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lewissheridan

A Frustrated First-time Buyer

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So when is this crash going to happen ?

I have decided not to delay my life and wait for a correction, so I have got married and have a baby due in June. Now my requirements as a first-time buyer are somewhat different now, I am looking for a 1 or 2 bed house/flat. I am 26 now, earning a reasonable salary (£30k per year), and yet I can't afford to buy anything without severely stretching myself to 5 times my salary. My wife is 24, and is working part-time in the local co-op, yet still we don't have any means to buy. I have a £5k deposit which I can't grow due to cost of living. But this is all against a backdrop of prudent living. I know this is a subjective issue, and this is always put forward when people tackle the 'I can't afford to buy' debate. And they propose various cut back in lifestyle decisions and all that stuff. But when is something going to happen, people need to begin their lives, not live in misery!

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Face it. For all their posturing about just wanting to get ahead the bulls just don't give a sh#$ about your position. Read the Bull's forums. It's all get ahead and screw everyone else. If the bulls and property owners had their way you'd never be able to afford.

Get angry. And when someone points out that it's never been easy to buy - Punch them in the jaw. They have no idea that "never been easy" has changed from "very difficult" to "impossible".

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Are you currently renting? If so, is there any reason you can't continue doing so?

Yes I am, renting a 1 bedroom flat for £525pm, which i feel is quite reasonable given the circumstances of the market etc. However, I need another room for the baby, so a 2 bed flat/house is what I would like. However i could rent for another couple of years, but with a baby i would like my own home. I know i'm asking a bit too much there!

Face it. For all their posturing about just wanting to get ahead the bulls just don't give a sh#$ about your position. Read the Bull's forums. It's all get ahead and screw everyone else. If the bulls and property owners had their way you'd never be able to afford.

Get angry. And when someone points out that it's never been easy to buy - Punch them in the jaw. They have no idea that "never been easy" has changed from "very difficult" to "impossible".

It annoys me chronic when my colleagues say i should buy now, friends say house prices always go up, i mean the average yes, but it's characterised by peaks and trough and it is clear we're at a peak now and the trend speaks for itself. My wife thinks to buy now. The thing is people don't want to do the research, don't want to understand the underpinnings of the economy an it's relation to house prices. It's ignorance driving this house price farce and the VI are loving it. How stupid we all are! How sad this all is.

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Just rent a 2 bedder until this housing fiasco unwinds itself. You can't afford a house right now, so why waste time worrying about it.

Edited by Pluto

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Easy, because you're lazy, expect too much and waste money on nonessential things like food or warmth. Years ago people on above average wages had to live in tents or caves for decades until they were in the earning prime in their mid 40's, then they could afford a dog kennel, and they were lucky to get that. Also, you're wreckless and irresponsible for spending £140 on an iPod, this act alone singularly explains why you cannot buy a home, it's all down to that one iPod.

Alternatively, years ago lots of people had their sorry asses bailed out by massive wage inflation, but personally I like the above story better.

Edited by BuyingBear

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So when is this crash going to happen ?

I have decided not to delay my life and wait for a correction, so I have got married and have a baby due in June. Now my requirements as a first-time buyer are somewhat different now, I am looking for a 1 or 2 bed house/flat. I am 26 now, earning a reasonable salary (£30k per year), and yet I can't afford to buy anything without severely stretching myself to 5 times my salary. My wife is 24, and is working part-time in the local co-op, yet still we don't have any means to buy. I have a £5k deposit which I can't grow due to cost of living. But this is all against a backdrop of prudent living. I know this is a subjective issue, and this is always put forward when people tackle the 'I can't afford to buy' debate. And they propose various cut back in lifestyle decisions and all that stuff. But when is something going to happen, people need to begin their lives, not live in misery!

Hi there,

I really hope you consider this carefully (its obvious just by being here that you are) because I feel you are exactly the kind of person with potentially most to loose from a serious HPC.

As a younger adult on a good salary your future and perhaps that of your families short-medium term finance is worth taking time to ponder. This site will provide you with numerous references to factual/non-factual data from VI's, government offices (i.e. ODPM), international agencies (i.e. OECD, UN), news reports (spun and unspun) and a wealth of anecdotal references. But please go exploring for your own resources, the internet has much to offer anyone with the time and thought to direct their searches appropriately.

The first point I'd make is on your deposit which is only going to represent a 5% deposit on a 100K property mortgage, most likely this won't find you much. Anything less than 10% and you won't be able to get a top rate on your mortgage, you may also have to pay an extra Mortgage Indemnity Guarentee (M.I.G.) or Higher Lending Charge (H.L.C.) for deposits under 10% which is now common practice amoungst many lenders. Check what rates and what clauses are included with at least 4 or 5 lenders... don't let them credit check you though as this can actually work against you sometimes - just get an offer in principal and compare them. I'd suggest you research this first and understand your borrowing capability and issues before viewing properties, if possible save for a deposit a little longer - for 5 times your income (£150K) you should have £7.5K (5%) as a bare minimum otherwise you're in 100% mortgage land and the rates there are typically 1% higher...

As an example the deposit/rates issue makes the following difference:

0% deposit = 150K mortgage @5.5% interest on a 25 year 100% repayment mortgage = £931pcm

5% deposit = 142.5K mortgage @4.5% interest on a 25 year 95% repayment mortgage = £800pcm

10% deposit = 135K mortgage @4.4% interest on a 25 year 90% repayment mortgage = £750pcm

(using http://www.bbc.co.uk/homes/property/mortga...lculator.shtml)

I'd suggest you look at fixed rate 5 year mortgages as you'll probably need to be able to budget month to month and two/three years from now won't feel like a long time with a baby on the way. It'll also give you time to progress your earnings in case inflation goes crazy. Make sure you that if possible you have no other debts (loans/credit/store cards etc.) as these typically are all on higher rates than a mortgage will be. Do not even think about an IO mortgage unless you are a very adept investor and will be able to make appropriate money available to repay the debt at term!

Use a mortgage comparison tool to check deals - something like this is good for starters:

http://www.moneysupermarket.com/mortgages

If you feel now is the time for you and your family make sure you set yourself realistic limits to your borrowing (remember to discount your wifes current income)... ALWAYS stay within that limit (more borrowed = more risk). If you think you've found somewhere you like ALWAYS make an offer of at least 10% under asking price as your initial move (after all you never know :o)

A HPC may not occur, or it may occur and not affect your area - But in case it does you should work out potentially what effect this will have on your potential investment. If interest rates rise or if prices fall what will this mean to you... An IR rise to 7% or 8% may seem odd to think of for many right now but its a very real possibility - it would have the effect on your borrowing of adding about £200 pounds per month onto your repayments. A price fall might put you in the position of being in negative equity... fine if you intend to stay in the property for a long time, but if you think you might have more children then a one or two bed house/flat might not be enough space - it would put you in the position of potentially having to take that debt to a new property.

Japan is the country which shows us the best recent example of a property bubble bursting... prices dropped consecutively for 14 years, in many cases even beyond half value from the market peak in 1991! The economy plunged into reccession, companies went under, jobs were lost, bankruptcies etc. - there's no evidence I have seen that says a decline of this scale cannot be repeated here in the UK, particuarly with our obscene borrowing habits. The point of this is that even if a HPC doesn't affect your property directly your finances and income is tied into the overall economy of the country and even of the world - so the larger the loans/mortgage/debts you run up the more exposed to changes in market conditions you become.

If the Mrs. wants to buy now and doesn't understand your rationale maybe ask a relative to have chat who saw the last HPC in the late 1980's up close either personally or had friends who did... anecdotal stories often can be more pursasive than facts and figures to some or even show her this site and encourage her to read and ask questions... the key thing about a HPC is its happened before and could happen again, being aware rather than ignorant is always the better option. Make sure she's involved in the desicions about mortgage etc. too because she'll better understand the effects of rate changes and your mortgage clauses ie. early redeption penalities, longer term tie-ins etc. - even if she doesn't seem keen or concerned, make sure she's aware of the economics of your loan... there's more than one thread on this board where spouses have become frustrated (husbands or wifes) because they didn't understand the rationale of their partners.

Whatever you decide to do just make sure you know why you are doing it and understand the risks and clauses involved.

I sincerely wish you and your family all the best of luck!

- Pye (Property speculation ninja :ph34r: )

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Hi there,

I really hope you consider this carefully (its obvious just by being here that you are) because I feel you are exactly the kind of person with potentially most to loose from a serious HPC.

As a younger adult on a good salary your future and perhaps that of your families short-medium term finance is worth taking time to ponder. This site will provide you with numerous references to factual/non-factual data from VI's, government offices (i.e. ODPM), international agencies (i.e. OECD, UN), news reports (spun and unspun) and a wealth of anecdotal references. But please go exploring for your own resources, the internet has much to offer anyone with the time and thought to direct their searches appropriately.

...

I sincerely wish you and your family all the best of luck!

- Pye (Property speculation ninja :ph34r: )

Hi Pye,

Thank you your reply, it makes a lot of sense to me despite the peer pressure as it were to buy.

My philosophy is never a borrower or lender be, with the concession of a student loan, a car and of course the mortgage when i decide to take one. I am very keen on the principles of a mortgage not being more than 3.5 time my salary, and the repayment not representing any more than a third of my gross monthly income. That gives me my parameters of £30k * 3.5 = £105k. So these figures make sense to me, and are affordable. However the problem is the property I need is up to £50k inflated. £105k will buy me a studio or at best a run-down ex council 1-bed flat in the SE.

I have seen the reoccuring theme of spouse pressure, and it is hard work to eloquently explain what is happening in the housing market, the role of vested interests etc and also explain the economic fundamentals that support my beliefs. I mean a graph of house prices peaking and troughing aren't even enough to convince some people. There is this innate believe that house prices are rising, get on the ladder now whilst you have the chance etc etc. I really think i'm losing my mind, house prices aren't really unaffordable! This is truely crazy. I explain this all to my nan who bought and let wage inflation sort out the rest, i tell her it's harder now. She says nothing as I feel she can see my concerns, and the fact that i'm so passionate about explaining them must make her think that there must be some truth to what i'm saying. It's like am I the only one who thinks house prices are criminal!

I've lived on this board for a few years now - i think it needs to start doing something to initiate change, rather than passive commentry on a house price farce that benefits too many people except first-time buyers. Can't we use this board to lobby local MPs, can't we put a proposed manifesto on multiple home ownership, who is looking after our concerns as citizen's of the UK! I think I will write to my local MP, I have had enough of this!

I am sick of this 'i'm alright jack' attitude, sick of student loan repayments stopping me paying into my pension, is there anyone else my age who shares my opinions or have i got it drastically wrong. Or am i preaching to the choir!!

To give an example, my sister friend rents a house with her boyfriend, he had 40k debts and declared himself bankrupt. Nice one! lived the life of riley in his 20s, now in his early thirties he has written off all that debt! not bad eh? Now he is renting, but his g/friend wants to buy, she believes now is a good time to buy!!!! Why ? cos house prices always go up! :huh:

Another one, "my brother has made 30k on his bungalow he bought for £100k on 100% self-certification mortage - paying interest only, he had it valued at £130k"

there are others i can't be bothered to write up..

someone wake me up please

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I'm in a similar situation. I'm quite happy renting because I'm sure either one of two things will happen:

1) We enter a new paradigm, as they say, and people like us earning a fair bit above average salary will never again be able to afford even a 1 bedroom flat in the SE. (well... this is the situation already, but presumably it will only get worse as house prices never go down. It will just be investors buying and selling amongst each other at ever increasing prices, a speculative market that never comes down)

2) House prices will become more affordable.

If we get situation 1 then in 25 years time what does it matter that you don't own your house? Neither will anyone else. 95% of the population rent from the other 5%.

If we get situation 2 then now is not the time to buy, it's cheaper to rent the same property and on top of that the property you would own would lose a large percentage of it's value.

Edited by spleeper

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I'm in a similar situation. I'm quite happy renting because I'm sure either one of two things will happen:

1) We enter a new paradigm, as they say, and people like us earning a fair bit above average salary will no longer be able to afford even a 1 bedroom flat in the SE.

2) House prices will become more affordable.

If we get situation 1 then in 25 years time what does it matter that you don't own your house? Neither will anyone else. 95% of the population rent from the other 5%.

If we get situation 2 then now is not the time to buy, it's cheaper to rent the same property and on top of that the property you own will lose a large percentage of it's value.

For the renting scenario , I currently rent @ £525pcm, which i feel is quite good for Surrey, but that's a 1-bed flat. Have baby due in June, now do i buy ? or do i rent ? My requirement is a 2-bed flat or house, this represents circa £700pcm renting, which inturn represents £16,800 over 2 years of renting. So i would need for my 2 bed house @ £180k to drop by £16,800 + (roughly 10%) in order to make renting the better choice.

So the gamble is this, will house prices correct, readjust, crash 10% in two years?

I think the stagnation and slow decline with occasional spikes will be a long drawn out affair, meanwhile i'm going nowhere fast! lining the pocket of some BTL'er who has leverage themselve of free credit!

This is severly f'ing up peoples lifes!

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For the renting scenario , I currently rent @ £525pcm, which i feel is quite good for Surrey, but that's a 1-bed flat. Have baby due in June, now do i buy ? or do i rent ? My requirement is a 2-bed flat or house, this represents circa £700pcm renting, which inturn represents £16,800 over 2 years of renting. So i would need for my 2 bed house @ £180k to drop by £16,800 + (roughly 10%) in order to make renting the better choice.

So the gamble is this, will house prices correct, readjust, crash 10% in two years?

I think the stagnation and slow decline with occasional spikes will be a long drawn out affair, meanwhile i'm going nowhere fast! lining the pocket of some BTL'er who has leverage themselve of free credit!

This is severly f'ing up peoples lifes!

Well, if it helps, I know directly of a BTLer who offered 15% below asking price a couple of weeks ago and the offer was immediately accepted. That worked out at about a £40k reduction I think. I'm feeling pretty sure that the Q2 land registry figures will be showing some sales like this coming through.

Also, you say you need a 2 bed flat or house to drop by at least £16,800 in 2 years for it to be worthwhile. I'm not sure this is quite right... I'm not sure how much difference it would make, but say they only came down by £10k then you also need to remember that that is £10k that you're not paying at least ~5% interest on for the next 20 or so years.

Add to that that you should really be able to save several £000's over two years on your salary with rent at £525, put that down as deposit and you should save £000's more on interest over the life of the mortgage. That's my plan anyway, 50% mortgages are the way forward!

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Face it. For all their posturing about just wanting to get ahead the bulls just don't give a sh#$ about your position. Read the Bull's forums. It's all get ahead and screw everyone else. If the bulls and property owners had their way you'd never be able to afford.

Get angry. And when someone points out that it's never been easy to buy - Punch them in the jaw. They have no idea that "never been easy" has changed from "very difficult" to "impossible".

I know, I have had someone patiently explain that the 3 times salary multiple they had bought at.. (best timing ever) was hard.. when I pointed out that the same place would be ten times the salary they would earn now.. they actually said..

"It's never been easy.."

what can you say to that sort of thinking?

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10% below asking is far too generous at this point in the cycle.

I'm viewing houses at the moment but will only buy if the asking price is roughly realistic already and I can get 25%+ discount.

Don't fall in love with a house there are plenty more out there. Just view lots of suitable properties, and make low offers..... you might get one accepted.

Kick back and enjoy renting in the meantime. Its quite nice having fixed cost accomodation.

So far this year my landlady has had to pay for:

2 x Boiler fix

1 x new shower

1 x new cooker

2 x new blinds (12 ft high blinds)

1 x Dyno-rod service for drains

1 x new kitchen tap

I really wouldn't have wanted to pay for those myself on top of a mortgage that was already stretching my finances.

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"I have a £5k deposit which I can't grow due to cost of living.

But this is all against a backdrop of prudent living"

TOO MANY YEARS...

Of have-it-all, and no recession...

have left people with the idea that they should be able to have what they want, when they want it.

Saving and sacrifice seem to be forgotten virtues, and so is "making do" with rented accomodation.

Those who move swiftly forward... marrying, having children, buying expensive homes

with loads of debt, are going to find themselves TRAPPED in an unhappy existence.

...

I was wondering when this comment would raise it's ugly face. And although I share your sentiments, it does no justice to my generation who aren't like that. It is easy to tarnish a whole generation with the same brush. If i'm honest, the only mistake i made was going to university, believing that I deserved to go having got decent a-level results. Ultimately it was not to be a successful endeavour for me, and the lesson i learned (no pun intended) is that I am now beginning life with a £15k student loan debt.

This must have it now society is evident everywhere, with people MEWing, young people putting emphasize on social aspects of their lifes, going out, fashion labels, playstation/ipod generation and all that. But i'm firmly of the disposition if you want anything in life you work hard and save for it. Case in point, I worked hard and saved £6k for my deposit. Realising it didn't represent 5% for anything i would like to buy, i bought myself a car. I paid 33% of it in cash, so in my mind i've borrowed sensibly well within my means. But then the question is do i need a car ? well i'm not going to debate or justify it here, however after years of travelling on SW trains, i was spending stupid amounts of money, suffering delays, cancellations, making me late for work, freezing cold waiting rooms with broken heaters, and breathing in smoke from thoughtless people on the station, so i'd rather subsidise that money to buy a car, but i would admit it represents something that i would call a luxury but brings me a quality of life. If i sacrifice the net benefit would probably be £150 extra to save and a lower quality of life, so i weighed it up.

A car and a house are undoubtedly the two most expensive purchases you will make. I never use credit cards, i'm a debit person all the way, and although i am tempted to use my new deposit to buy some luxuries like a new TV etc, i don't. I have a 14" portable and that's it! I think testament to me saving £10k given my commitments to rent, bills and student loan, it's evident i'm more than prepared to save and capable of sacrifice. It's far to easy to think i'm from a want it now and easy generation. I have worked in bars, retail to trawl through uni, and i have lived in dismal house shares and bedsits, but how dare i want a home!!!

Edited by lewissheridan

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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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