The Lemon Fool

Afternoon all

I was just having my hair cut (the process gets quicker each time ) and was talking to the young girl (well, early 20s) manoeuvring across the receding pate when and she started talking about her new mobile phone contract with Vodafone. She said that she's paying £76 a month, yes, that's £76, for the newest iPhone and package/bundle she's on.

I gulped inwardly and started to talk about Vodafone and how, if she perhaps spent £51 a month on her phone she could save £25 and buy Vodafone shares with this money (about 16 shares each month at the current price). Then, not only would she have a phone (albeit with slightly less functionality than she currently has) but Vodafone would also pay her money twice a year for holding these shares. Not only this, the money that VOD would pay her would go up (hopefully!) and given time could build up nicely.

She thought for a moment but decided that having the phone was more important now than having more money later on.

Tsk tsk

Cheers, OLTB.

She said that she's paying £76 a month, yes, that's £76, for the newest iPhone and package/bundle she's on.

Our phones last for ages and are all cheapish smartphones. When one phone company dared to put my wife's contract up a pound or so (she was paying approx 10 pounds), she stormed into the shop and cancelled it.

She thought for a moment but decided that having the phone was more important now than having more money later on.

Yep, it's almost impossible to discuss anything to do with investing with most people. Eyes glaze over.

Meanwhile, we just carry on picking up the divis from Vodafone.

Steve

OLTB wrote:She thought for a moment but decided that having the phone was more important now than having more money later on.

... having the top end phone, shiny new car car, prosecco nights and eating out a couple of times a week. And over a glass or two she's probably complaining that baby-boomers were lucky to be able to buy a house and that people of her generation cannot.

Not that I'm not beyond reproach. I have been clearing out and disposing of old books. I'm yet to get to CDs. But I'm thinking that we probably have a bout 600 CDs. Even if you assume each one cost only £10, then that is £6000 which could have been invested or spent on something else. It all adds up.

C

Clariman wrote:... having the top end phone, shiny new car car, prosecco nights and eating out a couple of times a week. And over a glass or two she's probably complaining that baby-boomers were lucky to be able to buy a house and that people of her generation cannot.

Well the argument goes that even if they lived like monks, they could not accumulate sufficient wealth to acquire a property. So if they cannot afford to buy property no matter what, then they may as well spend their money to have other nice things.

I don't know if that argument is completely true. But certainly, until very recently, property prices in much of the country were increasing faster than anyone could save.

The assumption that current economic conditions will continue forever is a folly not unique to the young.

Gryff

I know a young man, early 20s, on a marjinally-more-than-NMW job.

Leaving aside the deposit for now, for him to get a mortgage on the cheapest property available in our twon (nice, but nothing special as towns go) he would need an uplift of FIFTY per cent in his salary.

Its just not going to happen is it?

Of course the trite answer is "well he and his partner can jointkly get a property" - but that assumes a LOT of things ... for starters that he is lucky enough to find a partner (I was almost 32 befoie I found a partner, never mind one I was wanting to settle down with long term and share the responsibility of a property), that the partner will find work, that they don;t have children (need that 2nd income !!!) etc etc etc.

The partnet could be a chum, a mate. Well that was what a peer of mine did. His mate wanted out after two years due to a job offer elsewhere in the country. What a mess extracating themselves from that was - and these were chums that had no issues with each other.

So yes - if you don't earn enough for a mortgage, so cant get one, its understandable life becomes what other view as a "party" because the alternative is to live like somebody with a barely affordable mortgage, without the benefits of it, saving everything for ... weelll... what? Lets not pretend that savings on a NMW will end up beign suffciient to buy a property for cash in anything less than a lifetime!

didds

Surely if so few people can afford mortgages, the market will eventually stagnate and prices will fall.
Supply and demand innit?

If it wasn't for these people spending all their money then where would the profits for Apple and Vodafone come from to provide your dividends?

John

redsturgeon wrote:If it wasn't for these people spending all their money then where would the profits for Apple and Vodafone come from to provide your dividends?

John

so true. Regarding feeling sorry for people not being able these days on their salary to ever get on the housing ladder. Well I remember when paying £4.50 rent for a week in a poxy room in Tufnell Park. Think my salary was about £20.00 per week. So nothing has changed, its inline with today, about 25% going on rent. I didn't like the horrible room where I froze my ass off in winter and the 5 pence coins (for the heater machine) or whatever they were then lasted for all of 5 minutes and I then ran out of coins. Didn't like this kind of life and was told then that I would never afford my own place, so got an evening job, got an early morning paper round, cleaned cars, mowed the lawn at weekends and saved like crazy. November the 5th, squatted on the floor with my teddy(still have him) dressed up and had a sign around him saying Penny for the Guy(or something like that). And selling encylopedias was horrible, a story all on its own!

Over about 3 years, with better jobs, tip and good money from working in a nightclub and god knows what else, brought our first place,three story townhouse, (parts of Luton, didn't look like a war zone then) for 8K in Luton. Had to go to Bedfordshire as London was unaffordable for the size of place we wanted which was 4 bedrooms. I had saved 4K and walked into the Nat West in Great Portland St. W.1 and there was a lovely bank Manager there who congratulated me on my savings and loaned me the rest to purchase our new place in Luto, it was lovely, private garden, overlooking a park. Had 7 great years there, got a well paid job in London(or rather sold a lot for them on basic plus commission) and the train commute was real quick. Went through the three day working week saga but my company never laid me off and brought my wife in to the Company and that sure helped.

Anyway, sold in around 1981 for 30K. Had savings of around 40K plus and went to the same Bank Manager and asked for a loan of 30K to purchase a rambling run down country estate in Bedfordshire(family thought we were mad) for 100K....a lot of money then. Showed the manager the house, land and potential that we thought we could pull off and he immediately said we needed at least 50K in a mortgage, which we accepted and it was tough I recall when mortgage rates were about 8-9% around the early 80's(the interest rates were wonderful 14% I think, had no money though as fixed the place up and started taking some expensive holidays).

My wife and I both worked two jobs as needed to save and to cut a long story short, around 1986/7 put the property but mostly the land (8 acres) on the market and had a terrible time with the local Parishioners there who turned us down for planning permission for 20-30 homes. Paid this top Barrister in London £1000.00 a day for him to go to Court and fight our case. We won. The rest is history and like everyone else, be it health, wealth or whatever, we all have our ups and downs in life.

Not in any way trying to say.."look at me". No iphones then, no computers, etc, etc....just pencil and paper and hard work. It can be done by those that want it done. The trouble with kids today, they really are not interested in tomorrow.

on a 40 hour week at (say) £8/hour, requiring a 50% uplift of salary to get a mortgage on the cheapest available property in our town, that isn;t going to happen... so that's another 20 hours a week on top of that at £8/hour (which is better than NMW by almost a quid an hour for a 21 year old).

So that is two fuil time sat/Sun plus an extra four hours in the midweek... on top of M-F 8 hours a day.

"For ever".

Yeah right.

didds

Leothebear wrote:Surely if so few people can afford mortgages, the market will eventually stagnate and prices will fall.
Supply and demand innit?

Without government intervention to push prices up, market forces would work as you describe. Sadly we have a long history of governments of both parties pouring ever more public money into pushing prices up. And they're now so scared of a correction they'll sacrifice the productive economy to house prices, as in the Ballsian stimulus that prevented the hint of a correction in 2005 turning into a crash that year.

OLTB wrote: She said that she's paying £76 a month, yes, that's £76, for the newest iPhone and package/bundle she's on.

Having bought a phone for just under £ 100 last December and signed up for a £ 5 a month Sim deal with a relatively high data limit, what am I missing out on? I get charged extra for phone calls to the Isle of man, but that's it as far as unexpected additional costs are concerned.

Alaric wrote:
Having bought a phone for just under £ 100 last December and signed up for a £5 a month Sim deal with a relatively high data limit, what am I missing out on?

Without wanting to go off-topic for too long, can I please briefly ask which provider and which deal that SIM comes under, and what the monthly data-limit is?

Cheers,

Itsallaguess

didds wrote:on a 40 hour week at (say) £8/hour, requiring a 50% uplift of salary to get a mortgage on the cheapest available property in our town, that isn;t going to happen... so that's another 20 hours a week on top of that at £8/hour (which is better than NMW by almost a quid an hour for a 21 year old).

Has there ever been a time when a 21 year old on a low paid job could reasonably expect to be able to buy a house? Certainly not when I was that age (80s).

After graduating we managed to buy a small flat, but only by pooling two graduate salaries.

Are we expecting too much?

Scott.

swill453 wrote:

didds wrote:on a 40 hour week at (say) £8/hour, requiring a 50% uplift of salary to get a mortgage on the cheapest available property in our town, that isn;t going to happen... so that's another 20 hours a week on top of that at £8/hour (which is better than NMW by almost a quid an hour for a 21 year old).

Has there ever been a time when a 21 year old on a low paid job could reasonably expect to be able to buy a house? Certainly not when I was that age (80s).

After graduating we managed to buy a small flat, but only by pooling two graduate salaries.

Are we expecting too much?

Scott.

I bought my first house aged 21 in 1978. My salary was £3300 pa and I got a 100% mortgage on an £11k three bed semi in Tamworth. I see I could get a three bed house in Tamworth for £115k today which would suggest an equivalent salary of £38k require for the same multiples. Actually some graduate starter salaries are in that range so it is doable even today outside the South East.

John

redsturgeon wrote:I bought my first house aged 21 in 1978. My salary was £3300 pa and I got a 100% mortgage on an £11k three bed semi in Tamworth.

I think that would have been far higher than the effective "minimum wage" at the time.

My graduate salary in 1984 was £4500.

Scott.

My son will graduate next summer. In Chemistry - a subject that universally accepted it seems as a "real degree" whatever that may actually mean.

He won;t have a starting salary anywhere near 38K,

Ive been in industry, post graduation, for 34 years. I don;t earn much more than that.

Scott nailed it earlier - pooling with a partner.

If you don't find a partner in life you are stuffed. let alone not being a graduate to boot whiuch despite Tony Blair's best efforts is the case generally.


The ironies of all of this being that rents are just as expensive as mortgages on full properties. Which is why some people in their late thirties (and older!) have to rent a room in a shared house still despite the concept that shared rentals are for students and "young people" starting out.

didds

Itsallaguess wrote:Without wanting to go off-topic for too long, can I please briefly ask which provider and which deal that SIM comes under, and what the monthly data-limit is?

It's a cross between a PAYG and a contract, in that I pay £5 a month plus any extras through direct debit, but I can cancel any time. It's through the Carphone Warehouse ID brand. Data allowance is 2.25 G per month plus rollover. Checking their website every so often, they usually seem to have a similar deal on offer, if not that exact one. It is a contract of sorts, given that they periodically send marketing material asking whether I'd like to upgrade to some prestige model at £ large amount per month.

The difference then (in my case the '70s) is that yes it was a struggle initially to buy a house and pay the mortgage, but inflation was much much higher so that after a few years, with salaries going up with inflation, the real cost of the mortgage fell. As a proportion of income it steadily reduced. On top of that mortgage interest was tax deductible.

Now with relatively low inflation, the real debt persists for much much longer and many of the new build properties are little more than chipboard boxes.

The obsession with house prices not falling is just digging a deeper and deeper hole

swill453 wrote:Has there ever been a time when a 21 year old on a low paid job could reasonably expect to be able to buy a house? Certainly not when I was that age (80s).
Scott.

FWIW, I started my first graduate job in 1983, and found myself priced out.
But the man who was my team leader in that first job (i.e. told me what to do - not so much of a team) had started in the same job just two years earlier, and had been able to buy a flat. Only a grotty little flat in Willesden, but that was the "housing ladder". House price inflation over two years made all the difference. And of course in 1983 and through to 1985 when I first fled abroad, prices were rocketing up into an impossible distance.

The mid-90s was another sweet spot of historically-affordable housing when one might expect to buy young (sadly I missed it by being out of the country). I daresay there was a time around the start of this century that looked like the difference between 1981 and 1983 - though other things had changed.

My graduate salary in 1984 was £4500.

My graduate salary in 1983 was £6660. Totally insufficient either to buy or to rent in London at a time a soft floor on rent[1] was £130/week (being the London level of housing benefit for a single unemployed person before hard questions were asked), and Mrs T was under fire from the Lefties for bringing in that limit and imposing such an outrageously punitive limit on the 'poorest in society'.
[1] I presume that somehow excluded rooms found on a 'grapevine' such as students or nurses would have through their institutions, and as I had had the previous year in Cambridge.

UncleEbenezer wrote: House price inflation over two years made all the difference.

I also bought in 1981. There were government policies which caused prices to be sticky. It had been the Howe recession with very high interest rates although that didn't really affect London and the South East so much. Possibly more pertinent was that Stamp Duty kicked in at £ 30,000 giving a ceiling to prices of around that value. Another is that mortgage interest relief only applied to loans below £ 25,000.