1985... The year of 100% Mortgages at 5 times income

HAMISH_MCTAVISH

Restricting access to credit, where willing lenders serviced demand from willing borrowers in a free market, means that young people who start the property game with nothing are condemned to end it with nothing.

Increased regulation, however well intentioned, is yet another example of how Britain is leaping backwards into a re-run of the dreary 1950s with social mobility falling towards zero.

How easily Osborne, Cameron – or Clegg – could play the part of Macmillan.

Never mind the macro-economics. Self-interest is the one motivation you can always rely on and my personal experience of the property ladder was shared by many others in my generation.

One of the best financial decisions I ever took was a 100pc mortgage – yes, that’s right 100pc - for about five times my salary 25 years ago. No such loans are available today. Without such ‘irresponsible lending’, I might still be renting a bedsit in Kilburn rather than owning a home in Highgate.

That’s not intended to sound like bragging but to demonstrate why people who fail to understand the importance of credit – and, dare I say it, house price inflation – in the creation of wealth are either very naive or perhaps living under hedges on a diet of roots and berries.

They have certainly missed one of the simplest ways to accumulate tax-free gains available in our lifetime – at least until now.

Will today’s bedsit tenants thank the regulators for freezing them out of home ownership and condemning them to years of throwing cash away on rent? I doubt it.

The Chancellor should resist the temptation to meddle with markets, remember the importance of individual free choice and give young homebuyers a fighting chance.

http://blogs.telegraph.co.uk/finance/ianmcowie/100006262/why-irresponsible-lending-helped-me-and-millions-of-others/

That's weird.....

I could swear there's a lot of posters on here who seem to think 100% mortgages at 5 times income are a very recent invention.

And I just don't remember 1985 as being the centre of accusations that "irresponsible lending" was fuelling a housing bubble.

Hmmmm, I wonder if there could be a bit more to this high house price lark than just "irresponsible lending"....

Pimperne1

Actually, my Interest Only mortgages turned out to be a great decision for me - I suppose this only goes to show that there are very many different kinds of situation and one size doesn't fit all.

HAMISH_MCTAVISH

Now now pimp, that's just not allowed.

You simply MUST believe that the main cause of high house prices today was high LTV/LTI lending, and that today's absurdly tight lending is a return to "historical norms"..

Because, well, without that incredibly desperate thread to hang on to, you may have to accept that it's a HUGE housing shortage causing prices to be high.....

In which case the 50% crash everyone seems so desperate for simply isn't coming.

Now, repeat after me.....

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

I will not let reality interfere with my dreams of a crash

Cleaver

Increased regulation, however well intentioned, is yet another example of how Britain is leaping backwards into a re-run of the dreary 1950s with social mobility falling towards zero.

For goodness sake, we're not moving towards a 'dreary 1950s.' We've just had a financial crisis that nearly ended life as we know it, countries are in debt up their eyeballs, we spend way more as a country that we bring in and, as a smaller side issue, we have let a housing market get out of control to the point where the average house is about 7 times average salary. So maybe a bit of regulation and a bit of a re-think about our nation's finances and attitude to money is necessary, wouldn't you think?

In the author's eyes the 1950ss might have been 'dreary', but I get the impression that people in the 1950s had a much better attitude towards their personal finances and debt. Something we could all learn about now.

By saying all this I'm not advocating massive regulation to strangle credit and I'm not opting for five times salary lending (although there might be a time and a place for that). I'm just saying that there's a health middle ground.

PasturesNew

I wish I'd known about 5x salary mortgages in 1985... I was still living at home and 3x was what I knew about.

Of course, back then you didn't have the Internet - and 24 hour news - and inundations of adverts and promos and news and stuff and information ... etc. You got up, went to work, came home, ate your egg and chips for tea and read the local evening news.

geneer

HAMISH_MCTAVISH wrote: »

http://blogs.telegraph.co.uk/finance/ianmcowie/100006262/why-irresponsible-lending-helped-me-and-millions-of-others/

That's weird.....

I could swear there's a lot of posters on here who seem to think 100% mortgages at 5 times income are a very recent invention.

And I just don't remember 1985 as being the centre of accusations that "irresponsible lending" was fuelling a housing bubble.

Hmmmm, I wonder if there could be a bit more to this high house price lark than just "irresponsible lending"....

Do you know whats even stranger Hamish.
There was someone* not that long about claiming that even at the peak of the last bubble mortgage lending never got above 3.5x income.

So go figure. :rotfl:



*that would be you by the way.

A bit spammy today hamish.
Something upset you.

HAMISH_MCTAVISH

geneer wrote: »

average mortgage lending never got above 3.5x income. .

Fixed that for you.

Wookster

OMG hamish get a life

Graham_Devon

You need to include a bit of context too though Hamish.

What people have actually been talking about is 100+% mortgages. Interest only mortgages too, where you didn't even have to prove you had any intention of saving to pay the capital.

Even Lloyds themselves have admitted they have made a huge error here, just asuming people will be able to pay off the capital, as many cannot.

There is absolutely no point in opening lending up at 100% interest only mortgages when we already have a huge problem hitting our shores in the next decade. That problem being the one Lloyds are taking steps on now. People simply don't have the means of paying the capital off.

We have too many problems for your wish of mass lending, as a result of mass lending.

We need real discussions on this, and the problems we face, not just your style of "I told u so, I'm correct" style threads.

Whats more, banks simply are not going to give a 100% mortgage in this climate. House prices themselves are far too volitile.

neverdespairgirl

I have my doubts, factually. 25 years ago (1986, surely? Not 1985?) interest rates were over 10%. The BBC says the rate averaged 12.5% in 1986. And Halifax's SVR dropped for 13.5% to 12.75% in April 1986, for example.

http://news.bbc.co.uk/1/hi/business/593477.stm

Take some example figures. Say he earned £15k in 1986, and borrowed 5 x his income, therefore £75k. His interest-only payment would have been £781.25 a month, or £9,375 a year. Nearly two-thirds of his gross income, let alone net!

In short, I don't believe him.

PasturesNew

I earnt £15k in 1987 ... I'd struggle to find that these days.