How did you save for a deposit for your first home?

By the same approach to William’s I was able to start repaying portions of the mortgage capital off at the end of each mortgage year, from around year 12 onwards, and it made a big difference to the balance outstanding and the monthly repayments which in the early years had been nearly all interest. With these savings in hand It then became easier to pay off even more of the capital each year so my mortgage reduced at an accelerating rate. This compounding benefit of capital repayments meant that my mortgage was fully redeemed by year 18 and I was then able to start investing the ongoing savings towards my future retirement needs. I am not sure that I would have been in a position to do this in today’s circumstances.

My son took the same approach because if you do have a little spare each month – often the case a few years into the mortgage – it makes a big difference. He also had a savings account linked to his mortgage so any savings interest offset the equivalent mortgage interest by effectively reducing the loan.

It is a daunting prospect to take out a huge loan – but it was in my day also. There is no easy answer for many other than to go without non-essentials if you want to “get on the ladder”. Alternatively, you can live for today and accept the consequences.

I think we were going without the non-essentials for the first thirty years of my forty year career!

It wasn’t until the tail end that we could consider ourselves comfortable materially, but I suppose that did include making financial provision for the future which is also part of being ‘comfortable’. It also meant that we did not face a lifestyle cliff-edge when early retirement occurred seven years before the state retirement pension became payable.

Just to clarify the terminology in Malcolm’s graph above: “FTB” means “First Time Buyers”.

The graph shows that in northern England [and presumably Scotland?] the Prices to Earnings ratio has reverted to roughly where it was over thirty years ago, and that is probably a sustainable and affordable level.

The situation in London and the south-east is grossly distorted and must now be unsustainable, eventually leading to personal and micro-economic crises on an increasing scale. This trend needs to be reversed as a matter of urgency and jobs must be moved away from London as otherwise the capital will become entirely dysfunctional. Connectivity across the UK has never been better but still London draws people in and the planners’ only answer is to build even more homes and put more pressure on the transport network, schools, health services, and the entire infrastructure, in its turn sucking even more investment away from the other regions but creating poorer value in return [although government theorists say the opposite].

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That is the point being made duncan. You need to keep away from “popular” areas to avoid distorted prices.

The reason I queried the inclusion of Scotland in Nationwide’s FTB Earnings to Prices ratio graph was because I was not sure whether or not the category “Northern” referred only to England. As you explain, it possibly doesn’t although I don’t suppose the high-priced areas in the central belt are representative of Scotland as a whole.

Malcolm’s remark above is the significant point.

Decentralisation away from centres of government and business is one of the best ways to restore economic balance to the housing market.

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Yes, well that’s what’s got to change if there is to be any standstill in house price inflation, let alone any reduction. As I said in my original post that started this line of discussion, we are heading for a crisis that will make major cities dysfunctional. Just importing more people into such areas without the infrastructure required will drive out the economically vital people that are needed to propel the economy forward, the more so in a post-Brexit future. It will take some radical and brave decisions by politicians to uncouple us from this tendency and reverse it. Unfortunately, not only is there no appetite or stomach for such decision-making, it is politically unmanageable. It will make Brexit look easy-peasy by comparison and just look at the nightmare of indecision that is proving to be on all sides.

It makes you wonder what other ways Which? thinks there are to boost savings. Growing mushrooms or keeping chickens perhaps, and taking in washing, but the viable options are not exactly “creative”, “savvy” or “extreme”. The main thing is to stop making welfare visits to old Mr Ladbroke or helping poor William Hill with his rent. The one thing I didn’t do when I was saving hard was cancel my subscription to Which?, but I have been sorely tempted to do so subsequently!

Working longer seems an innovative way to boost savings. As does reducing unnecessary spending.
Have the later generations been brought up to feel a sense of entitlement? I well remember the days of “live now pay later” but I chose to pay now and live later – it lasts longer.

I think the “live now pay later” apogee occurred between 1975 and 2005. During that 30 year period apparently cheap lending, coupled with the banks positively falling over themselves to hand out cash with apparently few conditions (such as whether it could be repaid) contributed to the house price explosions and personal debt mushroom farms, which appeared just about everywhere.

The thing is that people became inured to debt accumulation at that time; they happily threw spending on their credit cards, happily paid a bit off each month and happily took out another card when the first became full.

The 2008 financial crisis occurred mainly because of criminals running banks and, more specifically, American banks. But the crisis was not only the result of criminal behaviour; it was also the result of years of profligacy, often by the generations who bought their first houses in the ’70s.

Of course, as the banks unanimously wrung their hands about the ‘few bad apples’ they found in their rotten-to-the-core organisations and threw sackcloth at the underlings, they also nodded sagely and explained that – from now on – they’d have to be extremely stringent with their loan conditions and make sure they’d only lend money to those who didn’t actually need it.

Thus, the current generation of young home buyers are, in effect, paying for the sins of their forebears; they’re the ones who’ve been hit the hardest – not because of anything they’ve done, but because of the criminals running banks and the profligacy of their parents and grandparents.

It’s truly obscene situation which no government has tackled adequately and I retain some hope that there’s a special place in Hades reserved for bankers and certain politicians.

We could reserve some hot seats for those politicians and financial advisers who promoted – very successfully – Private Finance Initiatives (PFIs) to pretend we were not spending public money when in fact we were mortgaging the future of the NHS (and the country).

Houses are not worth what most people are prepared to pay for them, but what they can borrow. Sense of value is lost, excused by the seemingly ever-increasing rise in prices to convince one they are a “good investment”. In a sense they are, given the alternative of ever-increasing rents. But when a CEO of a major housebuilder is awarded a £110Million bonus the value in houses becomes apparent. And when the lending pool starts to dry up the extent of overpaying for a house is revealed.

It might be useful to show the actual cost of a house if you were to build from scratch – the basic shell, the services, and the fixtures/fittings. Then look at the cost of building plots in different areas of the country. I believe the latter is where the real inflated cost lies; in our area a derelict bungalow is sold for £650 000; the bungalow will be demolished and a pair of large semis built in its place to be sold at a substantial profit.

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Durex is one of the brands belonging to the Anglo-Dutch international conglomerate Reckitt Benckiser who bought SSL in 2010. RB has over thirty brands of which eighteen are classified as ‘power brands’.

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Duncan – Whatver is happening to fertility, the population of the UK has increased substantially during my lifetime. On average, people are living longer. The point that I was getting at is that bringing up children is an expensive business so those with large families will have to be more careful with their money.

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OK, but my point is that having several kids makes it harder to afford to buy a house.

I agree with you, Derek. I feel that Which? veers off into elitism at times, especially in technology and motoring topics, even though many of the staff might be outside the target audience themselves.

It would be interesting to know the ages and incomes of typical Which? subscribers because there is no doubt that assumptions and stereotypes can influence its policy.

I think Which? Conversation brings in fresh contributions and balance but there seems to be a mutual lack of engagement. Pressure is only felt on popular topics like train fares or banks through weight of numbers rather than quality of reporting and sensational comments are used tendentiously to provoke responses.

The three major credit reference agencies (Experian, Callcredit, Equifax) are commercial organisations that charge for providing information. You can get your basic credit information for £2, but as each deals with data in their own way you are advised to check all three, if you want to know your credit rating. You can, however, get a free Experian report by registering with Moneysavingexpert.com Credit Club. Noddle.co.uk provides a free Callcredit report and score. Clearescore.com gives free access to Equifax. See Which?Money March 18.