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?

my neighbour is a teacher, bought the house for 24k, 800k now.

yes but many people get promotions along the way as well as annual pay rises so their salary rises faster…

non of my new neighbours are teachers!

@Shortjanet not true. My cousin bought in the last 5 years; a 110k house which they put down 5.5k for. Easily doable for 2 adults in their 20s. It’s a lovely 2 bed terraced house with a garden. Granted it’s on a main road but in a city and right on transport links. One of the problems amongst her friends was that they wanted their “forever” homes for their first homes; the 4/5 bed detached with the double garage. It’s a case of unrealistic expectations for many.

My mum earned £20k in 1990 and was able to buy a house in that year on her wage alone as my dads earnings couldn't be included. Now that house is worth almost £300k if not more.

When my parents bought in 1989 their house was £75k. My dad was earning about 30k a year. My mum didn't work. They borrowed up to the hilt.

Same house now is worth £350k. Someone doing the same job as my Dad would be getting 70k a year top whack. They could not have afforded their house in today's market.

It's not uncommon for people to borrow 4.5 times what they earn. That was never the case previously. The multiplers allowed have increased.

Its about affordability and how much a property costs compared to wages.

Even with higher interest rates, comparatively speaking, mortgages are bigger and take up a higher percentage of income.

In the past other things like food and energy represented a bigger percentage of outgoings.

We then had a period of very cheap food and energy which has also stopped suddenly, compounding the problem.

So people have borrowed more and have a bigger percentage to pay back, even at low interest rates.

No frills, no takeaways, one pub outing a month

that's one thing that has seen a significant change, pubs are dying & a lot less drinking & smoking.

amongst the youth

A two bedroom terraced house with a garden is over 200k where I live, though NCFT0922 and I don’t live in the south of England where I imagine it would cost more still.

My cousin bought in the last 5 years; a 110k house which they put down 5.5k for. Easily doable for 2 adults in their 20s. It’s a lovely 2 bed terraced house with a garden. Granted it’s on a main road but in a city and right on transport links. One of the problems amongst her friends was that they wanted their “forever” homes for their first homes; the 4/5 bed detached with the double garage. It’s a case of unrealistic expectations for many

Perhaps it depends where you live. I don't know of any houses going for 110k, that's not the norm in the UK. You talk of unrealistic expectations when all around us people can barely meet rent and bills let alone food. Having a warm home and food aren't unreasonable. There's so much 'I'm alright jack' among people, many of whom have big pensions and BTLs or big homes bought for peanuts.

Interest rates have been ridiculously low for a good number of years. Prsesent rates would have been seen as dirt cheap years ago.,it has fuelled house prices through the roof. With folk taking on gigantic mortgages. Even 6% was very cheap then

Of course you can’t get them everywhere, but there are houses available like that, or we’re pre-covid.

I remember the interest rate reaching 15% and despite not having the cost of living crisis we have at present, lots of people simply returned their home keys to the Building Societies because they had no way of meeting payments.

It took my son 9 years to save a deposit for a house.
It was long haul.
It took me about 4 months in the 80s.
I wasn't a high earner.
It's definitely harder now.
( I am in Essex though !)

To wonder how we managed our mortgage when interest rates were 13.6% 118
BlueBloodedBlue · Today 18:52

You managed because you (and me) received (unlike today's mortgage payers), tax relief on your mortgage payments. It was called MIRAS (Mortgage Interest Relief at Source). Example: if you paid £1,000 in mortgage interest in a tax year, that was £1,000 of income on which you didn't pay Income Tax - which in 1990 was 25%. So your income tax bill was reduced by £250 for every £1,000 mortgage interest paid. There was a MIRAS limit of £30,000 mortgage per borrower - so £60,000 for a couple. The average house price in 1990 was £58,000. So, a couple buying a £58,000 house, got tax relief on every penny of mortgage interest they paid. MIRAS was ended in the year 2000, by Gordon Brown, who described it as 'a middle class perk'.
It's telling that you (and other boomers) mention your 13% interest rate, but not the substantial subsidy you received from other taxpayers, most of whom were not mortgage payers.

I had a mortgage on 12.2 percent and 3 children. DH got a second job gardening every weekend. I had been a sahm but went back to work part time with youngest child 1 year old. I think without that extra money we would have lost our home.

So many more women work today compared to the 80s. If a woman did work it was a part time/ low paid job. Also, I think people spend more. It’s not about having a phone, it’s about habits such as having domestic help being much more common.

Yes no mobile phones, broadband, Sky contracts, Netflix, gym membership just basics. An old banger to get DH to work and pick up food shopping. I think more people will go back to this.

I think the lack of empathy from some of us 60s generation is also because we’ve been the butt of jokes for decades, mixed in with mockery and ‘OK Boomer’ as a dismissive response to anything and everything we say that isn’t part of the Zeitgeist. And now the ageism. So it’s easy to look at conspicuous consumption and blame poor spending choices when that has little bearing on the actual issues and causes.
It sets the masses against each other, so those responsible for the greed and the mess escape notice.

I dont know about that, my mum used to do cleaning in the 70s for various houses, she used to take me with her sometimes to these old houses. My mums friends all had cleaning jobs too so there was plenty of demand.

When interest rates soared in the 80s,90s, so many people lost their homes. Many home owners had negative equity.

People lived off loans, borrowed money and could never pay back because the interest rates kept soaring!
Loan sharks were charging ridiculous rates and then reposesssed homes.
The Buy to Let went out of control and still is which cause house prices to go up due to greedy property developmenr/landlords.
It should never happen again but I fear it will.

We shouldnt be expected to work all hours or have two jobs at the expense of our families, health.
It has nothing to do with making sacrifices to make ends meet. Most of us are careful. The proplem lies with the government, who have a terrible budget plan. The reality is, that this will make it hard for everyone who goes out to work anyway and pays for childcare that cost more than a mortgage!

I'm older myself.
I get it. I know that boomers have a hard time with people believing they had it easier
I think that they did really compared to today. It's different times now.
I found it difficult, but then I can see why it's much harder today.
Why can't we all just rub along and help the young? Why all this competition?
Some people will have more privilege,but the majority don't
We all need to try and realize that things are different now.

So would I. That was the point I was making. We did have it easier. How can that house have become more than six times as much in 30 years? The next one I bought is worse - I paid £75k for it and according to Zoopla it’s now worth £800k. It’s completely insane.

It's pretty basic. House price to salary ratio was far less. You paid far less for property so had far less debt to worry about.