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Converted Lurker

The Myth Of The Over Indebted First Time Buyer

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Average age for the ftb is now 34, which is alarming but not the key reason for this post. The average house price for the ftb is supposedly approx. 153K. The average deposit 10%, 15K. However, some banks and B.S. reckon their average lend to an FTB is 100-110K. Most ftbs, IMHO and experience, are taking good advice to kick the vendor, or developer squarely where it hurts. As a consequence most are taking a very relaxed view of the current situation, if they get an excellent deal they buy, if not they shrug shoulders and move on. I do not believe there is as much desperation to get on that there firstrung as some would have you believe.

O.K. the stats, 110K mortgage between 2 with all the excellent offers currently can start off at approx. £500 per month for a couple of years, roughly what the rental value is.

It is therefore a dangerous assumption to assert that the ladder has been completely kicked away from under the ftbs, it hasn`t and with falling prices the future is looking a lot brighter. It`s worth noting that with the average age now at 34, these are not desperate lemmings, most are more financially clued up than in times gone past. That`s why so many choose not to buy, not just due to being priced out, but also for recognising that until the market corrects and ticks all their boxes, they will wait.

Those that do buy at the figures mentioned tend to buy as couples, very affordable and lets not forget that the average figures are massively skewed by the concentration of housing and wealth in the S.East, 100K will get you a 2 bed terrace in my area on the Wirral. Going further afield you can be in 3 bed semi.

Yes I realise that the 2 bed terrace was half that price 5 years ago, however, it is still affordable for the majority of ftbs in my area.

Recent first time buyers are some of the least disfunctional clients of the lenders. Why, because their loan amounts are not that vast and the slight variation in their product rate tend not to hurt that much.

So please, no angst for the first time buyer, those that can will quite easily, those that can`t will, if they choose to, over the next 1-3 years.

If there is any pity washing around spare it on the guys that have (or think they have) 250K equity in their 750K homes. Rates go up, values come down, well and truly done over - wage slaves or court statistics. Actually no, no sympathy whatsoever, it`s a shame they`re not as clued up or sensible as most first time buyers ;)

Edited by Converted Lurker

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The average house price for the ftb is supposedly approx. 153K

Quote your source please.

The average deposit 10%, 15K

Again, source for average deposit %.

110K mortgage between 2

So every first-time buyer is a couple? There are no stats on this and you know it.

It is therefore a dangerous assumption to assert that the ladder has been completely kicked away from under the ftbs, it hasn`t

It is dangerous to assume that because the "ladder" is still standing in your tiny part of the North it remains in the rest of the country.

lets not forget that the average figures are massively skewed by the concentration of housing and wealth in the S.East, 100K will get you a 2 bed terrace in my area on the Wirral

They are not "massively skewed" by the concentration in the SE, they are an AVERAGE, substantial proportion of UK housing and population live in the South, they ARE the average, you are the outlier.

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I see a slightly different picture:

Young people/couples (late twenties) who have stretched themselves to get on the first rung of the housing ladder in the last couple of years. My advice to anyone in that position is try your hardest to build up your cash reserves to give yourself a cushion. Unfortunately the rash of property improvement programmes has seduced alot of these people to do the reverse and they have thrown even more money (upwards of 20%of the home's original price) into revamping their homes.

Yes there are some savy ftb's out there, but there also plenty who then go on to spend silly money enhancing their 'asset'. And the bank owns all of it.

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If the average age of a FTB is 34 then the biological clock is well and truly ticking as far as having children is concerned. A relatively large portion of couples still choose to have kids and of course our survival as a species depends on that continuing.

So any calculations etc about FTB's can not honestly be based on two wages unless you are adding in the cost of full time child care as well as stretching the overall household budget to cover the relatively large cost of raising children. It's far more realistic to assume one wage especially in this age of delayed marriage, frequent divorce and many FTB's being single anyway. So forget that idea of two incomes because it has never reflected reality for most.

Locally, I can either rent a nice house for $250 a week or buy it over 25 years for $550 plus maintenance costs. On one typical FTB wage that mortgage repayment would be over 90% of after tax pay and is simply impossible. The only way you can afford to buy is to either put in a huge chunk of capital upfront as a deposit (but that is still costing you on lost income from investing it elsewhere), earn well above average for someone of that age or forget about having children so that both can work constantly and prey that you don't ever split up. Not really an attractive situation versus renting at less than half the weekly cost and investing the rest in an asset which isn't overvalued as property is.

Of course, when houses are undervalued then all that will reverse and it will make sense to buy. But not now and probably not for a few years.

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shame...

someone, somewhere decided that joe bloggs who works for £5 an hour at maccies...

can't rent or buy their own pad...

time to quit i say and get free social housing...

what is britain coming to?

immigrant only jobs?

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Most ftbs, IMHO and experience, are taking good advice to kick the vendor, or developer squarely where it hurts. As a consequence most are taking a very relaxed view of the current situation, if they get an excellent deal they buy, if not they shrug shoulders and move on. I do not believe there is as much desperation to get on that there firstrung as some would have you believe.

There certainly is anecdotal evidence contradicting the above. I have no idea how the above statement (or indeed its opposite) could be proved convincingly.

O.K. the stats, 110K mortgage between 2 with all the excellent offers currently can start off at approx. £500 per month for a couple of years, roughly what the rental value is.

We all know that rental yields are poor in much of the county (i.e. mortgage repayments similar to rent are likely to be insufficient). Repayments that are 'roughly' the same as rent neglect maintenance, insurance, stamp duty, and expose the borrower to interest rate rases (not necessarily the same thing as base rate rises; what do you think might happen should the lenders find there is little new business to fight over while bad debts are rising).

£1000 a month is not a large amount to some people but it is to others. A large proportion of the population cannot afford to spend that much on accommodation. At a guess you would need about 2k net earnings to afford that. Not everybody makes that much, and then 130k does not even buy a studio in parts of SE. There were widely published figures showing that much of the country was unaffordable for 'essential' workers. Further evidence is that FTB deposits are supposedly rising (i.e. the only people able to buy have large deposits, so property is not afordable for many others).

It is therefore a dangerous assumption to assert that the ladder has been completely kicked away from under the ftbs, it hasn`t and with falling prices the future is looking a lot brighter. It`s worth noting that with the average age now at 34, these are not desperate lemmings, most are more financially clued up than in times gone past. That`s why so many choose not to buy, not just due to being priced out, but also for recognising that until the market corrects and ticks all their boxes, they will wait.

So FTBs can afford to buy but choose not to? What is your argument then. Will prices go up or down?

Roughly at what age would you think people should buy their first property? The majority would not be able to pay for it in much under 25 years, so that does not exactly leave all that many spare years after 34, especially if they hope to trade up more than once. BTW, 34 is the average, so many FTBs will be older than that.

Those that do buy at the figures mentioned tend to buy as couples, very affordable

Again, even some VIs accept that house prices are out of step with local incomes in much of the country.

Yes I realise that the 2 bed terrace was half that price 5 years ago, however, it is still affordable for the majority of ftbs in my area.

FTBs who buy housing find it is affordable, in the same way that space tourists find they can afford the cost of the flight.

Recent first time buyers are some of the least disfunctional clients of the lenders. Why, because their loan amounts are not that vast and the slight variation in their product rate tend not to hurt that much.

What? Are you serious? I suppose next you will claim that people take out I/O mortgages for the fun of it.

It does not take a genius to see why borrowers tend not to default straight after taking out a loan but it has nothing to do with them not borrowing as much as they can. Any FTBs who default now had to take out a mortgage at some point; are you saying they are now borrowing less than they used to?

I would have written a conclusion but now realise that I fail to see the point of your article.

MoD

Edited by MongerOfDoom

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FTB's are facing ever increasing debts - Universities will be charging higher fees from next September, which in turn will increase the debts many students leave university with.

I left uni just over 2years ago, and one of my house mates left with debts of over 20k, mostly student loans, but also some on credit cards. This was despite him having a part time job through some of the course, and working for 1year for work experience.

He reckons he'll still be paying off his student loan when his kids start university, which is really quite worrying.

This is by no means uncommon, and I read recently that the average student debt is now 15k and rising.

As a result it seems people are having to borrow more money, and take longer to pay it back. One of my friends who lives in Dublin has a total mortgage of 300k euros on his 2bed terrace (bought 2003, rented out) in WSM and his house in Dublin - and his mortgage is over 40years.

To sum it up the myth that FTB's are indebted is very true indeed.

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There certainly is anecdotal evidence contradicting the above. I have no idea how the above statement (or indeed its opposite) could be proved convincingly.

We all know that rental yields are poor in much of the county (i.e. mortgage repayments similar to rent are likely to be insufficient). Repayments that are 'roughly' the same as rent neglect maintenance, insurance, stamp duty, and expose the borrower to interest rate rases (not necessarily the same thing as base rate rises; what do you think might happen should the lenders find there is little new business to fight over while bad debts are rising).

£1000 a month is not a large amount to some people but it is to others. A large proportion of the population cannot afford to spend that much on accommodation. At a guess you would need about 2k net earnings to afford that. Not everybody makes that much, and then 130k does not even buy a studio in parts of SE. There were widely published figures showing that much of the country was unaffordable for 'essential' workers. Further evidence is that FTB deposits are supposedly rising (i.e. the only people able to buy have large deposits, so property is not afordable for many others).

So FTBs can afford to buy but choose not to? What is your argument then. Will prices go up or down?

Roughly at what age would you think people should buy their first property? The majority would not be able to pay for it in much under 25 years, so that does not exactly leave all that many spare years after 34, especially if they hope to trade up more than once. BTW, 34 is the average, so many FTBs will be older than that.

Again, even some VIs accept that house prices are out of step with local incomes in much of the country.

FTBs who buy housing find it is affordable, in the same way that space tourists find they can afford the cost of the flight.

What? Are you serious? I suppose next you will claim that people take out I/O mortgages for the fun of it.

It does not take a genius to see why borrowers tend not to default straight after taking out a loan but it has nothing to do with them not borrowing as much as they can. Any FTBs who default now had to take out a mortgage at some point; are you saying they are now borrowing less than they used to?

I would have written a conclusion but now realise that I fail to see the point of your article.

MoD

Thanks for this, look let`s get one thing straight, there is no reasonable argument agianst the fact that property values in this country are insane and defying just about every economic principal you wish to judge the current situation by. It feels somehow unjust that ftbs, having been good citizens during the UNI years, then come out saddled with a bit of debt and also struggle to find useful employment and struggle to buy their first property.

The overall point of the post is to suggest that, due to the rising age of the majority of ftbs, this group are a lot more savvy than they are given credit for. A lot are priced out undeniably, however, a proportion could buy, but choose not to as they have not bought into the Bull 5hit that owning is everything. The buying is engrained in our culture nonsense is in my humble experience enjoying a shift in culture. Yes some are older than 34, some are also younger...

My figures and illustrations are facts. I know that recent ftbs with mortgages of approx 100K are the least disfunctional clients of a major home loan management company. It is illogical to argue that a 0.25% in rate rises will cause an ftb mortgagee to panic. Buy one less dvd/cd a month each?

The average mortgage for an ftb is approx. 100K, to be paid back by a couple earning average wages, that is not a great deal of money IMHO. Yes, yes we can all provide anecdotes to prove the point, one way or the other. You should also recognise that ftbs are not the average buyer, therefore cannot expect to buy at average prices.

As for the going to Uni left with debts, the payment of the student loan is always hugely exaggerated, the monthly payments are a pittance once work is found and whilst I detest at the impotent objection put up at the time of their introduction the fees are here to stay, get used to it. Some over a certain age managed to leave UNI without debts racked up on credit cards by living frugally at the time and working through UNI doing 6 nights work a week.

Will prices go up or down? IMHO my best punt is down over a very extended period, perhaps as much as 10 years, prices will adjust by 25-30%. Wages will not catch up that dramatically to make the adjustment any easier.

As for the questions in the other reply to quote my source do your own research IPOD and any info. from my sources are my sources :P<_<

Edited by Converted Lurker

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  • 301 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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