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

DervProf

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"....

You may not remember any accusations, but you might like to consider if there was a bubble, and what happened to that bubble.

Sorry if I just burst yours.

Spartacus_Mills

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.

Didn't people get MIRAS at the time ?

ash28

Spartacus_Mills wrote: »

Didn't people get MIRAS at the time ?

Yes MIRAS was available on interest on mortgages up to £30k - when we first bought it was done through an adjustment to your tax code - it wasn't called MIRAS then - and around 1983/4 you paid your mortgage payment less the tax releif (the lender did the work not the Inland Revenue) - that was MIRAS. And it was certainly a help - though as your mortgage came down so did MIRAS. And by the time they changed MIRAS from basic rate tax relief in 1993/4 to 20%, here in the south east prices had gone up so much it was pretty irrelevant in your mortgage calculations. It was probably great in areas of the country where prices were low and it might have covered most if not all of your mortgage.

A married couple was counted as one for MIRAS and a cohabiting couple counted as two (they both were able to claim) and multiple purchasers all got it - removing the cohabiting couple and multiple purchaser element in August 1988 resulted in the housing boom in London and the south east - the government made the mistake of announcing the change several months (in the April budget) before implementation and the housing market in the south east and London went mad. I knew colleagues at work who clubbed together to buy houses to take advantage of MIRAS before the change.

crash123

I knew colleagues at work who clubbed together to buy houses to take advantage of MIRAS before the change.[/QUOTE]

And then it went tits up not long after that.

geneer

HAMISH_MCTAVISH wrote: »

Fixed that for you.

:rotfl:That the best you can do.


Rather looks like I was exactly right then.

Whilst you were, as I stated, misrepresenting data.

Thanks for clarifying your significant error.

PasturesNew

Cleaver wrote: »

£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.

Not round my way ... and we don't even have a Debenhams.

No call centres, no data entry. Cleaners are NMW/seasonal/part-time/casual and shop workers are NMW.

£7 is a qualified legal secretary - probably tops about 6 of those in the whole town, then it's a 35 mile round trip each day to the next town that'd have a few more.

Cleaver

PasturesNew wrote: »

Not round my way ... and we don't even have a Debenhams.

No call centres, no data entry. Cleaners are NMW/seasonal/part-time/casual and shop workers are NMW.

£7 is a qualified legal secretary - probably tops about 6 of those in the whole town, then it's a 35 mile round trip each day to the next town that'd have a few more.

Well, the minimum wage for most adults is about £6. And most minimum wage jobs pay minimum wage because the role generally doesn't require any experience or praticular skills. So if you can demonstrate a modicum of common sense and work ethic you should be able to achieve £7 an hour. Do you have a McDonalds near you? They pay minimum wage for an entry level job and any supervisor / shift leader will earn about £7. To get to those jobs you only need to stick around for 6 months, turn up on time and work hard.

I think what you're saying is that wages aren't lower than they were in 1987, it's just that there aren't many jobs near you.

ukcarper

Cleaver wrote: »

Well, the minimum wage for most adults is about £6. And most minimum wage jobs pay minimum wage because the role generally doesn't require any experience or praticular skills. So if you can demonstrate a modicum of common sense and work ethic you should be able to achieve £7 an hour. Do you have a McDonalds near you? They pay minimum wage for an entry level job and any supervisor / shift leader will earn about £7. To get to those jobs you only need to stick around for 6 months, turn up on time and work hard.

I think what you're saying is that wages aren't lower than they were in 1987, it's just that there aren't many jobs near you.

I’m not sure it is so easy to find jobs as some people think. I live in the Southeast and one company I know advertised a minimum wage job in the job centre and got 200 applicants in the first week.

Cleaver

ukcarper wrote: »

I’m not sure it is so easy to find jobs as some people think. I live in the Southeast and one company I know advertised a minimum wage job in the job centre and got 200 applicants in the first week.

True. And please don't think that I'm saying that it's easy to get a job out there at the moment as it clearly isn't. But I think it's easy to be a bit distracted by the number of people who apply for jobs rather than the quality of applicants.

When we advertised a £23k-ish senior admin role a few years ago we'd have maybe 30 applicants and end up with about 5 people I'd be happy to interview and, normally, they'd be 2 or 3 I'd be happy to employ.

Nowadays the same job will attract 130 applicants but the vast majority are people who don't even mention the job they are applying for in their application or CV, so there still ends up around half a dozen applicants that you end up interviewing and a couple that are good for the job. In fact, for the last job like this that we advertised we had 130 applicants but couldn't actually appoint as we just didn't feel the quality was there (we took a different route second time around and did appoint). I think that in a tough job market the poor performers are often the first ones let go, and then they all tend to apply for the few jobs out there. And people who are good are less likely to take a risk and jump to a new company, so you maybe don't get their applications.

All my opinion of course.

ukcarper

Cleaver wrote: »

True. And please don't think that I'm saying that it's easy to get a job out there at the moment as it clearly isn't. But I think it's easy to be a bit distracted by the number of people who apply for jobs rather than the quality of applicants.

When we advertised a £23k-ish senior admin role a few years ago we'd have maybe 30 applicants and end up with about 5 people I'd be happy to interview and, normally, they'd be 2 or 3 I'd be happy to employ.

Nowadays the same job will attract 130 applicants but the vast majority are people who don't even mention the job they are applying for in their application or CV, so there still ends up around half a dozen applicants that you end up interviewing and a couple that are good for the job. In fact, for the last job like this that we advertised we had 130 applicants but couldn't actually appoint as we just didn't feel the quality was there (we took a different route second time around and did appoint). I think that in a tough job market the poor performers are often the first ones let go, and then they all tend to apply for the few jobs out there. And people who are good are less likely to take a risk and jump to a new company, so you maybe don't get their applications.

All my opinion of course.

I’m sure your right about quality of applicants but the job was pretty basic and a large proportion of the applicants would have been able to do it, it is also in the Southeast where things are supposed to be a bit better.