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frugalista

Mr And Mrs Minimum Wage

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A couple are both working on minimum wage, which is £5 per hour. They work 40 hours a week, which I think means their annual take-home pay is around 18k.

They therefore have £1500 a month to play with. Suppose they spend a third of this on housing, which is above average, but not massively so. So, they have £500 a month to spend.

Assume a 25-year repayment mortgage, fixed rate for a couple of years. I think on this basis they can borrow about £85k. Add a £5k deposit (savings, parents, wedding gift, whatever) and they have a princely budget of $90k.

What can £90k buy you these days? Forget anything in London, the SE and probably the SW.

Perhaps outside this area they can get a studio flat, i.e. bedsit. Even then I am not sure.

Surely if this couple cannot buy, prices must come down.

I might add that if they cannot buy, then they also cannot afford the rent on a rental place with a yield that covers the landlord's mortgage. So, I can't see income-based BTL holding up prices at the low end.

frugalista

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A couple are both working on minimum wage, which is £5 per hour. They work 40 hours a week, which I think means their annual take-home pay is around 18k.

They therefore have £1500 a month to play with. Suppose they spend a third of this on housing, which is above average, but not massively so. So, they have £500 a month to spend.

Assume a 25-year repayment mortgage, fixed rate for a couple of years. I think on this basis they can borrow about £85k. Add a £5k deposit (savings, parents, wedding gift, whatever) and they have a princely budget of $90k.

What can £90k buy you these days? Forget anything in London, the SE and probably the SW.

Perhaps outside this area they can get a studio flat, i.e. bedsit. Even then I am not sure.

Surely if this couple cannot buy, prices must come down.

I might add that if they cannot buy, then they also cannot afford the rent on a rental place with a yield that covers the landlord's mortgage. So, I can't see income-based BTL holding up prices at the low end.

frugalista

Good point Frugalista,

But its worse than that because after tax they'll have about £1200.

If they were to borrow a sensible amount (3x one and 1x the other) that would be £72k borrowed. £5k deposit.

So £77k.

Which will buy you a park home in the south east, or a garage in london, but not a lot more.

In London, the situation wont be much better for them renting, with a flat costing say £800 upwards per month in most areas.

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Do they get no tax credit? Child benefit? Working families tax credit?

Cos mortgage providers are HAPPY to take that into account you know.

I am assuming they have no kids.

frugalista

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A couple are both working on minimum wage, which is £5 per hour. They work 40 hours a week, which I think means their annual take-home pay is around 18k.

They therefore have £1500 a month to play with. Suppose they spend a third of this on housing, which is above average, but not massively so. So, they have £500 a month to spend.

Assume a 25-year repayment mortgage, fixed rate for a couple of years. I think on this basis they can borrow about £85k. Add a £5k deposit (savings, parents, wedding gift, whatever) and they have a princely budget of $90k.

What can £90k buy you these days? Forget anything in London, the SE and probably the SW.

Perhaps outside this area they can get a studio flat, i.e. bedsit. Even then I am not sure.

Surely if this couple cannot buy, prices must come down.

I might add that if they cannot buy, then they also cannot afford the rent on a rental place with a yield that covers the landlord's mortgage. So, I can't see income-based BTL holding up prices at the low end.

frugalista

I guess that if both earn minimum wage it is also normal that they cannot afford a house. A lot of people believe that there is a right to own a house in the constitution....

To somebody that earns the minimum wage and is not sick or disabled I would suggest to work harder...

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But its worse than that because after tax they'll have about £1200.

They are basically on 10k gross each. On 10k I believe you pay about £500 income tax. Then I knocked off another £500 each for NI (dunno if that is correct) to get 9k each, so 18k combined.

If they were to borrow a sensible amount (3x one and 1x the other) that would be £72k borrowed. £5k deposit.

So £77k.

I am trying to base their budget on affordability rather than multiples. Affordability is the main bull's argument right now. So I was trying to stick to an income proportion. 1/3 of income. This is the bit I am least confident about. Is my estimate of proportion of income spent on housing too low?

frugalista

I guess that if both earn minimum wage it is also normal that they cannot afford a house. A lot of people believe that there is a right to own a house in the constitution....

To somebody that earns the minimum wage and is not sick or disabled I would suggest to work harder...

I am not moaning that "it's not fair" or suggesting that we pity this priced-out couple.

I am simply pointing to the fact that this couple cannot now afford to buy or rent (privately), whereas they could have 4 or 5 years ago. Until recently, this couple would have been the typical FTB of low end housing stock. Given that this is a pretty typical couple, how can prices be sustained at their current levels?

frugalista

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This is one sorry couple.

In this meritocracy that we live in, the truth is that they can't afford to buy.

There is nothing wrong with that, they are the people that the welfare net was designed to catch as they fall. They're why we pay tax.

Edited by Time to raise the rents.

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They are basically on 10k gross each. On 10k I believe you pay about £500 income tax. Then I knocked off another £500 each for NI (dunno if that is correct) to get 9k each, so 18k combined.

I am trying to base their budget on affordability rather than multiples. Affordability is the main bull's argument right now. So I was trying to stick to an income proportion. 1/3 of income. This is the bit I am least confident about. Is my estimate of proportion of income spent on housing too low?

Yes you are correct, sorry! I was thinking of one person earning 18k.

I think the main buyer for the low end flats will be BTLers, or FTB with a good windfall or high salary. There are also part-ownership schemes.

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They are basically on 10k gross each. On 10k I believe you pay about £500 income tax. Then I knocked off another £500 each for NI (dunno if that is correct) to get 9k each, so 18k combined.

I am trying to base their budget on affordability rather than multiples. Affordability is the main bull's argument right now. So I was trying to stick to an income proportion. 1/3 of income. This is the bit I am least confident about. Is my estimate of proportion of income spent on housing too low?

frugalista

I am not moaning that "it's not fair" or suggesting that we pity this priced-out couple.

I am simply pointing to the fact that this couple cannot now afford to buy or rent (privately), whereas they could have 4 or 5 years ago. Until recently, this couple would have been the typical FTB of low end housing stock. Given that this is a pretty typical couple, how can prices be sustained at their current levels?

frugalista

A couple with both earning the minimum wage has never been a the typical FTB of low end housing. THey were not able to afford anything even 5 years ago....

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A couple with both earning the minimum wage has never been a the typical FTB of low end housing. THey were not able to afford anything even 5 years ago....

Depends on where they live, here in the NW they could have got a good house in a good area for 65k (i know) but not now, they are priced out of the market.

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Surely if this couple cannot buy, prices must come down.

Why on earth must a couple on minimum wage buy a house? They can certainly afford to rent somewhere decent for £500 a month. What is it with the assumption that everyone in the country must own property, it certainly isn't the case in the rest of the EU.

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And then not everyone is a couple and hence only one wage, we are at a point in society where its financialy impossible to live as a single person anymore, for your average joe or jane.All these multiples given by banks and surveys and government ect are based on 2 wage earners paying for the one mortgage.The pe/ratio for single people is completely absurd.

This all goes with tony blairs family orientation policies, everything tony has done has been about the family unit as his strong religious beliefs instill in him.He has taken these over into common policy

working tax credits

child tax credits

education education education

council tax 25% more for a single person ie one wage = 75% of full

I am starting to believe the hidden agenda is to stop the increase in single housholds and keep the family unit together as per his religious beliefs.I think this is the whole nu-labour agenda though they have not gone as far to admit it outright.

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A couple with both earning the minimum wage has never been a the typical FTB of low end housing. THey were not able to afford anything even 5 years ago....

On the contrary, in October 2001 for example the minimum wage was £4.10. So their wages in 2001 were about 80% of their wages today.

What were typical low end house prices in 2001? Quite a bit less than 80% of today's prices I would think?

frugalista

Why on earth must a couple on minimum wage buy a house? They can certainly afford to rent somewhere decent for £500 a month. What is it with the assumption that everyone in the country must own property, it certainly isn't the case in the rest of the EU.

I repeat, I am not arguing that they should be able to buy. I am simply doing a bit of analysis of the affordability fundamentals.

You mention that they can rent somewhere decent (private presumably as they would not qualify for council housing) for £500 a month. This may well be true. However, if the couple themselves cannot afford to own the place, how is their landlord then covering his costs and making a reasonable profit?

You might say that the landlord has enough equity to mean that his mortgage payments are very low. This may be true, but then it is simply a case of a purely speculative investment. i.e. the property is not paying for itself in yield terms.

Fundamentally, landlords cannot rely on making money by housing people who want to buy. There is a sector of people who want to rent and this is where landlords make their money.

So, again, this points to a fall in prices.

frugalista

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in 2000, you could buy a big 3 bed house in a good area in the NW for about 65k, for 80-100k you could buy a fantastic place, then people on min wage could buy a good house for 65k and still live ok , the tosser who said "they should work harder" well maybe they do work hard, they might not be as bright or in general as rich as you, or have family to provide for them (give them money ) or might not be able to do top job as you tosser, but that is not the point, the point being is they should be able to afford a house is two people are working, even if on minimum wage.

by the way I am not on minimum wage and would still struggle to buy a good house in this day.

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in 2000, you could buy a big 3 bed house in a good area in the NW for about 65k, for 80-100k you could buy a fantastic place, then people on min wage could buy a good house for 65k and still live ok , the tosser who said "they should work harder" well maybe they do work hard, they might not be as bright or in general as rich as you, or have family to provide for them (give them money ) or might not be able to do top job as you tosser, but that is not the point, the point being is they should be able to afford a house is two people are working, even if on minimum wage.

by the way I am not on minimum wage and would still struggle to buy a good house in this day.

i find the lower the wage your on the harder you do work

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i find the lower the wage your on the harder you do work

Too right mate well said, Just hate it when people come on here and rubbish people that are on minimum wage, and think they should not be able to own their own home. I know people that are, and they do work hard. Harder than me in most cases.

Again i am not on minimum wage but no way would i buy again in this housing market state

Edited by James Toney

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Totally agree with the last two posts.

It's a shame that this site does attract the pig ignorant, who by the very nature of their predictable, unimaginative posts, demonstrate their lack of intelligence, I don't know about working harder, maybe you should try thinking harder? Or have you never travelled within a mile's radius of your naff little world?

In 1993 I spent two weeks at sea photographing a fishing boat crew from Newlyn in Cornwall. Most of them don't own their own boats, they rent them from someone else and basically what they catch is what they earn. In a lot of cases this is not very much! These people risk their lives everytime they go out to sea/work, doing a very dangerous job in the most appaling conditions. Even though the majority of fisherman were/are on a very low wage, they could still afford to buy a small cottage in Newlyn or Penzance. Now, thanks to an influx of gutless, chinless wonders 'who want to live somewhere pretty' at weekends this has become impossible.

So, Mr or Mrs pig ignorant tosser, why don't you walk it like you talk it? Go into the Swordfish pub in Newlyn and tell these guys that they're not working hard enough to be able to afford the most basic housing and hopefully you'll get a large gaff hook shoved where the sun don't shine!

No doubt you're probably one of the gutless, souless wonders who thinks it's Ok for the Cornish to have been bought out of their communities by identikit drones!

A very angry Cornishman.

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What can they afford?

...to Rent?

What's wrong with that, And why should they expect anything different?

Lots of people can not afford to rent - rents are sky high in the south. Just because house prices are sky high, doesn't make rents any kinder. 800PCm for a tiny hole that could have been bought with a mortgage for under £400pcm in 1999?

A choice between being fairly screwed and badly screwed is not much of a choice. Where have the cheap social homes gone?

In 1999 an ex-colleague who worked as a shop assistant in a bookstore for less than 11k bought a flat for 42k with a modest deposit. A small, tired flat. I'm sure at the time no one thought, 'Wow, cheap flats that even the poor can afford!'. They probably thought, 'Cheap, grubby first-time buy for a low earner'.

Some friends bought a similar flat in the same area this year with two incomes maxxed out for £125k.

Night and day.

Edited by CrashedOutAndBurned

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A couple both on the minimum wage should be able to buy or rent unless we want to rethink the entire way the british economy works. Anyone who thinks otherwise is in my mind either selfish and foolish. It's rediculous that a working couple on minimum wage (or essential professions) can't afford a home. They do not have the right to the best house in the street but they should not be homeless or subsidised by the state when they are performing a worthwhile economic function. If it is state subsidy then it is stupidly inefficiant use of money for anyone who pays tax and I think even TTRTR would agree with that.

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This is one sorry couple.

In this meritocracy that we live in, the truth is that they can't afford to buy.

There is nothing wrong with that, they are the people that the welfare net was designed to catch as they fall. They're why we pay tax.

It doesn't feel like a meritocracy to me, and I earn a reasonably good salary. I don't mind anyone making money out of hard work but that is not the case anymore, hence the brain drain. Why work you *rse off and get taxed almost to death, to live in a substandard state? What happened to enjoying the fruits of your labour. All I do these days is save, save, save. It will end in tears, and the smug and self satisfied will be the ones shedding the most!

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What can they afford?

...to Rent?

What's wrong with that, And why should they expect anything different?

I think you're missing the point though Bubb - even with renting they'd have to live on beans on toast if they were to try to save any cash...where's the justice in that for working your socks off each day?

Where I am a 1BR "apartment" (read dump) is 700 pounds per month + all bills.

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This is a rediculous thread anyway. The notion that there are couples out there where both are on the minimum wage & that's that is just HPC silliness.

Minimum wage jobs are taken as part-time jobs, 2nd jobs and jobs for teenagers.

Any couple in that position would spend their spare time looking for better jobs & govt support & therefore this discussion wouldn't apply.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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