uluru – well you know who to blame for that don’t you? Used to have security of tenure up until the mid eighties.

spngebob – you were doing so well until you said this 🙂

There are a lot of immigrants who arrived here homeless and have legitimately jumped the queue because of their needy circumstances.

This simply does not happen. The reason for th eshortge of council houses is the selling off of council houses cheaply and then refusing to allow councils to build more.

Apparently you can grab a repossession in Mepal from about £75k for a 2 bed, so there are options but you will probably have to commute further?

It does seem pretty bleak I guess, but as the guys have said above, budgeting really helps, it has helped me get onto the property ladder – whether or not it’s the right thing to do I don’t know. All I know is my parents rented for a long time, then bought a house late on and it didn’t work out so well for them, so I’ve opted to buy given that I have exactly nothing to inherit.

I had to move out of Cambridge a bit too – all the way to sunny Longstanton!

Apparently you can grab a repossession in Mepal from about £75k for a 2 bed, so there are options but you will probably have to commute further?

Chatteris (shudder) was also recommended to me as a cheap place to live too…

I did it especially for you TJ. I knew you’d rise to it! 😈

Oh, and btw, I agree with you about the sale of council houses causing a shortage. However, it is not this alone that has caused the pressure on local authorities to provide cheap dwellings.

I thought someone had hacked your login the sense that the rest of the post made! Then I read that bit!

aaah, overseas, here (Basque country) the only people who rent are students and me. Everyone else stays at home until they get married at 35, having saved a deposit for their mortgage which costs them 50% of their income.

25 years x £750/mo rent gets you accomodation
25 years x £750/mo mortgage gets you accomodation and probably half a million quid at the end of it all.

its actually more skewed than that.

in most locations the rent is less than the mortgage, particularly if you include house ‘running’ costs (ie repairs, wear and tear, etc etc). However rent goes up with inflation as time goes on, whereas a mortgage is fixed. Inflation roughly doubles ever 20 years (ballpark) – so by the end of the 25 year mortgage you’d be paying (on average) £1500 in rent, but still only £750 mortgage.

every country is different when it comes to rental vs buying. In germany, for example, rent is fixed when you sign the deal, and can’t be increased. They also can’t chuck you out – so if you move in somewhere, and live there for 20 years, you’re paying rent at 20 year old rates by the end. On the flipside, a lot of places don’t come with kitchens, and you’re expected to decorate yourself. In addition, there is high capital gains tax on anywhere you live less than x years (might be 5?) – which reduces the appeal to people wanting to do a place up and flog it on. A lot of people only buy when they are a deal older, but it kinda works due to the culture & law.

There is an opportunity cost with buying – the capital can be used for other investments. Oh I already said that really.

Find me a 25 year fixed rate mortgage!

Let’s not forget all the “hidden” costs of owning – of course there’s the interest, the agent’s massive fees, stamp duty, etc, etc.

We’re in a rare situation though paying £1k pcm for a place worth about £600k (ish) and a quarter of that is claimed back from our business. So our business is paying 250pcm for a lovely office with river views and we pay 750 for a 5 bed secluded house with five acres. A bit unusual I know.

it depends entirely on the location. In a lot of places the higher end of the market has higher costs to buy, compared to the cost to rent (I guess there are less people who can afford a £600k house who would prefer to rent). on my street houses rent for £1200-1500 (area is popular with students). I paid £214k, the mortgage interest on which is £900ish a month – a significant saving. You can’t get 25 year mortgages, but interest rates generally rise with inflation, so if you’re paying 10% pa on a mortgage your rent will probably be sky high too.

swings and roundabouts really. Rental agencies here in Brighton are charging over £300 per person + 8 weeks rent as deposit every time you move. gets pricey pretty quick

Find me a 25 year fixed rate mortgage!

Let’s not forget all the “hidden” costs of owning – of course there’s the interest, the agent’s massive fees, stamp duty, etc, etc.

Why d’you need a fixed rate?

And even with all those hidden costs, you’d still be ahead I reckon. Easily.

a lot of places don’t come with kitchens

excuse my ignorance but do they expect you to eat out all the time?
genuinely interested.

If we bought in this area our mortgage would be cheaper than our rent. Even taking into account extra costs associated with owning a property I think it would still work out slightly cheaper overall.

Our mortgage will be more than rent – but the figures are skew, as we’re buying a 3bed house (if you’ve got the money, why not?) …. yet would only need to rent a 1 bed flat.

Round here mortgages are vastly higher than rent.

My flat worth well over £200 000 is what around £1200 pcm on a mortgage would be around £700 – 800 pcm to rent.

If you are on a repayment mortgage then think of part of the money as like rent, and part of it like a high yield long term savings account.

Similar problem that I had when I separated from my ex. Had to sell up to pay her off now can’t afford the prices round here.

Made enquiries about a mortgage and was told I would need around a £30k deposit and may still not get a mortgage, dispite the fact I’m paying more in rent than I would a mortgage!

As for council housing, forget it, unless you are the parent in care, which is usually the mother a LA is only responsible for the parent in care.

On the plus side at least my son can stay with me whenever I like, at least my ex didn’t withhold those rights to me, stay with the positives, it’s only money.

And even with all those hidden costs, you’d still be ahead I reckon. Easily.

Very sweeping statement. What about a depreciating house (which all currently are) on a big mortgaged house? Nope.

And we put spare cash into savings accounts – which are currently doing “better” than money in property. Plus our business benefits from very low overheads so we make more money. Handy.

One size does not fit all and IMO the pressure to buy and following frenzy to be on “the ladder” is as responsible for the recession as bankers doing dodgy trading.

OP, you have to move. Go North young man

I think before you do anything you will need to save at least 20k first for a deposit. If I was you I would not pressure myself you have far more options with renting and less responsibility.

OP, you have to move. Go North young man

I live in Cambridge and this is what we’ve been pretty much looking at doing, 3 bed houses for the same rent as a 1 bed flat round here.
Better riding up north too!

Obviously not going to suit the OP though with his kids.

Surf-Mat

Know exactly where you are coming from as doing exactly the same myself. I love living rented. We rent a brand new flat for a fraction of the price it would cost us to pay a mortgage each month. Have an office set up in the spare room for the business and the landlord sorts out anything that goes wrong, pays the ground rent, does the decorating and insures the place etc, etc.

Now that property prices seem to be falling again the landlord is also taking the big hit – the cost of the property devaluing, which lets face it, on the purchase cost of 200k, even if it only drops 5% that’s still 10k – a lot more than we pay in rent each year. If it drops by more than 5% then we’re laughing.

Half way there now in 5 years, some of the deposit invested in a savings account (which is just about keeping up with inflation) and the other half invested in gold (which is way outperforming anything else at the moment).

Hopefully in 3-4 years, a combination of more savings and a dropping property market will mean the two will meet in the middle and we will be able to buy with cash – and live mortgage free 😀

I hate renting – I hate not being able to have pets, or being able to decorate or even put up pictures (not allowed to put nails in the wall), and most of all I hate the letting agency coming around every 6 months when we’re at work to inspect our house.

But it does have its plus points – you’re not tied down to a particular area, you don’t have to wait for a buyer to move, and the letting agency has to sort anything that goes wrong.

N Star – I like your style!

Mrs Toast – depends on where you rent. We are allowed pets, can nail pics to the wall, paint rooms, etc. We look after the place well so they are happy for us to do almost what we want with it. But yes, many rented places are quite limited in what you can do.

i got divorced 7 years ago, gave her the house, accepted that it would be a long road back to financial awesomeness. I’m perfectly happy to rent. one day i’ll buy some land and build a place. my advice is to completely get the idea of house ownership out of your mind and focus on getting a life back, getting a better paid job, getting laid, and in a few years re-assess the house issue.

I haven’t read any of the previous threads but…
I was in the same situation (but on a LOT less income) 7 years ago. I got a council house (in an area I’d grown up in) I think the rent was about £200 a month then. After I’d been in it for 2 years, I bought it for 34K (valued at 50K less the discount of 16K for being in it for 2 years) Managed to get a 100% mortgage which made the monthly payments about £210 a month IIRC. I was 47 yrs old at this point.
My personal circumstances have changed dramatically but I’ve still got my little ex-council house now worth about 90K.
I dunno whats changed as far as buying council houses go but If it’s similar then I’d swallow any pride you might have & go for that option if you can.

Yes, owning a house isn’t the be all and end all in life for us. We’d rather have an easy time renting and have much more time for stuff we like doing (biking and snowboarding) – rather than gardening, decorating and waiting in for the plumber to turn up.

For some people I know it’s different though. I guess they feel the need for the security of a more permanent place, which I guess is why prices have gone through the roof recently, egged on by easy credit and the media whipping up frightened first time buyers into overstretching themselves by spinning that old chestnut “quick, if you don’t get on the ladder now, you’ll never be able to afford it”.

Just remember chaps, life is for living – not for mortgaging yourselves to the hilt.

And for anyone who still thinks that owning a house is an ‘asset’ well you’re wrong – unless you’re lucky enough not to have to live in it. Read the book ‘Rich Dad – Poor Dad’ for the full explanation.

Friends of mine on a low income for Cambridge (which is anything under about £50k) bought a part equity with a housing association in Cambourne and commute by bus into Cambridge to work everyday.

Price here are obscene, but then there are a lot of very well paid people and a shortage of houses, it’s also almost recession proof, so never really dips much.

As for mortgage rates and deposits, these things are cyclical, so it will all be different in a few years.

It is interesting how these kind of discussions about houses, house prices, and home ownership really polarise people.

Surf-Mat, I like your approach, for what it is worth I think you are going about things the right way. Certainly in the early years of a mortgage, most of the payments is spent on mortgage interest, so if the opportunity arises to save lots of cash whilst having low costs, then that is a no brainer. If you can outstrip the effects of house price inflation whilst saving, then you are certainly onto a winner – if only for a few years until rent vs mortgage and house maintenance costs start to go against renting. I also think that house prices are likely to drop significantly over the next few years; we have had the mother of all house price bubbles, and it is due to pop. I know where I think the graph in the link below is going to head over the next few years……

Historical House Prices
Imagine what the equivalent 1996 price will be?

Whilst demand is so constrained, the population keeps rising and the average number of people per household keeps falling, house prices will only keep rising as demand keeps outstripping supply.

Its interesting. If I had taken surf matts appraoch when I last bought I would never have bought.

My flat cost me £48 000 on a mortgage – much lower than the rental at the time. It has appreciated in value massively – more than £10 000 a year since I bought it. so even if I had been able to save £10 000 pa I would never have been able to buy. Mortgage payment are under £4000 a year

Surf matts approach only works while house prices are in bust – if you have not bought by the time of the next boom you never will be able to

If you make the assumption that house prices will level off and only increase at the rate of inflation – c3%, then a house worth £300K today will be worth £628K in 25 years time, so if you save up over that period thats what you’ll need. You will need to put £1500 a month away for that @ 2.5% savings rate

Over that period a mortgage would cost you £531K @ 5%, thats £1771 so its is cheaper to buy the house in the future, so long as you know the market is flat, however If you add your rent to that you are looking at paying £928K in total to own the same house in 25 years time. a cost of £2500 a month.

Buying the house now with a large deposit if you have one is the best way forward, and then using savings to continuously offset if you have that opportunity,,,

If I had taken Surf Mats strategy I would not be able to be living in the house I am now.

Footflaps, you seem to be using the classic supply and demand argument for housing. This is true to an extent; due to the UK being a densely populated island, there will usually be high demand, although this will dampen when people begin to realise housing isn’t a one way bet. I would wager that if you asked the man on the street what his opinion of property as an investment class was in 1991, they would have given you a different answer to what they might have said in 2005.

But the crucial point about the supply and demand argument, is that the housing market works off the supply of credit, not supply of housing. As the vast majority of people need a mortgage to buy a house, the house they can afford is dictated by the supply of credit. Hence we have had huge house price inflation since 1997, as credit has been easy to come by. Now that credit is being restricted, and shows no signs of easing (despite 0.5% base rate, QE, and £300bn government assurances in the shape of the special liquity scheme), then house prices only have one way to go. Couple this with other poor fundamentals (historically high wage:price ratios, increasing unemployment, the upcoming austerity cuts, 20% VAT, higher than target inflation, etc), and the smart money is not in property at the moment. I would encourage anybody to download the property bee toolbar for Firefox, and have a look at how house prices are changing on rightmove.

djglover – are you taking into account the cost of owning, and maintaining a property in your calculations?

There does become a point where the mortgage becomes insignificant to the current rent levels, so I don’t think it is easy to say that buying now is better than renting, or vice versa. The point is that people who are despairing about the cost of housing now, should throw away any preconception about renting, do some maths, and also a bit of research into the housing market. Then things might not seem so bad.

NorthernStar – anyone who still thinks that owning a house is an ‘asset’ well you’re wrong

Well I’m not sure I agree but then I haven’t read of the book. I guess the point is that it’s an asset that needs maintaining – i.e. it’s a cost? Well we all need to live somewhere so we all have a cost; it just might be rent or mortgage or maintenance or…. So a house doesn’t give an income but does that really mean it isn’t an asset? It’s not a very liquid asset, especially at the moment, but it can be sold therefore it is an asset surely? Well in accountancy terms anyway. And if you’ve paid off the mortgage it’s an asset in that it minimizes your living costs – i.e. no rent – though there is the opportunity cost of course.

Would you like to comment based on what the book says?

The recent recession has also seen a baby boom, personally I’m surrounded by people who all have young children, they also laregly have more than one. So potentially we are facing quite an increase in population who within roughly 20 to 25 years (the term of my mortgage) will all be looking for places to live. It’s a gamble, it’s always a gamble and you have to decide to which bets you will place and when you are going to place them. Only time will tell what works out for whom 🙂

Depends on how you define an asset.

Put very simply an ‘asset’ is something which puts money in your pocket. A ‘liability’ is something that takes money out of your pocket.

If you want to be rich then you need to spend your life buying ‘assets’. ‘Assets’ are things where your money works for you and actually earns you more money in the process.

Owning a house which ever way you look at it is a big ‘liability’. Think of what it costs to own. Mortgage payments, interest, fees, insurance, DIY, plumbing, decorating, lots of your time – and the biggest cost of all is that it takes money directly out of your pocket that you could have invested elsewhere.

Yes you can argue that houses have gone up in value – perhaps by 100% over the last 10 years. But had you invested is say Gold instead they you would be looking at a 500% return on your money without any of the great expense and hassle that goes with home ownership. That put’s things into context doesn’t it.

A house will only becomes an ‘asset’ when 1. – You no longer need to live in it, and 2. – It’s going up in value. If it goes up in value but you still have to live in it then it is still just a ‘liability’. And its far, far worse now that house prices are on the slide again.

The end result is that despite some of the benefits of home ownership, owning your own home will never make you rich. It’s far to expensive in lieu of starting an investment portfolio and sucks too much of your spare cash and time away from buying what could be very successful ‘assets’.

There’s plenty more good reasons for a house being a ‘liability’ not an ‘asset’ in the book but you’ll have to have a read if you want to find out more.

Toby1,

Do you intend to sell your house to these baby boomers in 25 years time? If so where will you live?

Just a thought.

Me, I’m off to live in a tent somewhere near the woods 🙂

I’m not really defending the decision, I got fed up of living in a place without a garden, or a garage or without any real storage space, and also where I had to renew a contract every 12 months at a cost and had people coming round to inspect every 6 months. So rather than rent I decided to buy, I’m still not sure myself that it’s a good idea but it’s too late to back out now – I got the keys on Monday … it’s my first ever adventure into the property market, so I’ll let you know how it goes 🙂