Very well written and funny article. She needs a Monzo,
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There is one thing that I feel gets constantly missed in the whole āmillenials are irresponsible whiners that want to have their housecake and eat itā: The issue may not be the desposit, it may be the affordability:
We did manage to save up Ā£40k over 5 years. But when it came to assessing affordability thinking āwell done, finally we can buy a houseā. But lenders wouldnāt believe that we could spend Ā£100 a month more on a mortgage than we were currently spending on rent, despite having saved on average over Ā£600 per month for the previous 5 years. Our deposit as such was big enough, but because of frankly nonsensical affordability assessments we still needed our parentsā help to make up the shortfall between the maximum that lenders were willing to give us on our income and the price of the property we wanted.
Or, to look at the example of the author:
- house price: Ā£350k
- assumed deposit, supposedly reachable in 4-8 years: Ā£35k
- remaining mortgage amount: Ā£315k
- income: Ā£40k.
- maximum mortgage sheāll get: (usually) 5 times income = Ā£200k
- shortage: Ā£115k
Even if she considers her maximum potential savings of Ā£8.4k per year (which is ambitious on a 40k income in London!), it will take her almost 18 years to save up the Ā£150k she needs in order to get a mortgage for a Ā£350k house with her income. Alternatively she needs to get a payrise to Ā£63kā¦
So, if you actually are frugal, always take packed lunches to work, never go out on weekends, donāt travel the world, you can save up that amount of money over a few years. Itās entirely possible, and not even particularly hard. But lenders donāt think your mortgage is affordable anyway, so you can as well leave itā¦
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I think whatās more annoying is that for many flats Iām looking at, with just 10% deposit then mortgage actually costs less than rent with the current low interest rate environment.
Yes lenders could argue that I probably would be quite financially stressed when interest rate rise but realistically thatās not going to happen for the next 10 years at least. Most developed nations are stuck in this low interest rate environment and some countries actually have negative interest rate. Iām still āyoungā and my income is projected to rise in 10 years time and by then mortgage is only going to become more affordable for me even if interest rate rises.
HOWEVER I canāt leverage on any of this because I have no deposit. It would take me at least 9 more years of saving (whilst paying exorbitant rent in London at the same time), whereas people with wealthy enough parents can easily get on the housing ladder and leverage on this period of low-interest rate.
By the time Iāve saved up enough deposit, house prices are probably going to increase again and thereās a chance this low-interest rate environment would be gone, and Iāll still be stuck with renting 10 years later.
Just feels like Iām chasing a forever moving goal post 
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I feel your pain!
Very true! We actually pay Ā£100 per month more for a 4 bedroom house than we used to pay for a 2 bedroom flat. Itās insane! (We wouldāve happily paid more and shortened the term, but lenders just wouldnāt take us for a shorter term.)
Or if circumstances change, such as if you lost your job or got a pay cut.
Mortgages last many, many years, and 15% rates are not unheard of.
Whoās making that projection? Probably not the bank.
Or a working partner? Or move out of London?
You know the 2008 crash was in-part due to bad lending of mortgages, right?
Longer is fine! Overpay when you can, but have a cheaper safety net when you canāt.
But thatās equally true when renting. Whether I get evicted from my flat because I canāt pay my rent, or my house is repossessed because I canāt pay my mortgage, Iām without a home either way. (And arguably better off in the latter case, as I still have my share of the property.) The only case where you are worse off as owner than as renter, is if interest rates rise significantly (but even in that case Iād expect rents to rise, too, as quite a few landlords have mortgages to satisfy themselves), or if house prices fell drastically and your house is suddenly worth less than what you owe the bank - Iād rather not spend too much time thinking about this possibility ā¦
Well, itās not like you put an ad on facebook for a partner (or is it?). And āmove out of Londonā is what I did years ago - but that doesnāt make a huge difference unless you move seriously far away.
Yes. As so often in live we seem to have gone from one extreme to the other. If I take affordability calculations at face value my rent for the last 3 years was about 3 times what I couldāve afforded to pay - and I still managed to save around Ā£25k for a deposit during that time. Something doesnāt make sense here.
Very true, I guess! I do as you say, and have made my peace with it. But at first I was disappointedā¦