How Hard Is It To Afford A House?

[jp1]

How hard is it to afford a house?

How can anyone afford to buy a house for the first time?

The costs of buying are daunting

The country has had ten years of almost continuously booming house prices.

They are still rising briskly and continue to outstrip the rise in peoples' incomes.

Yet mortgage borrowing is thriving with no obvious sign of a slowdown.

And warnings that high prices would inevitably choke off the supply of first time buyers and thus act as a drag on the whole market seem exaggerated.

How do they do it?

Research by Bradford & Bingley earlier this year suggested that 40% of first time buyers now rely on their parents for financial help when buying a home.

The difficulty is getting a deposit together, rather than meeting the repayments [well yes if the 'deposit' is 100K!]

Bernard Clarke, Council of Mortgage Lenders

Half of those parents were contributing to the deposit while 17% were putting their hands in their pockets to help with the monthly repayments.

"The difficulty is getting a deposit together, rather than meeting the repayments," says Bernard Clarke, from the Council of Mortgage Lenders (CML).

"Lots of people in the industry are talking about assistance from relatives, for instance using the equity in their own properties."

So are parents really taking out top-up mortgages on their own properties to hand over large sums as cash deposits to their children?

"There is lots of remortgaging and lots of equity withdrawal going on, and lots of anecdotal evidence that people are doing this," says Clarke.

Buying in Bath

Christopher Bannister and his girlfriend Stephanie Vollmer are moving in together in Bath.

Stephanie and Chris got substantial help from her parents

He works as a research officer at Bath University while she is just about to start a PhD there.

They are buying a house for £170,000 and her parents have given her £100,000 towards the deposit. thats not a deposit - thet paying for over half the house!

After looking around he realised that on their own incomes they could afford hardly anything they liked.

And living in rented accommodation meant that they were not able to save much either.

"We couldn't afford it on our own," says Christopher.

"So her parents kindly offered to lend some money. - and when do they plan on repaying this 'loan' of course by the tim ethey could afford to their parents will have passed away

"Lots of people get money from relatives like grandparents. I don't see how anyone can afford to buy otherwise, there's no other way. Just while we were looking prices were going up."

Older buyers

Currently, new borrowers typically put down a median average deposit of 10%.

First time facts

40% of first time buyers get parental help

Only 20% of 20-24 year olds are home owners

First time buyers now make up only 38% of the total

Mortgage repayments use up 42% of their take home income

So half are likely to be putting down even more.

One reason they can afford it is that they may well be older with more money saved up.

The Nationwide building society recently estimated that 20% of apparent first timers in 2005 were older people returning to the property market after a spell in rented accommodation.

So the real squeeze is on the young.

Only 20% of those aged 20 to 24, says the Nationwide, now own their own homes compared to 34% in 1994.

Stretched borrowing

It is well established that, using traditional lending criteria, someone on an average wage or salary can no longer afford to borrow enough to buy the average priced house in many cities and towns across the country.

But that has not deterred every would-be home owner.

In the first three months of this year nearly 89,000 mortgages were granted to first time buyers, more than for the same quarter in any of the previous three years.

At the same time each home loan was, on average, worth 3.21 times the incomes of those buying the property.

Ten years ago the comparable ratio was just 2.39.

So the size of the typical mortgage relative to house prices has risen.

And if the median income multiple is now 3.21, that means that half of new loans are being lent at multiples even higher than that.

Low interest rates

Relatively low interest rates during the last decade or so - a reflection of low inflation - have been the key fact making it much easier to meet the payments on a big loan.

If the price is low then you can afford to consume more

Fionnuala Earley, Nationwide

The Nationwide's chief economist Fionnuala Earley says the cheaper the interest rate the bigger the loan you can take on.

"If the price is low then you can afford to consume more."

But as prices have outstripped incomes, some potential borrowers have clearly been driven away.

Throughout the 1980s and 1990s first time buyers typically made up 50% or more of those borrowing for a house purchase.

Now they make up just 38% of all buyers and their proportion in recent years has at times fallen as low 27%.

Last month the Nationwide published figures which suggested that house prices might be reaching the limits of affordability.

It estimated that mortgage repayments, for those on the average income, now absorb 42% of their take home pay.

That was a much bigger chunk of their money than ten years ago when the current house price boom set in.

Back in 1996, repayments used up just 18% of first time buyers' incomes.

So it seems that people, whether they be individuals or couples, are simply gritting their teeth and using up more of their incomes to finance their first step on the mortgage ladder.

Relaxed lending

Low interest rates have meant that lenders have been able to take a more relaxed attitude to giving out home loans.

Once upon a time you had to save with a building society for two years before it would even consider lending you some money to buy a home.

Back in the 1970s this sort of thing was known as a "mortgage queue".

Then, your loan would probably be restricted to three times a single person's income or two and a half times that of a couple.

That has all changed because competition has forced lenders to be more adventurous.

And they are also more sophisticated in their analysis of what individuals can afford.

But one thing that borrowers need to remember is that interest rates may not stay low for ever.

Many would be hard pressed if borrowing costs were to rise significantly.

Then, the bank of Mum and Dad might not be able to help so easily.

[clangnuts]

How hard is it to afford a house?

So the only way to buy a house is wealthy parents. What if your parents are poor? And to think that the class system was supposedly abolished 50 years ago!

Clangnuts

[Guest Bart of Darkness]

So the only way to buy a house is wealthy parents. What if your parents are poor?

What if you're an orphan?

[clangnuts]

What if you're an orphan?

...or disabled, or on a low income, or work for a charity, or divorced, or a widow, or low skilled, or old, or just plain poor (it really doesn't matter why)

Ironic that we are supposed to be such a politically correct society, and yet we discriminate just as much as we ever did. PC is all about gloss. There's no substance, no real values - just economic expliotation and exclusion for the many - dressed up as fair society for everyone.

I'm sick of this country and it's money grabbing morals. It's obviously too much to want an affordable home to live in. I don't really care that much about owning/buying/renting. I just want somewhere I can afford to live and work without paying out 80% of my income in housing costs. If the wife didn't have a job as well, we'd be F**KED.

Clangnuts

[RichB]

42% of income at low interest rates? Genius.

[right_freds_dead]

i get sick of it too.

its changing my personality. i was ready to settle and do the normal thing, but ive been thrown into a sort of life limbo. watching as all around lucky others buy up massive priced property after property. houses in the country and mew after mew. im sick of the politically correctness of a defunct enforced recycling policy. when its scorned upon not to save a tin can, but its ok to jet to the maldives for a cheap deal on a 747. its fine to drink drive and mow a 3 year old girl over or to attack medical students on a night out with a knife for no reason, but not ok to use your hosepipe for water you have paid for already.

im sick of paying massive rail fares, while national rail - the company that profits from rail ask the taxpayer for extra dosh, while we have no social housing building for the taxpayers themselves. im sick of africa and its endless inability to un-corrupt itself from starvation and im sick of the whole middle east situation with the israel and palestine.

there are a lot of things served to me on the itv evening news. most of them are not relevant to me or my life.

[warwickbloke]

How hard is it to afford a house?

Doesn't this prove to a few that the market is not just kept bouyant by BTLs, the FTBs are, to a certain extent pricing themselves out of the market.

Eventually the parents/family members that are able to 'lend a hand' will dry up, & discover that the only hand they have helped with is the one deep in the pocket seeking non existent funds.

[Guest Bart of Darkness]

Ironic that we are supposed to be such a politically correct society, and yet we discriminate just as much as we ever did. PC is all about gloss. There's no substance, no real values - just economic expliotation and exclusion for the many - dressed up as fair society for everyone.

I'm sick of this country and it's money grabbing morals. It's obviously too much to want an affordable home to live in. I don't really care that much about owning/buying/renting. I just want somewhere I can afford to live and work without paying out 80% of my income in housing costs.

Well said Clangnuts. Agree 100%

its fine to drink drive and mow a 3 year old girl over or to attack medical students on a night out with a knife for no reason, but not ok to use your hosepipe for water you have paid for already.

Another good point Fred. Human life seems to count for very little these days.

17 year old girl killed by hit and run driver, driver gets 100 hours community service.

Link.

[tonification]

Stephanie and Chris got substantial help from her parents

He works as a research officer at Bath University while she is just about to start a PhD there.

They are buying a house for £170,000 and her parents have given her £100,000 towards the deposit.

This is the new paradigm.

[dubsie]

Affordable while interest rates are below 8%, above that you might see a different picture. I'm at my limit with 100k mortgage so god knows how people afford 165k.

[Northern Monkey]

100k deposit?

Jeez - I'm thinking of selling myself on ebay now to a wealthier set of parents.

[SCUMBAG]

According to the NAEA % FTBs are 7.9%

http://www.naea.co.uk/uploaded_photos/news...surveyfinal.doc

[Rachel]

Well said Clangnuts. Agree 100%

Another good point Fred. Human life seems to count for very little these days.

17 year old girl killed by hit and run driver, driver gets 100 hours community service.

Link.

yet that bank manager who stole money from the bank he worked at got 10 years!

how wonderful that the courts consider money more important than human life....

[apom]

So the only way to buy a house is wealthy parents. What if your parents are poor? And to think that the class system was supposedly abolished 50 years ago!

Clangnuts

Or if your parents were willing to free their new wealth, re-mortgage their own property and lend it to you..

[Marina]

i get sick of it too.

its changing my personality. i was ready to settle and do the normal thing, but ive been thrown into a sort of life limbo. watching as all around lucky others buy up massive priced property after property. houses in the country and mew after mew. im sick of the politically correctness of a defunct enforced recycling policy. when its scorned upon not to save a tin can, but its ok to jet to the maldives for a cheap deal on a 747. its fine to drink drive and mow a 3 year old girl over or to attack medical students on a night out with a knife for no reason, but not ok to use your hosepipe for water you have paid for already.

im sick of paying massive rail fares, while national rail - the company that profits from rail ask the taxpayer for extra dosh, while we have no social housing building for the taxpayers themselves. im sick of africa and its endless inability to un-corrupt itself from starvation and im sick of the whole middle east situation with the israel and palestine.

there are a lot of things served to me on the itv evening news. most of them are not relevant to me or my life.

You sound in a similar frame of mind to me. If my wife left me and took the kids, the television(s) (we only have 5 in the house) would be in the re-cycling section of the local dump within 15 minutes.

I dream of a life with no television and no newspapers - in the country where I grow my own food and don't give a tinker's cuss about the Gaza strip. If you absorb all the info bombarded at you 24/7 - well it really is hard to keep your pecker up.

yet that bank manager who stole money from the bank he worked at got 10 years!

how wonderful that the courts consider money more important than human life....

You've read 'Money' by Martin Amis? I guess most people have as it was such a big bestseller.

It's a novel and it's very funny but, like all good literature, it has a lot of unpleasant but very well expressed truths in it. It made me really understand that there is nothing more valued in our society than money. Sin against money by stealing from your employer and they'll throw the key away.

Do something unspeakable to someone and you'll be out in a few years - if you go to prison at all.

The law has always been framed by people in a position of power. People in that position are wealthy. The law is framed to protect their wealth.

[warwickbloke]

You sound in a similar frame of mind to me. If my wife left me and took the kids, the television(s) (we only have 5 in the house) would be in the re-cycling section of the local dump within 15 minutes.

I dream of a life with no television and no newspapers - in the country where I grow my own food and don't give a tinker's cuss about the Gaza strip. If you absorb all the info bombarded at you 24/7 - well it really is hard to keep your pecker up.

You've read 'Money' by Martin Amis? I guess most people have as it was such a big bestseller.

It's a novel and it's very funny but, like all good literature, it has a lot of unpleasant but very well expressed truths in it. It made me really understand that there is nothing more valued in our society than money. Sin against money by stealing from your employer and they'll throw the key away.

Do something unspeakable to someone and you'll be out in a few years - if you go to prison at all.

The law has always been framed by people in a position of power. People in that position are wealthy. The law is framed to protect their wealth.

Gloomy weather got to you has it?

A population of 60000000 has to have a few bad apples, this is England, not stepford.

Wander around a busy shopping centre, most folk just want to be about their own business.

This is still a better place to live than many, & the dismal news broadcasts should highlight that fact for you.

[Jason]

According to the NAEA % FTBs are 7.9%

http://www.naea.co.uk/uploaded_photos/news...surveyfinal.doc

I think they have re-defined a first time buyer. The 38% assumes someone who has not owned a house in 6 months (?) or something like that. So this includes those who don't want to be in a house selling chain.

[pickle]

I dream of a life with no television and no newspapers - in the country where I grow my own food and don't give a tinker's cuss about the Gaza strip. If you absorb all the info bombarded at you 24/7 - well it really is hard to keep your pecker up.

You've read 'Money' by Martin Amis? I guess most people have as it was such a big bestseller.

Isnt that the problem with a lot posters on here, that they are just dreamers. If you want to move to the country and grow veg, then do it. But sure as sh1t whinging on here all day about house prices isnt going to make it happen.

Why is the answer to "I cant afford a house" never "go out and get a better job". This country has ALWAYS been full of people who cant afford a house. Look around at the vast swathes of social housing. The difference is that now, with a more socialy mobile society, that people born into a council house dont have to stay there. They can work their way up. Which means of course those who were perhaps born into a nice suburban semi, but dont really make much cash, will have to move down to replace them. This is what is happening. The fact that people cant afford to buy houses is nothing new. I think its just the fact that its now happening to new sections of society is comming as a bit of a shock to them. You dont hear many imigrants raised 3 to a bedroom in a council flat in hackney moaning about HPI!

Edited July 6, 2006 by pickle

[walker127]

I dream of a life with no television and no newspapers - in the country where I grow my own food and don't give a tinker's cuss about the Gaza strip. If you absorb all the info bombarded at you 24/7 - well it really is hard to keep your pecker up.

I lived on a boat in Malaysia and Thailand for 5 months last year, I don't have a TV on the boat and the newspapers outside Bangkok are in foreign so I did't buy any. If you buy local food from the market in Thailand your wouldn't bother growing your own, it is possible to eat well for less than £1.50 per day.

(Gaza strip?........... is that something to do with Newcastle United's football kit?)

There were a couple of times I ran out of money and had to go and cash some travellers checks only to find the banks were shut.........it was a Sunday and I hadn't bothered keeping track of what day it was. It was brilliant 5 months but it all ended in April when I came back to England to work. However, I already have the flight booked for November this year, and the boat is waiting on its trailer in a little yacht club in Malaysia.

Don't dream about it,......... just go and do it.

Edited July 6, 2006 by walker127

[nodumsunreader]

i get sick of it too.

its changing my personality. i was ready to settle and do the normal thing, but ive been thrown into a sort of life limbo. watching as all around lucky others buy up massive priced property after property. houses in the country and mew after mew. im sick of the politically correctness of a defunct enforced recycling policy. when its scorned upon not to save a tin can, but its ok to jet to the maldives for a cheap deal on a 747. its fine to drink drive and mow a 3 year old girl over or to attack medical students on a night out with a knife for no reason, but not ok to use your hosepipe for water you have paid for already.

im sick of paying massive rail fares, while national rail - the company that profits from rail ask the taxpayer for extra dosh, while we have no social housing building for the taxpayers themselves. im sick of africa and its endless inability to un-corrupt itself from starvation and im sick of the whole middle east situation with the israel and palestine.

there are a lot of things served to me on the itv evening news. most of them are not relevant to me or my life.

Todays Britain is the end result of the decision made in 1979 by the great British public that money was more important than human life. And to think, many people here would welcome the same bunch back into power. Britain is too right wing with new labour, the last thing we need is the Tories back.

[Jason]

I lived on a boat in Malaysia and Thailand for 5 months last year, I don't have a TV on the boat and the newspapers outside Bangkok are in foreign so I did't buy any. If you buy local food from the market in Thailand your wouldn't bother growing your own, it is possible to eat well for less than £1.50 per day.

(Gaza strip?........... is that something to do with Newcastle United's football kit?)

There were a couple of times I ran out of money and had to go and cash some travellers checks only to find the banks were shut.........it was a Sunday and I hadn't bothered keeping track of what day it was. It was brilliant 5 months but it all ended in April when I came back to England to work. However, I already have the flight booked for November this year, and the boat is waiting on its trailer in a little yacht club in Malaysia.

Don't dream about it,......... just go and do it.

British food is now being sold in Thailand, at TOPS supermarkets, and have been sold in Malaysia for some time.

Just thought i'd add something irrelevant to this thread.

[walker127]

British food is now being sold in Thailand, at TOPS supermarkets, and have been sold in Malaysia for some time.

Just thought i'd add something irrelevant to this thread.

Not irrelevant at all.

I have never been to a TOPS supermarket but Lotus Tesco are big all over Thailand as is BIG C; in Malaysia I used to shop at Jusco. They are just like the equivalent European supermarkets and the range of food is excellent, though prices are not cheap.

[Parsnip]

if you cant afford one then move to an area where you can or carry on renting or buy with a m8. If you owned a place and were selling it you would want to get market value for it. there are people prepared to pay market value. you can't always get what you want.

[enworb]

Very difficult to afford a house but a studio or 1 bed flat just may be possible

A year or so before I bought my split level maisonette, I nearly bought a 3 bed terraced house. Had I waited until now I wouldn't be able to buy a studio for the price I paid for my 2 bed maisonette. It's very difficult but i'm not convince that waiting is the answer. Maybe lowering expectations like I had to is the easiest way onto the ladder.

[munimula]

if you cant afford one then move to an area where you can or carry on renting or buy with a m8. If you owned a place and were selling it you would want to get market value for it. there are people prepared to pay market value. you can't always get what you want.

Thanks for the advice but I'll choose to live in a nice area by renting and then buy in a nice area when prices have corrected themselves in a few years. I should therefore end up getting what I want by waiting patiently and I won't have to put up with living in a non-desirable area.

Buying with a mate - what brilliant advice. Not even on the ladder, just standing on a box still unable to reach the first rung. That will really help.

Very difficult to afford a house but a studio or 1 bed flat just may be possible

A year or so before I bought my split level maisonette, I nearly bought a 3 bed terraced house. Had I waited until now I wouldn't be able to buy a studio for the price I paid for my 2 bed maisonette. It's very difficult but i'm not convince that waiting is the answer. Maybe lowering expectations like I had to is the easiest way onto the ladder.

It's amazing how you can write that and not see how black and white the current situation is.

You could have bought a 3-bed terraced, now you couldn't even buy a studio and yet you believe that prices won't correct. Stupid or dumb? I can't make my mind up.