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?

I was a child when this happened and I remember my parents having lots of children come to our house for play dates and they ate a hot tea. The mothers would come by and we all ate together. Leftovers were sent home with the family because it was more than we could possibly eat.

I remember others in class coming to school and saying they would be moving to live with other family members. It went over our heads, but their home had been repossessed.

if you keep borrowing /banks lending more, then house price go up, so people borrowing to the hilt also fuels the problem.

I'd argue ever increasing prices of houses & rents has lead to more borrowing/banks lending more as opposed to people just borrowing more for the sake of it.

Do some research. How much was your flat, what was your salary then? What would it cost now, what salary would your 1990 job pay now? House prices have increased far far more than salaries.

For the last decade people have had to borrow to the absolute hilt to buy property. 1990 vs 2022 is not remotely comparable and just a modest % increase is going to increase monthly payments by £100s when everything else is also going up.

Much rather 15% on £60K than 6% on £300K but ho hum there we go.

not to mention stagnant wages has meant it you don't get on the ladder it just gets harder.

On top of bigger wages compared to the house price….Don’t forget free university, easier access to dental and health care, cheaper gas, electric and water bills. Households who could survive on one income so no childcare fees etc etc.

Much greater pressure on housing stock has forced up prices. When I was a child most families had one home and both parents living in it. The children I teach (secondary) mostly have two homes-one with mum and one with dad.

My dad worked his day job as an engineer and then did an evening and weekend job to make enough money. My mum worked two part-time jobs.

my uncle lost his house.

I got a second job

We shared a car, had no phones, had no Sky tv or broadband and hardly ever went out. I’m not sure a lot of people are prepared to do that now. That’s the problem. Those who have never experienced this will struggle with the concept. I’m sure bank of mum and dad will be used very often in the coming years. Arrears were 10% plus at the building society I worked at in the 90’s and loads had their homes repossessed. It’s not beyond the realms of possibility that it will happen again.

Bought a newish 3 bed house in the 90’s for £65k and the deposit was about £4k. Our joint income was less than £30k and I wasn’t even in a permanent job, just temping on a low wage. None of that would happen now.

These conversations often stray towards blaming people for 'reckless borrowing" and completely ignore how house buyers have had no choice to borrow larger amounts given the crazy inflation which has happened since 1990. A pretty shitty attitude if you ask me. Anyone who has bought in the past 5 years or so will have had to raise a stupid deposit, a mortgage at much higher multiple of their salary, and is now about to have the interest rate cranked right up. But is their fault because smart phones and internet apparently.

So if the ratio of income to house price has doubled (based on “wages have gone up by factor of 6 and houses by factor of 12”).

So with the predictions of 6% interest rates in the spring, that makes it an equivalent situation to 12% interest rates “back in the day” no?

Things are quite different now. The multiple of borrowing has been pushed to 4, 5 or more times salary, people have far more personal debt on top of mortgages eg pcp on cars, mobile phone contracts and personal loans. People have more monthly outgoings (not all essentials but they are under contract all the same) eg subscription tv services, home broadband (in addition to the mobile phones remember), gym membership, multiple clubs for kids (I had to choose 1, gave up ballet for brownies), eating out is far more frequent too - was literally 3 or 4 times a year when I was a child!)

It's going to be tough and hard choices will need to be made, but unless interest rates hit 8% or so I doubt it will be too bad assuming they drop after 2-3 years which is typical

My wages haven't risen significantly over the last 20 or so years. But you could buy a two bed terrace for around £130,000 where I am. To buy the same house now is anything between £270,000 and £310,000. 🤷‍♀️

No.

I know so many people who have benefitted massively from property price increases over the last decade, yet still comment that it was harder back in 19whenever and can’t understand why people are still renting when the inflated house prices they have benefitted from are a massive part of the problem. Barely anyone I know would be able to afford the house they have now, if their circumstances changed. The whole system is absolutely fucked.

So many different expectations and spending patterns in the past than now.

I remember getting my first mortgage in the 1980s and managing to get the absolute "bargain rate" of 12.9%

Most lenders also expected you to save with them for a couple of years before you could apply for a mortgage

So with the predictions of 6% interest rates in the spring, that makes it an equivalent situation to 12% interest rates “back in the day” no

what?😆

I'd argue ever increasing prices of houses & rents has lead to more borrowing/banks lending more as opposed to people just borrowing more for the sake of it.

But the house prices increase because of demand and that demand is people paying more and more.

Yes! And the comments above about younger generations relying on bank of mum and dad - why do you think they often need to, and where do you think the money in the bank of mum and dad typically came from? That's right, house price rises.The system has been totally fucked. I'm lucky enough to be ok at the moment, eleven years left on mortgage and a ten year fix but I feel so, so sorry for those with rate changes on the cards soon.

There were so many people unable to pay their mortgages that some lenders went under too. Town and Country were one of them. They had been offering 100% mortgages so even if the property was repossessed there was not enough equity to cover the loan.
I tried to do the wage v house price increases based on the first house I bought (late 1980s) but these days they all have central heating and footed kitchens so there weren't any comparable.

This is happening.

House ownership was achievable with a 3 x salary mortgage as house prices were more affordable.
Credit in various forms was not as easily available, I.e. Credit cards, store cards, pay day loans.
Student tuition fees were paid for by the state. Thank Mr Blair for those costs now.
Living costs were lower. No subscriptions and monthly fees for WiFi, phones etc.
People were less materialistic, managed with one car, lead simpler lives.
People made their own sandwiches and hardly bothered with coffee and bottled water.

We bought first marital home in 1989 although I had a house before
Could borrow max of 3.5 x higher earner (usually male) and 1.5 lower earner
or some lenders would allow 2.5 x joint
I was lucky to be able to put down £6k and pay all fees from the previous property
it was still a struggle - DH did loads of overtime - we had a lodger and I did a few evenings in a bar as well as working FT
No honeymoon - cheap wedding - first few holidays we had were in a tent until DH bought an old van and converted it himself into a camper van
Most of our furniture was second hand and there weren’t as many consumer goods to buy
We didn’t go to pub or out for meals - weekly treat was a bottle of wine on a Saturday night!