Mortgage struggles

[GB72]

Is it so shocking that people don’t want to buy a cheap house in a hole?

It is not shocking but that was how it was when I bought my first house. Bought that, lived there for 3 years, sold on and bought a better one etc until I could afford the house I wanted.

 

[BiMGuy]

It is not shocking but that was how it was when I bought my first house. Bought that, lived there for 3 years, sold on and bought a better one etc until I could afford the house I wanted.

How long ago was that?

We did something similar, and got very lucky with house prices going up and the property we bought as we moved up the ladder.

Back then our first mortgage payment was £225 per month on a £50k mortgage for a small 2 bed semi. We paid £60k for the house. Those same houses are now £200k or more. Wages haven’t gone up the same as house prices.

The equivalent these days would mean buying in an area I would not want to live in.

 

[PJ87]

So she wants to buy a house, right?
Even though she's single.
Most of the people I know (myself included) got on the property ladder by buying a small flat to start with.

I'm also perplexed by her claim to have a "well paid full time job" when £775 a month is half her salary.

This is another click-bait BBC article.

Sorry but are you saying her wage is per? For her area I don't think it's classed as a low paid job

Apologies if I've read what you said wrong?

If she went to uni she will have the fees to pay which will take up a good % of her income aswell

 

[PJ87]

 

[ColchesterFC]

Sorry that's not what she said at all.

"My salary isn't enough to cover the threshold to get a mortgage of £200,000," she said.

So she is looking at 250k houses by that looks , or less with 200k mortgage and some aside for fees and that

However she could get less mortgage but I'm going on what she actually said .

So the headline should be, "Woman with unrealistic expectations can't afford to buy a £250k house". An 80% mortgage at that level would be almost double her current rent. There are plenty of properties that she could afford to buy but that wouldn't give her the opportunity to get the obligatory sad face photo in the news. I don't know why she'd even be looking at houses that expensive when it's clearly unaffordable on her salary.

 

[GreiginFife]

I think her maths are a little broken. If she's half of her income at £775 that puts her roughly on £23000pa (c. £1560pm). Not a bad wage, wouldn't say good but certainly not bad. Forgetting the current interest rates, even if the rate was 1%, to get £200k (plus deposit) that would put the lending somewhere around 8x salary. This has NEVER been a thing.

Her inability to get a £200k mortgage on a £23000 salary has nothing to do with the current climate.

Even the best (or highest, not sure it could be classed as good) lending for mortgages that I have seen is 5x single income. That would give her access to a max £115k. Just doesn't add up to me.

I get that it's tough for young people, my niece saved for 10 years to buy her house. It's not in the area she wanted but she's got herself a cracking 2 bed semi with a decent sized garden within her £160k budget. And she DOES have a good income at £35k.

 

[cliveb]

Sorry but are you saying her wage is per? For her area I don't think it's classed as a low paid job

Apologies if I've read what you said wrong?

If she went to uni she will have the fees to pay which will take up a good % of her income aswell

Maybe I have it wrong, but if £775 is half of her take-home, that's £18,600 a year after deductions.
So that's about £22k gross? If that's defined as a "well paid job" in Cardiff, I hate to think what you get in a poorly paid job.

(And FYI, you don't start repaying student loans until you earn well over what she's getting)

 

[ColchesterFC]

Maybe I have it wrong, but if £775 is half of her take-home, that's £18,600 a year after deductions.
So that's about £22k gross? If that's defined as a "well paid job" in Cardiff, I hate to think what you get in a poorly paid job.

It's barely above minimum wage based on £10.42 per hour for a 40 hour week.

 

[PJ87]

Maybe I have it wrong, but if £775 is half of her take-home, that's £18,600 a year after deductions.
So that's about £22k gross? If that's defined as a "well paid job" in Cardiff, I hate to think what you get in a poorly paid job.

(And FYI, you don't start repaying student loans until you earn well over what she's getting)

It's not that much more than that depending on plan and that could be what's bringing her wage down further

 

[PJ87]

It's barely above minimum wage based on £10.42 per hour for a 40 hour week.

So if the article said minimum wage worker who's saved 50k can't afford to buy a house would it be better?

Still not a good state of affairs

 

[cliveb]

It's not that much more than that depending on plan and that could be what's bringing her wage down further

She's 24 years old. Plan 1 loans are for those who started uni before 2012. So if she started uni at the age of 13, you have a point.

 

[ColchesterFC]

So if the article said minimum wage worker who's saved 50k can't afford to buy a house would it be better?

Still not a good state of affairs

Then the article would be wrong and misleading.

If I earned twice as much as her and was complaining that I'd saved £100k but couldn't afford to buy a £500k house would you feel the same? Wanting to borrow nine or ten times my income to buy a house I couldn't afford? She can afford to buy a house, she's just choosing not too because she has unrealistic expectations and thinks the world owes her something. She sounds to me like a whiny spoiled brat.

 

[Bdill93]

If I earned twice as much as her and was complaining that I'd saved £100k but couldn't afford to buy a £500k house would you feel the same? She can afford to buy a house, she's just choosing not too because she has unrealistic expectations and thinks the world owes her something. She sounds to me like a whiny spoiled brat.

I agree... Also part of that 50k is given to her by family it seems - so she's not saved the whole lot and just expected that she'd walk into a 250-300k property thanks to the bank of Mum and Dad.

LOL

 

[GreiginFife]

Current lending averages, I think (haven't researched much, just asked a couple of former colleagues) are around 4 to 4.5 times salary. To get the £200k she wants she'd need to be on around £45k so that would need to be some amount of salary being garnished to get her nett income down to that level.

The basic maths just don't add up in this case.

 

[cliveb]

One more observation...

If someone earning around £23k or so can save £50k by the time they are 24, I am full of admiration. Good for her.
She only needs to stick it out for a few more years and then she can buy a house for cash.

 

[GreiginFife]

One more observation...

If someone earning around £23k or so can save £50k by the time they are 24, I am full of admiration. Good for her.
She only needs to stick it out for a few more years and then she can buy a house for cash.

I think there is information that some of this £50k was provided by family/friends.

 

[Bdill93]

I think there is information that some of this £50k was provided by family/friends.

Yep!!

No way on earth she's saving that with her rental costs unless she eats a slice of bread per day and never buys anything else..

 

[RichA]

It's nearly 30 years ago, but back when I was 24 I don't think I knew anyone my age who owned their own house. We were all in rented places.
I was 29 when I bought my first house and only just got a mortgage then by going financially all-in with MrsA.

"Single, low wage 24-year old unable to get large mortgage" wouldn't have made much of a headline before the internet though.

 

[GreiginFife]

Yep!!

No way on earth she's saving that with her rental costs unless she eats a slice of bread per day and never buys anything else..

Took my niece 10 years to save £25k whilst paying rent and other bills. And she was on a decent wage.

 

[SwingsitlikeHogan]

I struggle with this analysis (not saying it’s wrong given it’s your lived experience) as I can’t see how it applied to me back then. I bought my flat in 1986 for £35k. My salary was just over £10k. I had saved a little bit and borrowed a bit from Bank of MaD for a 10% deposit of £3.5k. My mortgage was 3x my income. When interest rates rocketed I had loads of room in my disposable income to accommodate the increased monthly payment - though it did cut very deep into it. And the 13-15% rate (whatever it reached for me) was a very brief peak, and they soon dropped.

Today it feels to me that the average more recent mortgage holder has a mortgage that leaves little disposable income once mortgage, power and basics are paid. I suspect that the stress testing of applications given increased interest rates assumed a higher rate would be reached over a few years and assumed that the applicants income would have grown sufficient over that time to accommodate all but the very worst outlier rates. Plus it would not have assumed an increased cost of living (power, food, fuel etc) of anything like what we have experienced.

Strikes me that that the stress testing assumptions have not held.

Just checked current estimate for my wee Bristolian flat bought in 1986 for £35k with a 3 x salary mortgage and 10% deposit.

£333,000 to £368,000

Assume £350k and so 10% £35k deposit . Assume a 4x salary multiplier a buyer has to be earning £75k. It is a small 2 bed flat…

Back then it was typical of the purchases my friends and work colleagues with decent graduate jobs and good early career salaries were making. It was the sort of place that was reasonable and normal for a single person to buy as their first step on the ladder.