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?

House we rent now which we couldn’t afford to buy last sold for £230k in 2004 and is now a £600k house. Nothing special either, only 2 bedrooms and needs remodelling and modernising. But location location location. Elderly neighbours who each bought for around £100k can’t understand why we rent and why we don’t just buy the house off our landlord. We have a decent income, pay higher tax rate, but can’t afford it unless we have a 6 figure deposit out of nowhere. Plenty of people snap them up though when they pop up for sale in our road

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

There's demand to buy because rents for many were more expensive & less secure. And people who had money buying more property eg BTL growth. It's not only driven by demand though, it's been driven by borrowing costs. You don't tend to get high prices & high interest rates.

Council houses easily available, with secure tenancies on low rent, with a lower population arguing for them. Virtually no private rental sector. Also a ‘dole’ system, with a right to help whenever work was not available and often when it was, no sanctions and almost no questions asked. An actual welfare state - I often think that the welfare system then must have been very similar in effect to the ‘citizens basic income’ idea.

It was a very different world.

Different times. People talking like this doesn't help matters now does it ?
What do people want , a return to those days ?
Or everyone to lose their homes ?
Why not show some empathy instead of harking back?

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.

We only bought because we lived at home rent free & was also given some cash to help. The cash came from property.

I remember hiding from Bailiffs and our house being repossessed in the 90's so I don't think everyone managed.

Jesus Christ!

I bought a house on my own in the 1980s. Because I was a woman, they were really cautious over what they'd lend so as the mortgage rate soared, I had income to cover it. My wage was not better than it is now I can assure you of that.

Don’t forget the dodgy self certify mortgages that used to be about. I know a fair few people who used dodgy brokers in 90’s and 2000’s to get one of those mortgages and that got them on the ladder when in reality they didn’t have the income for it.

This explanation is interesting:

In cash terms, in 1990, the average household would therefore have had a disposable household income of £12,353, at a time when the average house cost about £57,726.

By comparison, in 2020, the average household income was £37,108 and the average house price was about £234,947.

During the last 30 years, therefore, the average household income has tripled, but the average house price has quadrupled.

Thought this was an interesting thread twitter.com/dawnafinch/status/1574678156467838978?s=46&t=jzko9yGd37d0BUK6P1rBaA

House prices are about 4 times they were in 1990's and in many cases wages for same jobs are just double or so.

So you need 4 times the amount of deposit on less money whilst renting more expensive properties than you did back then.

Plus general cost of living is much higher.

My parents house they brought in 1991 for £91k is now worth £350k.

The jobs they did in 90's paid £14k a year and now £28-36. (Teaching)

Their interest rates were high but went down.

You couldn't get a mortgage (and struggle to save for a deposit) for the same house on same jobs today.

There's demand to buy because rents for many were more expensive & less secure. And people who had money buying more property eg BTL growth. It's not only driven by demand though, it's been driven by borrowing costs. You don't tend to get high prices & high interest rates.

I was talking about last 10-15 years when interest rates have been low and how prices have increased. As I said chicken and egg house prices will increase if people borrow and places lend more.

I think some people really shouldn't have expected rates to stay this low for this long, and they haven't really got very high yet.

And before anyone starts I only bought my place 8 years ago.

There was no constant negative stream of doom and gloom due to social media and round the clock news channels. People were happier with less. Now there is a constant pressure to have the latest phone, games console, decor, new cars, stuff that back then would only have been for the better off and not a benchmark of poverty.
Just my thoughts.

Also people to remember in a lot of places we haven't seen the crazy price rises where you have to lend 11 times your salary.

You forgot avocados.

All day I've been hearing on the radio "back in the day we paid 15% interest rates and survived, in the tone of we had to go through it so now it's your turn. Firstly, not everyone could afford those interest rates and plenty had to hand back the keys to their home. Secondly, those that could were fairly miserable and on tender hooks the entire time and living was fine but just that. Enough already! Life was rubbish then like it's rubbish now and there's no gloating in that.

I was 23 earning 11k and was able to borrow 33k for a one bed house in the Home Counties. My total bills came to about 600 a month from what I remember

That's unthinkable for young people now.

As I said chicken and egg house prices will increase if people borrow and places lend more

You are completely ignoring the 08 crisis & QE though.

I think some people really shouldn't have expected rates to stay this low for this long, and they haven't really got very high yet.

and yet the bank should have raised them faster but it's almost like they know what is riding on it.

And that included food so I had a good few hundred left to save or go out on.

Also people talking about spending habits. Younger people have less disposable income nowadays vs previous generations because of high housing costs. So it's not all 🥑

Saving on the items you listed is in no way comparable to how much house prices have increased relative to wages in some areas of the country.

My in laws bought their house in 1984. FIL earned £10k, MIL didn’t work. Their house cost £24k.

The house next door to them has just gone on the market for £320k. If FIL was working the same job as he did then, he would be making about £30k. Cancelling Netflix and skipping a takeaway treat once a month is not going to be a solution to a FTB buying that house.

We only managed because I was on the staff of a high street bank and got £30k at 5% (and got taxed appropriately) and the remaining £20k on an endowment mortgage. We bought an ex local authority house, as we lived in an expensive city.

I think its unhelpful to pretend that spending habits have nothing to do with how financially stable someone is.

I speak from experience, takeaways, out to dinner, lots of holidays, nights out, clothes and shoes I dont need, marks and sparks food, I have literally pissed away money on 'good times' and could have been so much better off now.