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?

The main issue is house prices were comparatively low, so the price rises caused by high interest rates were more affordable for more people.

Since then, my wages have x by 2.5. My house price has x by 5.

People have paid too much for their homes vs salary lulled into a false sense of security by low interest rates. This just a statement of fact.

If it is supply.and demand why did house prices in my.village rise by 25% when 500 new homes were built? Completely pricing out the locals and people from London rubbing their hands at the their 'bargain' that cost the Developer a quarter of sold price to build?

We have all been had by greedy developers, banks and their government cronies.

Northern Rock, for example, gave 110% mortgages. The entire value of the property, no deposit needed, plus a secured loan which was sold as “you can get some furniture and do your decorating.”

when was this though? not after 2008?

A lot of people did end up in negative equity, didn't they? I'm sure I remember it being discussed by my parents and their friends (I'd have been quite young) that so and so wanted to move house but couldn't because they were in negative equity. And these were middle class professionals, though at the time quite a few would have been very much at the start of their careers.

My parents bought a 4 bedroom detached house in 1991. It cost £180k and they were borrowing something like 120k. They had a combined income of something like 45k yet that mortgage was considered "stretching". Despite having an above average income, they never spent money on things like home decor, new cars, technology, nicer clothes etc. We never went anywhere on holiday involving flying or hotels. We only ever ate out once or twice in inexpensive pubs on holiday, we never ate in restaurants and had a takeaway about once a year

They budgeted meticulously, every penny was accounted for, and they were better off than many.

how much was your monthly payment

People have paid too much for their homes vs salary lulled into a false sense of security by low interest rates.

Yet what option do people really have when the high mortgage is still cheaper than the rent on a smaller house?

In my last house I paid a mortgage of around £500/month and the rented house next door (same size) was let for £900/month.

This is the whole issue explained extremely clearly.

And this is why high interest rates decades ago do not compare to high interest rates now - the relationship between wages and house prices is so different.

Yes. Lots of people were stuck and couldn't move on.

"Northern Rock, for example, gave 110% mortgages. The entire value of the property, no deposit needed, plus a secured loan which was sold as “you can get some furniture and do your decorating.”"

Yes, the Northern Rock Together Mortgage was up to 125%

But those Northern Rock mortgages were before the financial crash weren't they? As in years & years ago?

@boxybox they were in the early to mid 2000s. They allowed you to borrow over 35 years if you were young enough and so many people have found themselves trapped to this day.

Landmark mortgages now manage these loans at a crap interest rate compared to other lenders. Unfortunately 2008 saw many of these Northern Rock borrowers unable to meet the criteria other lenders wanted to remortgage.

How old are you @boxybox? Do you not remember the issues surrounding Northern Rock and the type of lending that went on in the early 2000s?

I know about those mortgages & are disastrous they have been for some people. However I thought when people were talking about those borrowing high multiples/over leveraging themselves & artificial low interest rates I assumed they were talking about what happened post 08...

Before 2008 but the posted I quoted didn’t specify a year. Just ‘25 years later’

Yes, they are.

2008 isn't that long ago. People are still dealing with the money they borrowed then.

However, I agree with you. To get on the property ladder now you can't borrow 3 times your salary and get anything at all in vast swathes of the UK.

Isn't this thread about the impact of todays high prices vs wages & increasing interest rates. I'm sure that will impact some people who bought in the early 00s but since that was 2 decades ago I wouldn't class them as FTBs or recent entries to the house market.

I think the thread was about then vs now.

And now it's much more difficult but my generation keep popping up with "ooh, back in my day we just didn't sleep and raised our kids on gruel and dripping cause that's just what we had to do"

I assume because the LL mortgage was £500pm and the extra £400pm was for costs/profit. I agree with you I don't see what other option people have.

I feel very sorry for people coming out of low fixed rates soon. Martin Lewis had some good advice about adding more to your term/fixing for 10 years

Alot of people.i know scarred by parents losing homes in 80s/90s fixed for 10 years willing to pay the higher cost for the security.

Oh my life. 🤦🏻

A previous poster said:

“Fast forward 25 years later, totally amazed when our daughter applied for a mortgage, no deposit needed, 100% mortgage, the lenders seemed to be throwing money at borrowers.”

Another poster replied, “Who gave her that? I'm astounded.”

I replied to say, “it may well have been Northern Rock.”

Yes renting is a huge issue particularly the costs of renting. The low interest rates also fuelled the BTL market compounding the problem.

@takliyah my reply was a general reply to the Northern Rock convo kicked off by the below comment. I just don't think it's particularly relevant.

Fast forward 25 years later, totally amazed when our daughter applied for a mortgage, no deposit needed, 100% mortgage, the lenders seemed to be throwing money at borrowers.”