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

purch

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

The bubble started around 1987. (when Fatty Lawson started mucking about with MIRAS)

....of course, the junior members of the forum won't remember those heady days and will have to rely on secondhand "bloggers" for their info.

Loughton_Monkey

Phew! 1985. Long time ago.

You had me scrambling for my records.

I was living 'oop north' at the time [Wilmslow] with a mortgage of £35K on a valuation [end 1984] of £73.5K. But mortgage interest was £4883.84 for the year 1985 [interest only], but it dropped to £4225.17 for 1986, and £3362.68 for 1987. So I make that 14%, 12%, and 9.6% respectively.

But I sold early 1988 at £135K - which was much lower than 'market value' because it got blighted by a by-pass. Nevertheless 83.6% profit in 3 years was still 'respectable'.

Can't imagine life on a 5X salary mortgage, though. At 14% interest, paying 70% of gross salary would have been very 'painful'. I do however recall it being a 'bad' time for me in cash flow. Huge profit on the house, of course, but I had very little cash to spare. I recall the old gas boiler going wrong, and the little guy coming round telling me that it was 'so old' that the repair would cost £80, because he would need a 'Whitworth' bolt specially made. Far better to pay £300 for a new one he said. Couldn't agree more, but I simply had to cough up the £80 because £300 was 'out of my league' at the time.

So leaving out the 'blight'. I would have doubled my house price in 3 years. Even so, I made more in those 3 years on the house than I actually earned in salary (my records show).

These times will return, Hamish, but try and tell these 'youngsters' and they won't listen! OK, you don't get 20% every year, but when you do, it pays for the few years (like now) when they stagnate a bit.

Loughton_Monkey

neverdespairgirl wrote: »

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.
Nearly two-thirds of his gross income, let alone net!

In short, I don't believe him.

See my post (above) for the rates I was acatually paying, interest only, with NatWest.

I can't recall anything about 5X being possible, but, like you, I don't believe it for 1985.

Graham_Devon

Just had a quick google search on this bloke. He's basically Hamish mark 2.

Heres what he said about mortgages in 2006.

The fundamental point is that homebuyers are adults who should be free to choose whether or not to borrow in what is the most competitive mortgage market in the world. Nobody is forced to borrow a penny but everybody can see that property has proved a profitable investment in the past - and that the wiseacres who have been warning of a crash for many years now have been wrong.


That is not to say they will not be right one day because no market rises forever and a trend is only a trend until it stops. But anyone who shunned property in the past has missed massive tax-free gains because the average house price has doubled in the last five years. So much for the experts and their warnings. The important point is that adults should be free to choose to borrow if they wish - but they should do so with both eyes wide open to the risks as well as the rewards.

Then in 2009, apparently he criticised such mortgages...

There can be no doubt that lending criteria had become alarmingly lax at the top of the housing boom, when Abbey was willing to advance five times borrowers' income and Northern Rock would lend up to 125pc of property value. These deals were criticised in this newspaper and elsewhere at the time but it would be wrong to suppose that such loose lending got us into the mess we are in today.

And here he is in 2008, complaining that these mortgages got us "into this mess"

So, amid the jubilation about this week's rate cut, perhaps it is worth restating that it was excessive borrowing and inadequate saving that got us into this mess. The credit crisis cannot be solved by encouraging people to default on their loans or try to borrow their way out of debt.

And here he is complaining that (and remember point 1, about people being able to choose what they do?) there isn't enough of a safety net for mortgagees.

No, what bothers me is the question about how many homebuyers will actually receive any help from this initiative – or, indeed, others announced as long ago as last month. With the Council of Mortgage Lenders (CML) predicting that 75,000 homes will be repossessed next year it was disappointing, to say the least, for the housing minister Margaret Beckett to hazard a guess that the answer might be as low as 9,000 – or not many more than one in eight.

My guess is he owns investment property.

purch

Just had a quick google search on this bloke

You really need to get yourself a "proper" hobby Dev.

Even watching porno's in a darkened room, would beat googling some loser who talks !!!!!!!! about house prices :eek:

Cleaver

PasturesNew wrote: »

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

£15k a year is about £7 an hour. You could earn roughly that with no real experience or qualifications: call centre, data entry, cleaner, shop worker etc. My 17-year old niece has just got a job at Debenhams and gets paid just under £7 an hour.

ash28

neverdespairgirl wrote: »

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.

We moved to the south east in 1987 - we were offered over 4x income by an estate agent's financial person. We didn't take it - not because we didn't like the houses in that price bracket (we did very much) - but because we weren't sure of our ability to pay the mortgage. As it turned out it was a good decision - it wasn't that many years later that the mortgage was well over half of OH's income.

Estate agents are b*ggers really you ask to look at houses up to £60k and they start
sending you details of houses between £70k and £85k - why don't they take your word that the price you say is the maximum you want to pay is actually the maximum you want to pay.

You could get 100% mortgages - you could get those as far back as 1982 and probably before that - and with a mainstream lender.

Loughton_Monkey

ash28 wrote: »

You could get 100% mortgages - you could get those as far back as 1982 and probably before that - and with a mainstream lender.

I got 100% mortgage in 1973. In fact 100% plus legal fees - so in fact 102.6%

neverdespairgirl

purch wrote: »

The bubble started around 1987. (when Fatty Lawson started mucking about with MIRAS)

....of course, the junior members of the forum won't remember those heady days and will have to rely on secondhand "bloggers" for their info.

I remember 1987. Amy was being an idiot, Catherine was my best friend in the world ever, and I had an aquazoom 9th birthday party. I also did my common entrance exams (a bit early).

Sibley

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.

What a great quote.

Sums it up really. Unless 100% mortgages return people will be stuck in bedsits.