Interesting question from the telegraph comments

[iamnumerate]

Quote

It was actually a question. It would be interesting to see if people took the present day salary of the type of work they were doing when they were saving for their first property, worked out what the approximate value of that property is nowadays, accounted for modern base cost of living as a renter (but excluding all luxuries) to estimate how much they could save per year, and then calculated how many years it would take them to build up a deposit and if it would be feasible to buy an equivalent property.

I did this and the answer is a lot more than it took me even if I were very very lucky.

 

[Johnno1167]

It’s a really interesting question . Not that simple because demographics can change . I’ll have a go ..

 

My first ever home, I brought 3 years after graduating in the  early- mid 90’s. Very modest 2-3 bed semi . It was £26K.  I left there 5 years later . Rented a room to help pay the bills and mortgage.   My graduate salary ( engineering ) then was £ 10K  in 1992 approx . Average salary for the town was similar at the time , maybe a touch more . At that stage in life , my friends who stayed home and didn’t go to uni, were earning slightly more in their mid 20’s though my salary appreciated more quickly as I moved jobs with experience .

the house was last sold 1 year ago, for £185K.

The employer has gone, and very few professional level grad jobs left of equivalence (requiring an engineering degree) in the town. Average pay in the town is approx £35for those who have a job today (mostly the council).  It is very much a service economy town, no industry left at al. You have to commute a fair way to get into a decent paying job ( I still have several friends in the town ).

 

so, less professional jobs in the locale, and a modest house now 5 times average salary of the town vs 2.5 back in early 90’s.  You have to commute way out the town into Birmingham or surrounds to achieve that, so £2-3K on communing costs alone .  

 

 

[mynamehere]

To answer, I need to know if I receive the average FTB gift from relatives of 40-50k or not.

If not, that's still an interesting excercise in demonstrating inequality, but it doesn't help us understand what's fair value, which I assume is the point

[iamnumerate]

3 minutes ago, mynamehere said:

To answer, I need to know if I receive the average FTB gift from relatives of 40-50k or not.

If not, that's still an interesting excercise in demonstrating inequality, but it doesn't help us understand what's fair value, which I assume is the point

I think point is to see if things are easier than in the past, same or harder for a similar person.

The amount the average FTB gets is irrelevant because we are trying to compare not only FTBs with the past but to see if there are people who could have bought in the past but didn't.

 

[mynamehere]

3 minutes ago, iamnumerate said:

I think point is to see if things are easier than in the past, same or harder for a similar person.

The amount the average FTB gets is irrelevant because we are trying to compare not only FTBs with the past but to see if there are people who could have bought in the past but didn't.

 

Seems a little arbitrary to consider the average salary, average cost of living, but then exclude the average gifted deposit as irrelevant. 

 

 

 

 

[dugsbody]

24 minutes ago, mynamehere said:

Seems a little arbitrary to consider the average salary, average cost of living, but then exclude the average gifted deposit as irrelevant.

What does average gifted deposit mean?

Total value of all gifted deposits / all new buyers whether they received a deposit or not

?

[iamnumerate]

41 minutes ago, mynamehere said:

Seems a little arbitrary to consider the average salary, average cost of living, but then exclude the average gifted deposit as irrelevant. 

 

 

 

 

It is irrelevant because it could be that there are less people buying now because only the richest can buy so the average gift amount has gone up for the average FTB, but the amount the average person compared to the past as dropped.

(The percentage of people who buy a house is not constant).

However why not just take what you were given and think about how much it might be today.

[TenYearToGetMyMoneyBack]

5 hours ago, Johnno1167 said:

It’s a really interesting question . Not that simple because demographics can change . I’ll have a go ..

 

My first ever home, I brought 3 years after graduating in the  early- mid 90’s. Very modest 2-3 bed semi . It was £26K.  I left there 5 years later . Rented a room to help pay the bills and mortgage.   My graduate salary ( engineering ) then was £ 10K  in 1992 approx . Average salary for the town was similar at the time , maybe a touch more . At that stage in life , my friends who stayed home and didn’t go to uni, were earning slightly more in their mid 20’s though my salary appreciated more quickly as I moved jobs with experience .

the house was last sold 1 year ago, for £185K.

The employer has gone, and very few professional level grad jobs left of equivalence (requiring an engineering degree) in the town. Average pay in the town is approx £35for those who have a job today (mostly the council).  It is very much a service economy town, no industry left at al. You have to commute a fair way to get into a decent paying job ( I still have several friends in the town ).

 

so, less professional jobs in the locale, and a modest house now 5 times average salary of the town vs 2.5 back in early 90’s.  You have to commute way out the town into Birmingham or surrounds to achieve that, so £2-3K on communing costs alone .

Similar figures for me in 1986. Back then it was almost carved in stone above the building society door "Thou shall not borrow more than 3x salary". Interesting a 7.5% deposit was absolutely fine. A record of saving that with the same building society was probably more important than the size.

I recall housemates giving me a strange look when I said "when I decide to buy a house I don't want to be worried about raising a deposit". However, at the time that was true.   

4 hours ago, mynamehere said:

To answer, I need to know if I receive the average FTB gift from relatives of 40-50k or not.

I got a £100 bed and a £200 cooker and am still grateful. Thanks Mum.

Edited June 27, 2023 by TenYearToGetMyMoneyBack
typo

[Freki]

7 hours ago, mynamehere said:

To answer, I need to know if I receive the average FTB gift from relatives of 40-50k or not.

If not, that's still an interesting excercise in demonstrating inequality, but it doesn't help us understand what's fair value, which I assume is the point

The point is to make some people realise they live in houses they could not afford today. 

[mynamehere]

52 minutes ago, Freki said:

The point is to make some people realise they live in houses they could not afford today. 

after googling it... about half of FTBs are gifted deposits these days, versus only about a quarter back in 2000.

It was relevant back then, and it's more relevant today. If the question is how long to get your deposit together then it makes no sense to take  "no help" as the base line.

 

 

 

Edited June 27, 2023 by mynamehere

[btd1981]

I was doing something like this in real-time on 2010s Berkshire. Pay increasing with inflation. Houses increasing faster than my gross earnings. Demoralising to realise my strongest buying position was practically when I started saving.

[iamnumerate]

7 hours ago, mynamehere said:

after googling it... about half of FTBs are gifted deposits these days, versus only about a quarter back in 2000.

It was relevant back then, and it's more relevant today. If the question is how long to get your deposit together then it makes no sense to take  "no help" as the base line.

 

 

 

Maybe that is because there are half as many FTBs as in 2000.

I got £1k - I would need to get £60K to get the same flat today.

 

[HPCatlast.]

A long, long time HPC fan.

ERIC, what happened to my HPC hero?

 

To your question.

1972 (gazumping was rife) we bought a wreck of a 1 & 1/2 bedroom (top of stairs was into a small bedroom, with just one door, into a 2nd bedroom) cottage for £5500.

Only allowed a mortgage of £4500, so borrowed part of the £1000 (nearly 20%) deposit from a relative.

Weekly wage at that time was £25.92p at GPO telecom!

5 years later (1977, after a new roof, rewire, replumbed, new kitchen, new bathroom, etc) we sold for £10250 to buy a 1930's 3 bed semi.

During those years we had rising interest rates, so one full time job and 2 part time to cover the bills, no posh car, just a Morris 1000 van.

What I did learn after paying a 'repayment' mortgage for 5 years was that I still owed nearly £4500!!

When I questioned how come, I was told 'early years is mostly interest, later years pays the capital', LESSON LEARNT!

Next house (from 1977) I saved like a miser, every December I tried to pay £1000 off the debt. before recalibrated in January. When interest went up we paid, when interest went down we carried on paying the higher figure.

After the experience of those first 5 years mortgage payments and the debt remaining where we started I was obsessed with clearing any debt as quickly as possible, I have no respect of the 'finance industry!!

One more move in 1987 to another 1930's, extended etc. etc. but mortgage free at 50, thanks to the lesson learnt on our 1st home (bankers want your interest ££'ss, not debt reduction).

Then, at 54 we got a small 5 year mortgage to buy a holiday hideaway in France, just about to celebrate our 20th anniversary. All thanks to lessons learn from our 1st mortgage, clear the debt ASAP!  

 

EDIT. sorry forgot to add, our 1972 cottage at £5500 became a £325k purchase in 2022!

Edited June 28, 2023 by robbingXpat

[winkie]

17 minutes ago, robbingXpat said:

A long, long time HPC fan.

ERIC, what happened to my HPC hero?

 

To your question.

1972 (gazumping was rife) we bought a wreck of a 1 & 1/2 bedroom (top of stairs was into a small bedroom, with just one door, into a 2nd bedroom) cottage for £5500.

Only allowed a mortgage of £4500, so borrowed part of the £1000 (nearly 20%) deposit from a relative.

Weekly wage at that time was £25.92p at GPO telecom!

5 years later (1977, after a new roof, rewire, replumbed, new kitchen, new bathroom, etc) we sold for £10250 to buy a 1930's 3 bed semi.

During those years we had rising interest rates, so one full time job and 2 part time to cover the bills, no posh car, just a Morris 1000 van.

What I did learn after paying a 'repayment' mortgage for 5 years was that I still owed nearly £4500!!

When I questioned how come, I was told 'early years is mostly interest, later years pays the capital', LESSON LEARNT!

Next house (from 1977) I saved like a miser, every December I tried to pay £1000 off the debt. before recalibrated in January. When interest went up we paid, when interest went down we carried on paying the higher figure.

After the experience of those first 5 years mortgage payments and the debt remaining where we started I was obsessed with clearing any debt as quickly as possible, I have no respect of the 'finance industry!!

One more move in 1987 to another 1930's, extended etc. etc. but mortgage free at 50, thanks to the lesson learnt on our 1st home (bankers want your interest ££'ss, not debt reduction).

Then, at 54 we got a small 5 year mortgage to buy a holiday hideaway in France, just about to celebrate our 20th anniversary. All thanks to lessons learn from our 1st mortgage, clear the debt ASAP!  

Well done, that's the way to do it.

[Freki]

38 minutes ago, robbingXpat said:

Then, at 54 we got a small 5 year mortgage to buy a holiday hideaway in France, just about to celebrate our 20th anniversary. All thanks to lessons learn from our 1st mortgage, clear the debt ASAP!  

And affordable house prices. Even better, high level of interests mean that you struggle at the start and quickly stop struggling. The reasoning behind, is that you get a fixed monthly payment that you can afford. At the beginning it stings, but several years of salary increases at 8% to 10%, and suddenly your mortgage is not taking such a large chunk of your income. Even better, the interest rates in general went down after peaking in 1980. So not only did your mortgage go down, your income went up. 

45 minutes ago, robbingXpat said:

What I did learn after paying a 'repayment' mortgage for 5 years was that I still owed nearly £4500!!

A shame that nobody took time to explain this. At 15%, your first installment is 97% made of interest payment. At 2%, it is 39%. Hence once again, higher interest rates mean that you can clear your debt faster. 

All in all, yes higher interest rates are welcome, the main thing now is for the price of houses to go down accordingly, so instalments remain relatively similar for a similar purchasing power.