The generation poorer than their parents

mumps

Percy1983 wrote: »

Yeah thats great so in 1974 I could be safe in the knowledge that interest will have to come down.

Now I can buy worrying that interest rates can only go up.

What would the mortgage payment be now on a 9.8% as per you example (not unreasonable with the amount of trackers/SVRs which are base + 4%)

The trouble was we didn't know the interest rates would go down, in fact when we were struggling with 13% it got worse and went to 14%, in my house we just couldn't afford that and I had to cut short my maternity leave and then it went to 15%............. Hindsight is a wonderful thing.

ukcarper

Percy1983 wrote: »

Yeah thats great so in 1974 I could be safe in the knowledge that interest will have to come down.

Now I can buy worrying that interest rates can only go up.

What would the mortgage payment be now on a 9.8% as per you example (not unreasonable with the amount of trackers/SVRs which are base + 4%)

1974 13.90%
1975 12.77%
1976 13.90%
1977 10.21%
1978 11.25%
1979 15.96%
1980 18.17%
1981 15.23%

Also no trackers, fixed etc just SVR

At 9.8% it would be £1300 which is 62% of gross wage, but I would be very surprised if interest rates go to that in the near future. 7% would give about the same percentage of take home pay and I think that is probably a long way off.

The thing that happened in the 70s to make it easier as time progressed was inflation. But my point is it was not as easy in the 70s as you think that’s not to say it isn’t hard now.

Loughton_Monkey

Percy1983 wrote: »

Yeah thats great so in 1974 I could be safe in the knowledge that interest will have to come down.

Now I can buy worrying that interest rates can only go up.

What would the mortgage payment be now on a 9.8% as per you example (not unreasonable with the amount of trackers/SVRs which are base + 4%)

Valid point about rates can only go up from here.....

But the 70's was a totally different [and extremely difficult] time. It is not 'feasible' or foreseeable that today's interest rates will go up to (say) 9% without (a) massive inflation, and (b) consequental high wage inflation.

Many of us will remember times when mortgage payments were easily 60%/70% of income - for short periods perhaps - but each 9% pay rise was helpful, as was the fact that the house was rising in value very nicely. So a pain worth taking - and incidentally an extremely good lesson on how to live on less!

I think most of us over 60 will say this: Yes, overall, we have survived financially. This is much less because times were 'good [they weren't] but because we learned how to live within our means and set the right priorities. In fact I cannot think of any sustained period you could describe as "good". Virtually all my memories (at different times) were of....

• Absolutely frightening inflation (27%).
• Periods of horrific unemployment.
• Periods of extremely high mortgage rates.
• Draconian tax rates [up to 96% marginal in some cases]
• Periods in which our house was worth not a penny more than 10 years previously.
• Disappearance of mortgage tax relief, Life Assurance tax relief.
• Strikes, riots, rubbish piled high in the street, massive crime rates.
• Progressive disappearance of company benefits, taxation of those that remain.

Life is full of swings & roundabouts. I just checked my records, and found that 3½ years after graduating (and working) I had precisely £70.90 in the bank. OK, a few quid in (mortgage related) Life policies etc. and a bit of house equity. But I was sitting on a second hand sofa, watching a hired television, having just splashed out on a second hand spin dryer to ease the workload of 'she who must be obeyed'.

If today's 20 year old ends up (at my current age) any poorer than I, then I think the reasons will be 99% to do with his/her 'choices' and virtually nothing to do with the 'economy' - least of all mortgage rates.

Percy1983

It does go with what I am saying, you are comparing bad times to good times as far as interest rates go.

Likewise many of those in the 70s-80s would have got some of the good times later on.

The point is, the bad times weren't as bad then as they could get now (quite easily), and the good times then where much better than the good times now.

I know what you say about 7-9% being a long way off, but you have to agree I am not going to see such good rates for the next 25 years.

ukcarper

Percy1983 wrote: »

It does go with what I am saying, you are comparing bad times to good times as far as interest rates go.

Likewise many of those in the 70s-80s would have got some of the good times later on.

The point is, the bad times weren't as bad then as they could get now (quite easily), and the good times then where much better than the good times now.

I know what you say about 7-9% being a long way off, but you have to agree I am not going to see such good rates for the next 25 years.

If you took out a mortgage in 1974 you would have had double digit interest rates for the next 18 years in fact they were 18.7% in 1980. House prices were 5x average wage in 1974 compared to 6.4 now.

Loughton_Monkey

Percy1983 wrote: »

.....The point is, the bad times weren't as bad then as they could get now (quite easily), and the good times then where much better than the good times now.

A matter of opinion, I'd say. I am looking back over 40 years since I started work. The next 40 years will be.... what it will be..... and I speculate that overall, it will balance out. Whether people will choose to cope with the ups and downs of the economy, or whether they will follow recent trends and spend, spend, spend, live for today... is, I believe, the question.

Percy1983 wrote: »

I know what you say about 7-9% being a long way off, but you have to agree I am not going to see such good rates for the next 25 years.

Phew! Not sure I would agree. 25 years is a very long time. I still think prosperity [or should I say the ability to 'enjoy' it for sensible individuals] will continue to rise 'on average'.

However, I would couple that by saying that although today's 20-year-old is likely to have the same potential wealth as I amassed (plus a bit more), the 'issue' is very much that this rise will be very marginal and incremental. The dissatisfaction will come purely from the fact that when today's 20-year-old retires in his 60's with his average 'pot', he will see all the Chinese, Korean and Indian 60-year-olds retiring with a pot 6 times as large, appearing, by comparison, to be as rich as Croesus.

Graham_Devon

ukcarper wrote: »

Here are some figures for you to think about

1974 Interest 14%, house price £10k, average wage £2k £166 per month
Miras in operation so effective interest rate 9.8% £9k mortgage £81.35 per month

So mortgage 49% of gross wage

Now interest 5% house price £160k average wage £25k £2083 per month
£144k mortgage £851

So mortgage 40% of gross wage.

You are comparing two extremes....yet the conclusions are not that far away.

Do it on 7% mortgage interest.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Do it on 7% mortgage interest.

Graham, you can still get a lifetime tracker of 2% above base today.

Just have a think, for one second, about how long it is likely to take for base rates to get back to 5%.

The probable outcome is that we won't see 3% for a decade, with a significant chance of never seeing 5% in the term of a mortgage taken out today.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Graham, you can still get a lifetime tracker of 2% above base today.

Oh shush "mortgage rationing - until I want to defend my other position" McTavish.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Oh shush "mortgage rationing - until I want to defend my other position" McTavish.

Seriously, you're just trolling now.

I've responded to your assertion of 7% rates with a valid point.

Try answering it.