[Closed] Taking out a massive mortgage

Just as an aside re: BTL, my parents are selling their house atm. It went on the market last week.

There were six viewings at the weekend and they accepted an asking-price offer yesterday from a BTL investor who already has a few houses in the area.

So as widely predicted, the increase in SDLT and looming tax changes have actually had zero impact on demand. All the doom-mongers predicting housing market collapse and investors begging for alms in the streets will have to keep waiting, and whining, for quite a while yet 😀

it makes sense at the beginning as usually income rises, prices go up, LTV goes down and then it gets cheaper.

Well in the days of higher inflation, debt eroded very quickly and pay rises meant it became more affordable over time.

In this new era of zero inflation, I'm not so sure the same argument holds.

Most incomes aren't increasing in line with the increase in property prices though, and this has been the case now for the last 2 decades at least. Plus foreign investors are really screwing things up out of all proportion the the SE. So common sense would be to try to live some way within your actual means, rather than gambling on finding the end of that rainbow. But so many seem to totally ignore this. After homes, the most expensive thing most people might buy is a car, yet most seem to exercise common sense with such purchases. Why don't they apply such reason to a much larger and riskier financial transaction?

"i think the bigger question is how long can you pay the mortgage for if you lose your job?"

I've seen this destroy families. Buy low, pay off early, and you at least have some financial security. Doing the opposite is just asking for trouble.

"[i]It makes sense at the beginning as usually income rises, prices go up, LTV goes down and then it gets cheaper.[/i]"
This.

We felt like we stretched ourselves a bit when we bought our current house in 2006 and our mortgage was, coincidentally, about 40% of joint net income. LTV 85% IIRC. But we had no other financial commitments so never had trouble putting food on the table etc., were confident that our salaries would go up, and perhaps crucially, we bought a house that we knew we could add value to.

All things combined, mortgage is now <20% of net income and LTV about 40%. I feel like I'm quite well off, but my 15 year old car suggests otherwise. Hmm 😐

So to the OP - is the rest of your financial situation likely to change (for better or worse) over the next 35 years ? Job prospects, other loans getting paid off, school/Uni fees, even wanting to help your kids buy their first house ?? From what you've posted it all sounds a bit risky tbh but it might be OK.

As a 26 year old potential first time buyer in the very near future, this thread scares the sh*t out of me

"it might be OK."

But then, it might not.

Nobody can predict the future. People used to think they could, when there was the illusion of 'jobs for life'. But we live in an increasingly fluid, transient world, where things can change very quickly. Perhaps it's best to err on the side of caution.

"As a 26 year old potential first time buyer in the very near future, this thread scares the sh*t out of me"

And so it should. Be afraid. Be very afraid. I do not envy you at all. And I wish your and future generations much better luck than you have right now. Because it's shit, and it's not your fault.

I've a lot of friends who've made literally 100's of thousands of pounds (i think the most was 300,000) in the space of a few years by buying the most expensive house they can afford in London.

I realise these are extreme examples, but the idea that people [u]only[/u] buy a house to appear "better" than others, or that buying a cheaper house and paying if off earlier is [u]definitely[/u] a better investment is nonsense.

It might be true, it might not.

Houses aren't cars of fancy bikes, it's one of the few times borrowing a lot can make sense.

(Yes, I realise it could all crash tomorrow and once interest rates were 15% etc... )

"It makes sense at the beginning as usually income rises, prices go up, LTV goes down and then it gets cheaper."
This.

+1.
We bought our current place in late 2009 for £245k, with a 170K mortgage.
We've since spent £120K developing it.
We re-mortgaged a year ago to clear the house development debts, and now owe approx. £260k - mortgage repayments are £1350.
the one opposite us is currently on the market for £525k - it is smaller than ours, and needs a full refirb.
The house 4 doors down from us is up for rent - at £1650 pcm.

I'm happy/comfortable with our position. when the childcare bills go down we'll start overpaying it a bit.
- I feel we have options if we loose one of our jobs etc.

We could sell (should get in excess of £550k) and have enough cash to buy something cheaper almost outright.
We could rent it out - the rent would more than cover the mortgage - and buy/rent something less desirable.

One of best decisions we made was not getting sucked into a big mortgage...initially I was disappointed I wouldn't get my 'dream' house ...but now as a family we don't have that extra stress of paying off a big mortgage to worry about... which leaves more money for other stuff and we love our house even more for how it makes us feel...and remember , stress gives people heart attacks...not worth dying over a house....

Because it's shit, and it's not your fault.

Well partially. The very low turn out at elections by the under 30s has meant and will continue to mean that all economic policy will be targeted at benefiting older people.

Until the young turn out in force at the ballot box, nothing will change.

[quote=clodhopper ]I've never understood why so many people are willingly to live on the very upper limit of what they can get away with borrowing. It's surely common sense to know that a lender wants you to be locked into a contract to repay the loan, for as high and long as possible. To me, it's just idiocy to go down that route and end up struggling to meet repayments, an potentially facing financial ruin. Just so you can appear 'better' than others.
Some neighbours have just sold for a silly amount. God knows how the new owners can afford it. Surely they must now be in debt for a very long time? The sellers are moving to a much cheaper area, and to a bigger place, but they are moving to somewhere which cost the same as the place they just sold, when they bought it. Therefore, they now have a massively reduced mortgage, and much less stress in life. They will be able to pay off the debt a lot earlier, and reap the rewards of their 'investment' much sooner, than if they'd gone with the maximum that their lender was offering. Very shrewd indeed. Unless the new owners have paid off a big chunk already, or are in very well paid jobs with rock solid security, I fear they may well end up with a life of misery, should any disaster befall them. Too many people just don't have any contingency plan. The lenders won't care,as they'll get their money whatever happens.
[u][b]We're in the extremely fortunate position of having zero mortgage, zero debt and relatively very low expenditure.[/b] [/u]Coupled with not having kids, it means we could enjoy far more 'freedom' than most. We could sell, make a mint, and buy somewhere really nice somewhere else. We could also get a mortgage for something really crazy. But we already live somewhere really nice, in our opinion, and aren't interested in moving, or incurring new debt and stress. Our lawn is a lovely colour.
I think too many people are chasing rainbows. [u][b]And there really is no pot of gold awaiting them.[/b][/u]

where did you find yours then?

very easy to be dismissive from that sort of position..

just think of the numbers as not existing. Its the only way I can justify it. 🙂

where did you find yours then?

in the 70's, i would imagine...

OP - ignore those with anecdotes about themselves or others who've made 'thousands' through property (or the gloaters) - it's illusory wealth. You can't eat bricks or exchange them for food in Tescos! There's a huge amount of delusional willing suspension of disbelief around house prices and wealth in the UK...

Osborne knows this and has boosted house prices for precisely this reason - to try and get people spending again to prevent stagnation and deflation. So far it's been effective to a degree in that the economy hasn't collapsed, but it's not worked in that we're almost entirely reliant on consumer spending and house prices to make GDP look good... neither of which are sustainable in the long run.

Property is an illiquid asset so the idea you can sell it, just like that, for a huge amount of cash as and when you find yourself in trouble is delusional. You need to find a willing and able buyer and they'll be thin on the ground when prices begin to fall as they'll all be waiting a little longer (no-one wants to buy into a falling market)

Most of all, ignore any random on the internet who says 'fill your boots, I did and I made it' - you have no idea of their real personal circumstances and certainly how informed they are about wider economic and financial matters and the anatomy of financial bubbles. One of the main signs of a bubble is when the majority of people believe that prices will go up forever - especially following a recent rise...

The biggest lie we've been told about the bust was that it was purely the banks' fault - consumers and householders have taken on more debt that they could manage on the assumption that economic growth and wages would continue to rise over the long term - which was clearly wrong. Super low interest rates are there to prevent massive default on consumer debt and mortgages, which would send the system crashing again...

The Millenials are smaller in number than the Boomers, are earning less and have less job security. If you think they're going to be willing or able to pay house prices higher than they are today in 10 years time, then you're being naive - as a lot of people are...

I've never understood why so many people are willingly to live on the very upper limit of what they can get away with borrowing. It's surely common sense to know that a lender wants you to be locked into a contract to repay the loan, for as high and long as possible. To me, it's just idiocy to go down that route and end up struggling to meet repayments, an potentially facing financial ruin. Just so you can [s]appear 'better' than others.[/s] [b]live in a massive house, with a double garrage, vegetable patch, big conservatory and a driveway you could park a dealers forecourt on without disturbing the apple tree?[/b]

FTFY.

My neighbors are lovely, old couple, moved into the house in the 70's, I do envy that his entire garden is a vegetable patch, but he brings us runner beans so it's not all bad.

"As a 26 year old potential first time buyer in the very near future, this thread scares the sh*t out of me"

And so it should. Be afraid. Be very afraid. I do not envy you at all. And I wish your and future generations much better luck than you have right now. Because it's shit, and it's not your fault.

Scared the crap out of me (28 when I bought last year), but TBH all that's changed is the previous safety net was "if I lose my job and can't pay my rent I'll move back to mum and dad's" is now a bit more complicated and would involve lawyers and the bank.

Every generation has some crap,
War,
Depression
More War
Post War
Threat of nuclear annihilation
Thatcher breaking the unions
AIDS
Thatcher and the EU (and subsequent 18% interest rates)
(something must have gone wrong in the 90's? The Irish?)
House Prices.

Nobody can predict the future.

nickjb - Member

I think that is the key. When we bought our current house we went for a middling option. If we'd have gone for a cheaper house then we could have saved a little more but spent the last 8 years living somewhere less nice. If we were feeling a little more daring one of the options we were considering but obviously didn't go for would have left us with £500k of equity by now! Making money is easy in hindsight One of the reasons for our caution was the constant advice that interest rates were so low they could only go one way and that house prices were artificially high.

I went the other way with mine, sold everything that I could to get the deposit up as high as I coulf and borrowed as much as I could reasonably afford (given that I've got childcare, student loan and unsecured debt) and bought a house that was at the very limit of what I could afford...in the short term.

My logic? My costs will reduce. My salary will get higher. My LtV rates will improve (cheaper renewal). If I wait another 5 years, I'll not be able to afford the house I'm about to buy. If I buy a smaller/cheaper/poorer area house, I'll have to move again in 3-5 years. Moving alone would cost in the region of £20-25k (Stamp, EA Fees, Solicitor, new fixures etc) factor THAT cost in over even 5 years and you could be talking £400PM.

Should interest rates go up, I can afford around 7% (I don't think the government is in any position to allow rates to go up beyond this any longer) and we can afford evething we currently do on my salary alone, and would require a lifestyle curb to survive on my Wife's salary at 7%, but it's all factored in.

I can cut costs if required (I can ride to work) and my wife can work from home. 3 Years from the point of purchase, and projecting rates of 4% my 10 year spreadsheet is projecting a rosy outlook.

Out of interest for those people who are renting (or who used to rent) what proportion of your take home goes on rent and then how much extra on bills.

When I was renting it was always 30-45% of my take home straight away on rent and depending on where I was it got up to 70% with bills included.

Now that was as a single person sharing a flat and as a sole renter.

I came to the conclusion that housing is expensive and whatever you do there is a risk. Perhaps if you have a fixed rate mortgage you at least have some illusion of stability. Like others have said it all depends on what the amount left over is and what your total outgoings are.
With the new affordability criteria for loans these should be taken into account so if all the banks say you can afford 40% of your take home as long as you were honest on the outgoings you might be fine or you might not.... 😯

Jambo has it right on Clodhoppers post. For most people mortgage and debt free is the pot of gold at the end of the rainbow. Basically Clodhoppers you have made it to were most people see as the end of the rainbow. Having you own house to live in is the way go get there via a mortgage. Nothing wrong with that and the size of your mortgage to income often just reflexs your attitude to risk.

Broess - I'm not sure how many years we have been reading your doom and gloom predictions regarding the housing market however supply (limited) and demand (high) means that in areas like the south east it's unlikely there will be a price crash. The last recession merely flatlined house prices in the SE rather than seeing huge price drops.

As it currently stands, Mrs D and my own combined bills and necessary expenditure are around 75% of our combined take home, but that includes £1300 a month for Childcare.

When previously renting with my wife on (unpaid) maternity with Daffyjnr, we were at 105% for 6 months and reliant on savings.

When renting without baggage (no offence to Jnr), we've always been at around 60-75% of total income on living. We prefer to live somewhere very nice and be able to do a little less than visa-versa.

When I first moved here, about 30% of net pay, but through good luck and pay rises that actually dropped to more like 15% of net pay.

I came to the conclusion that housing is expensive and whatever you do there is a risk.

And what he forgets in his analysis is that even in a falling market, people have to live somewhere.

And there may be fewer UK born millennials than boomers, but there's also immigration. Because people forget that in spite of the media this country still rocks.

Perhaps if you have a fixed rate mortgage you at least have some illusion of stability.

Stability/risk, stability that it can't be pulled out from under me, risk that I can't just hand the keys back and only lose a months rent/deposit. Apparently it's something called "grown up with responsibilities". Yes there's less risk if you can somehow time travel forward 10 years, but then there's no chance of reward either. And realistically homelessness isn't an option, so whatever you/I do will involve paying money for a home either by mortgage or rent.

God knows how the new owners can afford it. Surely they must now be in debt for a very long time?

You then go on to say...

The sellers are moving to a much cheaper area, and to a bigger place, but they are moving to somewhere which cost the same as the place they just sold, when they bought it.

Bear in mind that when 'the sellers' first bought their house they were probably stretched and 'the new owners' will probably eventually find themselves in the same position as 'the sellers'.

Broess - I'm not sure how many years we have been reading your doom and gloom predictions regarding the housing market however supply (limited) and demand (high) means that in areas like the south east it's unlikely there will be a price crash. The last recession merely flatlined house prices in the SE rather than seeing huge price drops.

Since 2013 when prices shot up 20% in about 6 months.
To be fair, I didn't predict massive inflows of foreign money into London (£170bn according to the Panama Papers) or deliberate sustaining of emergency interest rates or deliberate stoking of supply of credit by the Chancellor (Help To Buy). And neither did you, I'll wager. In 2012 there were no predictions of London prices going up 50% in 3 years that I saw - did you? It was a surprise to everyone...

I take my views on UK house prices from reading the articles and the comments on the FT, Economist and Investopedia primarily, rather than the peculiarly British blind faith that house prices will go up forever, whatever the economic fundamentals show and whatever similarity the market has to the 1929 US crash, Tulip Bulbs, Tech Bubble, 1989 crash etc

And if you read carefully I'm not predicting a crash. It's interesting that you and others are suggesting that cos you're basically making up what I said so you can counter it...

I'm pointing out that anyone who thinks house price inflation is real wealth and that prices will continue to go up forever and never crash ever again is being naive as it ignores all historical prededence and basically assumes the long term future will be like the recent past, which is pretty much the first thing any investor learns not to assume...

I don't really view my house as an investment it's more a means of avoiding the incremental rises and instability of renting. I rented for 8 (5 Leeds, 1 Cumbria, 2 Bristol) years (due to various things) but can't say that I really lost out. When we moved into out Flat in Leeds, It had been bought the year previous as a buy2Let for £245k, when we moved out in 2010 it was worth £195k (based on others in the building) Had we bought a similar flat (and it was a consideration) It would have equated to the same as having rented it (a loss of £50k) Housing as an investment is always a risk, housing as a means of stabilising is a better long=-terms goal. Renting (especially in the UK) is simply a bit wasteful, but if you're planning to own a property only for a few years before moving on/up, I'd be surprised if there's a lot in it between renting and a mortgage in terms of money wasted. Stamp, Fees, interest, arrangement will all rapidly eat into and perhaps outstrip any perceived saving.

OP,

I would get an Agreement in principle before I moved any further. I recently went through the new mortgage process. It terrified me.

your salary has very little to do with it compared to loans credit cards, childcare costs, car purchases, mobile phone contracts, sky/virgin contracts, student loan payments etc etc etc. which all have an impact on your ability to pay.

they then stress test it by taking the interest rates up quite a few notches. all in all I found the whole experience unpleasant! and am already nervous about re-mortgaging despite it being 18 months away.

in the end we got our mortgage and everything is fine; don't plan to move until kids have grown up and left home (eldest is 2 1/2 so ages away) not bothered if it doesn't go up as its my home not an investment; why do we (as a society) feel we have to or should make money on our homes?

I'd rather live in a normal sized house and relax

Who decides what is normal? You **shudders**?

similarity the market has to the 1929 US crash, Tulip Bulbs, Tech Bubble, 1989 crash etc

True, but people don't need a model T, tulip bulb, or internet startup to live, you can sell those at a loss, lose everything and walk away. Pretty hard to do that with a house, because there's always someone who needs a roof over their heads.

Basically all those crashes are driven by under supply followed by a very sharp drop in demand. Short of nuclear holocaust is there likely to ever be a rapid drop in demand for housing? Crashes can and do happen, but they need something to precipitate them, a big interest rate rise, mass unemployment etc. The rates are independent of government so we won't have the same issues with the ERM we had in the early 90's. At the moment there's nothing on the horizon other than a general feeling of "what goes up".

Broess - you didn't write the words "there will be a crash" but you did predict a correction and have many times previously predicted a crash.

Well that may happen but house prices will go up, in the long term, over 10's of years. Hopefully not as fast as they are doing now. That's just down to normal inflation, supply (we aren't building enough homes) and the desire in the UK to be homeowners.

House prices will go up long-term but they will crash short term destroying the over-sttetched borrowers and the gambler BTL (no sympathy for them praying on those trapped in the rental market. I don't believe the 'look I'm only charging market rates mate' rubbish).

One of the main signs of a bubble is when the majority of people believe that prices will go up forever - especially following a recent rise...

Ain't that the truth! And some of the comments on here about house prices continuing to rise are just plain scary!

Well that may happen but house prices will go up, in the long term, over 10's of years. Hopefully not as fast as they are doing now. That's just down to normal inflation, supply (we aren't building enough homes) and the desire in the UK to be homeowners.

Investment/speculation from home and abroad has nothing to do with it then?

Crashes can and do happen, but they need something to precipitate them, a big interest rate rise, mass unemployment etc.

BREXIT!!!!!!

BREXIT!!!!!!

Indeed! DeutscheBank are predicting the biggest daily fall for the pahnd for thirty years.
There will be consequences!
[img] [/img]

According to agents my area has grown 7% this year. Area we are looking at 12%. One agent commented that it felt very much like 2007, when prices stagnated. A little bit.

Point about mortgage in principle, yep next stage had initial meeting to understand potential limits. I was told 488k was likely to be upper end. No debts. Could afford double the repayments if lived of baked beans and didn't turn the heating on. I should be fine. Hopefully. If rates go up massively I reckon others will be up the Creek long before we are.

Surely drop in pound will mean a flood of foreign buyers snapping up suddenly cheaper property?

This is the wonder of our s0-called free market

The supply and demand for housing is distorted...
...more importantly, the cost of financing is grossly distorted

Upshot, it is not possible to make sensible investment decisions. At its crudest housing is fully valued/overvalued (esp London) versus earnings but not so against financing costs (due to our unorthodox monetary policy)

Its bollocks frankly - no way for a market as important as housing in the UK to function

[img] [/img]
br />
To be fair, this was their 'best case' scenario....

This was their 'worst case' scenario

[img] [/img]

DeutscheBank?

A million plus influx into Germany because of Merkel will bite German harder than UK's brexit in the future.

Indeed! DeutscheBank are predicting the biggest daily fall for the pahnd for thirty years.
There will be consequences!

So we'll be exporting cheap stuff, jobs will go up, wages will go up, the whole caboodle will correct itself via a bit of inflation and my huge mortgage will be affordable.

I LOVE YOU!!!!!!!!!!!!

(It won't happen though, the out's are going to be at best 40%, if there was any realistic chance of a Brexit then the market would be through the floor already).

I bought a old pile in York, cost 147K in 1998 had a 88k mortgage which I paid of but at the time I was on something around 2.5K a month net, bringing up kids all the usual bils took some doing as th house swallowed money renovating it.

York is a reasonably nice place to live very touristy & the house is within walking distance of the city & minster area, consequently prices in certain areas have increased handsomely, some where in the region of 550K for it now. I rent it out as we bought a new place very close by two years ago minus the feel & character of the old place.

I took out a 100K mortgage on value of 495K, we got a kind of inside deal with a local builder ( riding mate is a director) bought of plan, a small plot 5 houses in a private Culdesac & I've pushed hard to get rid of the mortgage & it felt like a weight round my kneck but it's increased rather quickly in value so I feel a bit happier though the increase in value isn't the main focus, low maintenance quieter location & large man cave.
I've nearly paid it of now, though it felt like a large commitment at the time it's paid of nicely, same house with the builder now would be around 580, after all the graft & saving I'm now thinking sod it sell up & down size & spend a lot more time in the lakes.

52 years old & tired from long trips working away putting it bluntly F*&in knackerd, if I were to have my time again I'd buy smaller places & rent them all out, maintain them & roll the profits straight into other property's letting me ride my bike with my lad a lot more which I'm hoping to do so very soon.

Surely drop in pound will mean a flood of foreign buyers snapping up suddenly cheaper property?

Nothing's cheap that you don't want...

I had a crazy mortgage once. Worked every hour I could in a well paid job and was constantly skint.
I got sick so sold the house.
Bought a much smaller place in snowdonia and a sweet place near the Austrian Alps with profit of the sale.
I am now mortgage free. My sister lives rent free in Wales - just pays the bills, and I'm in Austria living and loving life once more with no stress. Toady it was 25 degrees here.

iolo,

Spot on can't fault you what a way to live, keep it up.

House prices will always go up long term, no question, but the rate of rise is like lying a Toblerone on a table with one end resting on top of a book - in other words, there are plenty of peaks and troughs along a rising path.

Right now it feels like we're nearly at the top of one of those big peaks, with a big downhill likely before we start going up again.

"Jambo has it right on Clodhoppers post. For most people mortgage and debt free is the pot of gold at the end of the rainbow."

I think Jambo has actually missed the point I was trying to make, which is; live sufficiently within your means to be able to absorb any potential disasters that may occur, such as losing your job, serious injury/illness/disability, structural failure etc. Buying a home is a serious investment and should be approached with a careful plan, not just borrowing the maximum the bank wants to lend you. Lenders have a vested interest in you making large regular repayments rather than smaller ones.

Taking this approach has led to us being debt-free, and having very low living costs. My wife works part-time in a job she loves, and I'm semi-retired. We have sufficient investments to provide us with enough to maintain our current lifestyle. We could work more, earn more, buy more, but we feel that our situation enables us to have a much better quality of life. We can easily afford all we need, and don't feel compelled to spend needlessly on shit that is of no real benefit or importance. We can afford nice holidays when we want, and don't have to worry about school holidays etc. We have made choices that give us the life we want. I'm sure there are many who think we're daft for not wanting bigger/better/more, but we're pretty happy as we are.

I'm reading things like 'bigger house', 'nicer area', 'better schools' etc, and wondering if some people really have got their priorities right. If living in a smaller house means you don't have to work such long hours, for so many more years, in order to have more free time to relax in, isn't that something worth 'suffering'?

I'm also somewhat alarmed by the naivety shown by some, towards the future. 'Disasters are only something that happens to others, I'm bullet-proof and water-tight'. Well, good luck with that.

"52 years old & tired from long trips working away putting it bluntly F*&in knackerd"

Was it all worth it?

"if I were to have my time again"

It doesn't work like that. As you've discovered.

I'm reading things like 'bigger house', 'nicer area', 'better schools' etc, and wondering if some people really have got their priorities right. If living in a smaller house means you don't have to work such long hours, for so many more years, in order to have more free time to relax in, isn't that something worth 'suffering'?

Think about it the other way around, you could have bought a bigger/better house, had all the benefits of that, watched it's value go up, then sold it, downsized to your current house, pocketed the profit and semi-retired even earlier.

And it still depends where in the country you are, £300k in North Yorkshire buys you a farmhouse and 20 acres. £300k in Reading buys you a 3 bed in Whitley (where 'Road Wars' was mostly filmed). Low supply / high demand means anyone living within 60min of London is probably going to have a big mortgage. They don't necessarily want a big mortgage, but it's that or Whitley.

300k in North Yorkshire buys you a farmhouse and 20 acres.

http://www.rightmove.co.uk/new-homes-for-sale/property-34654932.html

Yeah, but Harrogate is to North Yorkshire what London is to the entirety of the South East.

"Think about it the other way around, you could have bought a bigger/better house, had all the benefits of that, watched it's value go up, then sold it, downsized to your current house, pocketed the profit and semi-retired even earlier."

Crap idea. Would have involved working more/longer hours initially. We'd probably not yet have paid it off. Which defeats the object. Not to mention potential risk (my wife had to have a lot of time off work for medical treatment). The money saved went into investments which have yielded a decent return. Current value of our place is ridiculous. No, we made the right decision. We were lucky to be in a position to do so when the market was a lot lower than it is now. I sympathise with anyone trying to buy a home now; their debt wil be relatively far greater and they'll have to work a lot longer to pay it off. I doubt wages are going to rise to a level where housing costs are as proportionately low compared to incomes as they were 10, 20+ years ago.

Not needing a bigger house (no kids see?), means we started off in a place the perfect size. I have a nice little workshop. There's less to clean and dust. Fitting new windows was cheaper than it would have been with a bigger place. It's all about having realistic, attainable targets, than chasing rainbows.

bit of light reading for you.

[url= http://www.mrmoneymustache.com/ ]mr money mustache[/url]

while he is very extreme it shows what is achievable.

We're in a more fortunate position than most, as we have a house and a very manageable mortgage.
But, first time buyers in the South east where i live (Brighton) would need around 10-12 times salary loans to afford even a small house here (if you take average salary-average house price). That, is definitely un-sustainable. The effect of this however, will be more about moving population around and 'Ghettoising' our towns and cities.

We should not forget that all of our problems are first world ones and look to the benefits we have, over many others.
We have a mortgage of around 10% earnings, but would consider going up to around 25% if we wanted to have some bigger or in a better area. I'm old enough to remember the dire position may were in in the 1980's, enough to remember that this stuff does happen, so we would be very cautious with overstretching.

A great read for anyone who wonders if they have the right approach to money and saving, would be a book called 'Rich dad, poor dad. It challenges you to look at risk and reward in a non-emotional way.

Bigger, better, more. Not my values on which to judge success.

Bigger, better, more. Not my values on which to judge success.

For me, having somewhere bigger meant my girls get to have a room each and we can still have guests. As they get older they can have privacy in their own bathroom (we have an en suite), we have a garden so they can run about outside with our dog, play on their climbing frame, wendy house or trampoline. I can grow vegetables and we can actually sit out in the sun on a nice day.

Then, when I die, they can share out that little bit of wealth I accumulated and buy themselves something similar (very much in the same way I had the money to buy our bigger place - through an inheritance).

we made the right decision. We were lucky to be in a position to do so when the market was a lot lower than it is now. I sympathise with anyone trying to buy a home now; their debt wil be relatively far greater and they'll have to work a lot longer to pay it off

So the short story version of your advice is, that your advice is 20 years out of date and wouldn't work for anyone buying today?

I can see how buying at the bottom of the market is a brilliant plan, but it's not really advice to give people is it? You've not stumbled across the secret of financial freedom, you've gotten lucky. What should people do now whilst they wait for this crash. Bearing in mind we've been 'crashing' since 2007, it's now 2016 and not much sign of prices dropping (5year CAGR in Reading is >5%).

The problem isn't some sort of one-upmanship keeping up with the jonses that those suffering a bout of inverse snobbery would believe, it's simple lack of supply and over demand in the South East.

Hopefully (and I'm saying that in spite of being mortgaged to the eyeballs) the change in planning permission rules which is freeing up office space for conversion to flats will be the silver bullet, pushing up commercial rents, putting the brakes on the SE's economy and reducing demands for housing as company's opt to locate elsewhere in the UK.

"So the short story version of your advice is, that your advice is 20 years out of date and wouldn't work for anyone buying today? "

No. The short story is; set your sights lower, and live within your means. IE; if you can comfortably handle a £300k mortgage, yet your lender is offering you up to £500k, which would see you stretched to the limit financially, then it would be stupid to borrow so much. The lenders aren't interested in your potential ability to continue paying, they are protected by law and will get their money one way or another. They won't lose out. Which is why they're happy for you to incur massive debt.

"Hopefully (and I'm saying that in spite of being mortgaged to the eyeballs) "

You seem to be particularly optimistic, at a time when perhaps measured pessimism would be the more intelligent approach. Why are you mortgaged to the eyeballs? Have you taken the maximum loan you could get? Why? Could you not have found somewhere cheaper? Somewhere a bit less 'desirable'? Maybe a slightly smaller (yet still adequate) house? Have you considered what will happen if you end up in a situation where your mortgage becomes too big a financial burden for you to handle?

"I think for most people it isn't about showing success but to have a nice(r) place in which to live. After all, we all spend much of our time in our houses so why not have somewhere you love?"

I think too many people are thinking about ideals, rather than realities. And I think too many people want to live in a 'nice' house somewhere 'nice' with 'good schools' and 'good transport links' etc. IE, the moon on a stick. And too many simply cannot accept the fact that they will struggle to achieve that ideal, and put themselves under extreme financial strain. We have friends who bought a stupidly expensive place; they now have to work stupid hours, never have any free time, hardly get to spend time as a family, have suffered considerable emotional strain as a result, all to have that 'dream' home. When they could have saved themselves from all that, and gone for something within their means, and ended up with a better quality of life. You pays your money you takes your choice. Caveat Emptor.

House prices will keep going up and up........

o dear me.

I just took a look at my old one bed flat in a not super high demand area but still half way between Glentress and Edinburgh, bought for 78k in 2004, sold for 115k in Nov 2007, its been on the market for around a year or so now, currently at offers over 97k, ooof! not sure what the point was... but I guess that place after 9 years is still very much in a dip.

Just thought this was worth throwing into the mix for those who think the current situation is either a) sustainable b) a positive for the wider population and wider economy. ITEM CLub generally well-respected.

[url= http://www.ey.com/UK/en/Issues/Business-environment/Financial-markets-and-economy/ITEM---Forecast-headlines-and-projections ]E&Y ITEM Club[/url]

A couple of interesting highlights

'Supply and demand' or deliberate policy?

It seems clear that the low interest rates and high equity prices engineered by central banks in response to the financial crisis have encouraged households to invest in housing rather than low-yielding financial assets.

'Note use of the term 'social cohesion' - do you think angry, skint, Millennials are going to ruin their lives with heroic amounts of debt to fund the retirements of the older generation or are they going to just refuse to play the game and refuse to pay your asking price?

And 'financial stability'... can we actually afford another bust?

in our view the high level of house prices relative to income does pose a risk to financial stability. Affordability also poses a risk to social cohesion, threatening to lock younger generations out of the housing market.

This is also interesting, as I've not seen reference to it before. The banks and pension co.s are now complaining about superlow interest rates - for the banks it means they can't cover their costs when they lend money out and for pension companies it means they can't meet their liabilties ie: pay our pensions. But this reference to the banks wanting less money going into property is not something I've seen before. IIRC the banks got what they wanted in 2008...

The British love affair with property remains undimmed. Investing in homes was by far the most popular investment choice last year – perhaps unsurprising given the continuing low interest rate environment we’re living in. The financial services industry will be watching this flight to bricks and mortar with alarm given the negative knock on effect this has on their assets

Whilst I appreciate all the analysis the reality on the ground in my specific area there are only a couple of decent properties available and they are available for silly prices. I've broaden the search area by 30 miles and it's the same. We've saved and planned have substantial equity and savings, I am not some numpty just borrowing as much as I can....frankly a decent family home on a decent wage is looking like a pipe dream without a massive mortgage

It is possible to pick up 10 year fixed at 2.99% so bank analysts aren't expecting rates to be changing drastically in the next decade.

I'm mid-application for a Lifetime discount mortgage (3.69% discount off the SVR) which currently works out at 1.95% with no early redemption fees.

We are taking some equity out to extend the house, leaving a mortgage of 340,000 over 18 years. The payments are 20% of our joint salary.

in our view the high level of house prices relative to income does pose a risk to financial stability. Affordability also poses a risk to social cohesion, threatening to lock younger generations out of the housing market.

What do they mean "threatening to", it's already happened in the South East!

It is possible to pick up 10 year fixed at 2.99% so bank analysts aren't expecting rates to be changing drastically in the next decade.

Nothing to do with what they think, just a function of their funding cost for that period, you could argue it is what the market thinks though.

I just took out a mortgage yesterday to buy my mum a house - 120k at 1.95% on an offset. I did get a decent discount and there was a 995 quid fee but I thought that it was quite sharp.

If I pay off an extra 10% a year and have 8 years left repayment, how many years will that shrink to? My guess is 5 painful years. Is this correct?

[url= http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator# ]found the answer[/url]