To wonder how we managed our mortgage when interest rates were 13.6%

[BlueBloodedBlue]

We bought our flat in 1990 with a mortgage rate of 13.6%

I know house prices were much lower but so were wages.

I'm obviously not minimising the current nightmare situation so many people are facing, I just don't really understand the economics so would be grateful if anyone is able to explain in simple terms please?

People had 3 X salary back then usually, it's much higher now. And house prices were far far lower. Plus wages were better. So it's not comparable.

Interest rates were high but everything else was low

People only needed/were allowed to borrow 2-3x one salary, and even at the higher interest rates, payments were a lower % of household income

The rest of the costs of living were lower, personal debt was non existent, so even after mortgage payments, there was enough disposable income to pay other bills etc
Obviously bills didn’t include broadband, mobiles, Netflix etc..!

Not that life was peachy… I remember as a child the persistent fear my parents had and being cognisant of the concept of repossessions from an early age

But spiralling personal debit is a significant difference between then and now

Plenty of people didn’t manage. I’m off an age where I knew couples who gave their flat back to the Building Society and went to live (separately) back at their parents.

The differential between earnings and the mortgage was different then. Our first mortgage was about 10% of our take home pay. Today someone doing the exact same job as I did then wouldn't even get approval for a mortgage on that house, let alone find it as easily affordable!

House prices have risen much, much faster than wages is the simple answer.

I know house prices were much lower but so were wages

In 1990 the average house price was 6 times the average salary. Now it’s 12. Hope that helps.

People have pushed themselves to the absolute limits now on terms of borrowing and house prices have soared. That's the problem. There's no room for manoeuvre at all.

That’s it basically. Because there was no choice. Never mind ‘but wages were lower then too’, the wage - house price ratio was a damn sight better before house prices quadruped in less than 4 years around the 00s and I suspect you know it. If not you should.

People didn’t have phone contracts, broadband/tv, 2 cars on pcp, high commuting costs , that’s all fairly standard for all but the lowest incomes nowadays. Unless you were always at the pub/eating out, outgoings were far lower 25+ years ago.

Thank you - I hadn't considered the personal debt issue. You're right, I don't think we ever had the opportunity to borrow - I remember trying to apply for a credit card and only being offered a few hundred pounds credit limit as I wasn't a high earner.

Lots of people didn’t. I knew quite a few people who had their homes reposed or they had to sell quickly. In fact, it was common to see properties that were up for sale due to repossession, something I haven’t seen for quite a few years.

My parents moved house around then and it was the only time in their live they had no savings. No wonder they struggled taking on a higher mortgage with rates that high. Savers (with no or low mortgage) must have been delighted

I will stop biting after this, but if you can survive without an internet connection now then you must be surviving by cash-in-hand or black market or outright illegal means. Everything has been forced online.

Apparently it will be more or less the same if we see 4% due to the size of debt people take on these days.

mobile.twitter.com/EdConwaySky/status/1572975559449407489

This. It’s not a like for like comparison at all

I remember. I was 15 at the time and my parents had to sell their house down south and move up north to buy a much cheaper one as they couldn't afford the mortgage repayments.

Many people did lose their houses.

The problem is house prices is chicken and egg, if you keep borrowing /banks lending more, then house price go up, so people borrowing to the hilt also fuels the problem.

By only having outside toilet and lump of coal for Christmas

Here we go again. Yes wages and house prices were both lower. But house prices were much, much, much, much, much lower and wages were just lower.

In 1990 the average house price was 6 times the average salary. Now it's 12

This is it. My mum always talks about the super high interest rates of the 90s and she's right, times were tight and I remember my parents being worried about money but the difference is that mum didn't work and the mortgage had been calculated on just dad's salary. I don't know many people nowadays that can afford their house with just one person working, most couples I know both need to work in order to afford the mortgage. Yes, many people have stretched themselves to the limit but if you've wanted to get on the property ladder in the last decade in many cases you've had to stretch your borrowing because the price of houses have soared relative to wages.

People forget there are regional differences, people quoting the multiples are really using figures from the south, or south east.

There are lots of areas in the country where those multiples are much lower and affordable.

My first mortgage was 15% at one point. The difference is the house cost £60k, which was 2.5 times my salary. That house sold for £385k last year. Go figure.

Bought our first house in late 1980s and maximum borrowing was 2.5 times joint income. Bear in mind that the expectation then was double-digit interest and so affordability checks took account of that. Although it was swiftly discontinued, we qualified for MIRAS tax relief ( I.e, our tax code was adjusted to take account of mortgage interest.
It was all about Thatchers dream of a nation of home owners.

That said, DH & I had no choice but to save and buy, there was very little to rent in our area and then , as now, social housing was impossible to get unless you had a lot of points.

We we’re 26 when we bought our home; my extended family of that age today, have little hope of doing the same , unless we can help them out.

I know house prices were much lower but so were wages.

It's the ratio of prices to wages that is important though...

My dad did overtime every weekend to keep the mortgage paid.