning generation - 'we did it, you should do the same.'

Utterly neglecting the fact that when they bought, property prices weren't completely out of sync with earnings.*

yep this is my parents attitude

they think i have "failed" as i am <gasp> renting and...on a council estate

fucks me right off sad

ethelb Tue 29-Jan-13 17:20:55

@laymizz I tried living outside of London and the commute was fine, but it cost as much as the rent saving. Down to the £10. Makes you wonder if it is deliberate? hmm

WhataSook Tue 29-Jan-13 17:27:32

compos its the 'poor me generation' that is out of synch. My parents did do it hard to get their home, they had children younger and less salary, but still managed.

It's all the bullshit must-haves that my generation saddle themselves with, iphone, ipod, sky, flat screen tv, car, fashion, working holidays for a year, and my favourite, having to buy a house in a desirable area, 3 bed, fantastic schools and as FBT!

lljkk Tue 29-Jan-13 17:27:57

Lots of people who will buy because they inherit from their parents, the parents & grandparents who benefited from easier environment to buy in decades before. I don't think a whole generation will be shut out, existing wealth in property will get passed down somehow.

noddyholder Tue 29-Jan-13 17:31:53

Existing wealth will get passed down but that doesn't help people now. If my dp and I live for at least another 30-40 years my ds will be 40-50 and may already have grown teenagers by the time we croak!

meddie Tue 29-Jan-13 17:33:54

You cant really rely on inheriting your parents property.
My nanas house will be used to pay her care fares. My Aunt who's in her 80's and childless has had to sell her home to fund her care fees.
My mums house is probably the only one that would be passed on as its unlikely she would go into care.
Whether my kids would see anything out of mine or whether it too would be used to care for me in my old age (they both work away) is also in doubt.
So even that avenue is now closed to a lot of families.

jamdonut Tue 29-Jan-13 17:35:58

Just want to say Shared Ownership is NOT great. We bought a 50% shared ownership flat back in October 1989...just as the last huge crash happened. Then we were in negative equity for 13 years!!!
We needed to move because I had (accidently blush) had a third child and the flat was only a tiny two bedroom one. There was no way we could buy in the area we were in (West Hertfordshire) because house prices had suddenly shot up! We didn't want to rent, so we ended up moving 250 miles away to an area with very low house prices. Luckily we are happy here, and with a small mortgage, but there is not much in the way of good jobs here so we are not hugely better off as such. We muddle through.Somehow.

noddyholder Tue 29-Jan-13 17:36:23

The elderly care thing is a huge factor in this and I think is going to become more so as time goes on.

amicissimma Tue 29-Jan-13 17:38:16

I think the worry about buying is comparatively recent.

My dad was 50 before my parents bought their first place. Till then we lived, like many other families, in rooms in someone else's house.

DH and I didn't buy until our 30s. That felt normal. We didn't want to buy in our 20s ( not that we could afford it) because we wanted to be able to move at short notice in response to the demands of the job market. To get a mortgage we had to show evidence of several years savings and only one salary was taken into account in case the other was lost to either being a SAHP or childcare costs.

I think one of the problems is that a lot of younger people bought in the 90s & 00s with squillion % mortgages, so more people than previously were chasing the housing stock. (Plus population growth and an increase in single-adult households)

havingastress Tue 29-Jan-13 17:38:48

I don't think you can do it now without significant handouts from your parents (or them allowing you to live with them rent-free whilst you save up, same thing whichever way you look at it!)

We're just selling our place and moving to rented. We've already lost £45k on the property and prices are going down and down. We can't take the risk of going into negative equity as we have a baby, and we live in an apartment. We just can't live in a top floor apartment with no lift with kids indefinitely!

We will walk away with about £15k. Given that we've spent £48k on mortgage over the last 8 yrs and put £50k deposit down, it's fair to say that it's not just renting that is throwing money away.

God knows how we will ever afford a house. We will need at least £30k deposit and the cheapest house around here is £130k. The most mortgage we can get is £100k.

Sad times all round!

ComposHat Tue 29-Jan-13 17:41:23

Oh god whatasook I wondered how long it would be before the iPods and flat screen TVs were trotted out. What you've posted, is largely cotter.

Every TV made in the last six or seven years has been flatscreen. Cathode ray TVs can't be bought for love or money. An MP3 player costs at most £100. It is some way short of the £25,000 I'd need to get a deposit on £100,00 flat, which certainly won't buy a 3 bed or something in a desirable neigbourhood in many parts of the country.

It is unarguable that our parents generation bought in a more favourable climate. Wages were lower, but the proportionate cost of housing was too.

If you can tell me a way of saving that amount (especially as interest rates aren't keeping pace with inflation, so the value of what savings I have are diminshing month on month) whilst simultaneously handing over huge portions of my income to a baby-boomer buy to let landlord, who bought our flat 'for peanuts' in the 90s. I would be grateful beyond words.

illjkk yes it will be passed down when parents die, but most people will be into their 60s or even 70s themselves when their parents die. It also locks in inequality betwen those who inherit wealth and those who don't.

RedToothBrush Tue 29-Jan-13 17:44:28

Theres certainly a few new builds that also offer deals at 5% noddy - I don't think all these require a guarantor.

And a quick google tells me there are a few none high street lenders who are advertising 100% mortgages (and over 100% mortgages which include stamp duty and legal fees) seemingly without a guarantor to people with less than perfect credit ratings. I wouldn't touch any of them with a barge pole. I can only assume they are managing to do it, by charging huge fees and interest. They give me the same feeling as pay day lenders give me.

Much much safer and financially sound to save for longer to go with a bank or building society who are familiar than get take one out if you ask me.

ComposHat - I think there are some people for whom what you say is very true. House prices have gone up far more than wages have.

But I also think there are some people for who what LayMizz says is also utterly true though too. I can look at friends who are a similar age to me or a good few years younger (DH is younger than me and has quite a few friends who are younger than him) and I know they have an above average wage and live a lifestyle which is frankly beyond their means. They should be in a position to get on the ladder, but don't have the maturity nor will to plan to do so. Certainly lifestyle and expectation does come into this for some people. We have friends who we don't go out with as much as we would like, as we know we simply can not afford a night out on a scale they do on a regular basis. It shocks me. On the whole people only want to take on responsibility much later in life than they did 20 or 30 years ago and deliberately delay marriage and kids in favour of 'freedom' and I do think this mindset about mortgages is a reflection of something of that.

In some cases, not all.

TBH, I think the problems now lay more with rental market that needs a massive overhaul and restructuring, rather than with the mortgage and home ownership market.

Skinnywhippet Tue 29-Jan-13 17:45:09

I dont know the answer. Perhaps we just need to increase a culture of saving. The Chinese save approx. 27% of disposable income vs UK saving a mere 7% of disposable income. People can still buy houses, but the age of a first time buyer will continue to get higher.

AmberSocks Tue 29-Jan-13 17:45:16

buying a house shouldnt be seen as such a big deal,its not in a lot of other places.

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