Life is so unfair!

_CC_

dunstonh wrote: »

Actually that is a bit of a myth. The banks publish data on this. You get variances but using the Nationwide BS first time buyer affordability measure you find the following using the UK average (they do list by region as well)

2015 Q2 - 34.7% (mortgage payment as a % of mean take home pay)
2007 Q4 - 51.8%
2000 Q3 - 26.0%
1995 Q1 - 19.9%
1989 Q3 - 55.3%
1985 Q2 - 39.6%
1983 Q1 - 28.5%

London is currently 65%. It peaked in 1989 at 90.2%

That's not "property values to earnings", that's mortgage to earnings.

Price to earnings for the dates you mention are:

2015 Q2 - 5.3 (London at its record high of 7.8 surpassing it's peak of 6.4 2007 Q3 by some margin)
2007 Q4 - 5.7
2000 Q3 - 3.3
1995 Q1 - 3.2
1989 Q3 - 4.9
1985 Q2 - 3.6
1983 Q1 - 3.6

Which all kind of illustrates how people can hardly moan by 15% interest rates vs 0.5% base rate of today. Repayments aren't particularly cheap compared to the historic data, despite the record low mortgage rates. But, the debt people have to take on is ever increasing as a ratio of their income.

McKneff

What about us women who paid 'Married Womans Stamp' when it was not explained the long term effect of this on state pension.


I get only 60% state pension,

jem16

McKneff wrote: »

What about us women who paid 'Married Womans Stamp' when it was not explained the long term effect of this on state pension.


I get only 60% state pension,

I'm not so sure it wasn't explained, rather than ignored.

My mother ( now in her 80s ) knew what it meant but she still chose it as her earnings were very small.

Tromking

bigfreddiel wrote: »

Well let's go back a few years so I can moan and say how unfair it was paying a 15% plus mortgage rate, 17% inflation and a three day week. I tell you life was tough, if only interest rate had been 0.5%!

I forget that in 1990 our first mortgage on a £57K house was costing us £743 per month!
Happy days! 😀

mumps

_CC_ wrote: »

That's not "property values to earnings", that's mortgage to earnings.

Price to earnings for the dates you mention are:

2015 Q2 - 5.3 (London at its record high of 7.8 surpassing it's peak of 6.4 2007 Q3 by some margin)
2007 Q4 - 5.7
2000 Q3 - 3.3
1995 Q1 - 3.2
1989 Q3 - 4.9
1985 Q2 - 3.6
1983 Q1 - 3.6

Which all kind of illustrates how people can hardly moan by 15% interest rates vs 0.5% base rate of today. Repayments aren't particularly cheap compared to the historic data, despite the record low mortgage rates. But, the debt people have to take on is ever increasing as a ratio of their income.

But if house price to earnings is less than double and interest rates are 30 times higher then surely you are better off with the lower interest rates? Maths isn't my best subject so maybe I'm missing something.

I first bought in 1974, actually I keep saying that but I think it might have been 1973, but I'm not sure what the ratio would have been then.

_CC_

mumps wrote: »

But if house price to earnings is less than double and interest rates are 30 times higher then surely you are better off with the lower interest rates? Maths isn't my best subject so maybe I'm missing something.

I first bought in 1974, actually I keep saying that but I think it might have been 1973, but I'm not sure what the ratio would have been then.

You can't borrow at 0.5%, so let's assume people can borrow at ~3% today.

On that basis, yes you would have a cheaper monthly mortgage than when rates were at 15% despite the much higher price of houses today, but as the "mortgage to earnings" figures show - they're not that much cheaper.

Regardless, this is a simplistic way of looking at it.

How long did people have to pay 15% for? That was at the higher bound of historic rates and they have fallen dramatically since then. You also have to factor in inflation rates and wage inflation.

As interest rates fell, credit became looser meaning people who did purchase during those high rates now had much lower borrowing costs and found the value of their house increasing.

This is the opposite to people buying today. People are buying expensive homes with low rates. This will be fine if rates remain low for the foreseeable future, but they are much more susceptible to even moderate increases in borrowing costs, and they are buying at a time when the underlying asset is expensive compared to the long run trend.

I'd much rather be in the 15% camp, personally.

bandraboy

Also doesn't the 'mortgage as a percentage of net wage' figure include those on interest only mortgages, who aren't actually paying down the principal.

Plus that figure will be skewed by the large number of people who bought years ago and have tiny mortgages in comparison to today's wages, which will reduce the average.

Then in 2007, the property market was buoyant, with more first time buyers paying ridiculous amounts to get on the "ladder", which would have skewed the figures again.

Also banks require higher deposits, so average mortgages are smaller than they would have been 5 years ago.

Lots of variables.

mumps

_CC_ wrote: »

You can't borrow at 0.5%, so let's assume people can borrow at ~3% today.

On that basis, yes you would have a cheaper monthly mortgage than when rates were at 15% despite the much higher price of houses today, but as the "mortgage to earnings" figures show - they're not that much cheaper.

Regardless, this is a simplistic way of looking at it.

How long did people have to pay 15% for? That was at the higher bound of historic rates and they have fallen dramatically since then. You also have to factor in inflation rates and wage inflation.

As interest rates fell, credit became looser meaning people who did purchase during those high rates now had much lower borrowing costs and found the value of their house increasing.

This is the opposite to people buying today. People are buying expensive homes with low rates. This will be fine if rates remain low for the foreseeable future, but they are much more susceptible to even moderate increases in borrowing costs, and they are buying at a time when the underlying asset is expensive compared to the long run trend.

I'd much rather be in the 15% camp, personally.

I have a mortgage at 0.5% and that is on a buy to let so it is possible. I can't honestly remember how long I paid 15% but I do know it was high before and after the 15%, just not that high. I do remember the year we bought our first house that the rate increased at least 3 times.

Of course the other point is we didn't know how long the rates were going to be that high, we didn't know if they were going to go higher and we didn't know what was going to happen with inflation. Oh for a crystal ball.

It was also impossible to get a fixed rate deals when rates were 15% or for some time before that, well it was for us maybe other people managed it. I don't understand why people wouldn't get a fixed rate deal now. They have been commonly available for some considerable time.

mumps

bandraboy wrote: »

Also doesn't the 'mortgage as a percentage of net wage' figure include those on interest only mortgages, who aren't actually paying down the principal.

Plus that figure will be skewed by the large number of people who bought years ago and have tiny mortgages in comparison to today's wages, which will reduce the average.

Then in 2007, the property market was buoyant, with more first time buyers paying ridiculous amounts to get on the "ladder", which would have skewed the figures again.

Also banks require higher deposits, so average mortgages are smaller than they would have been 5 years ago.

Lots of variables.

In 1973, when we bought our first house, we could only afford an old run down property and had to find a 20% deposit, lower deposits were possible on better properties but most young couples I knew couldn't afford them. We ended up paying a 15% deposit as our house needed so much doing, rotten windows and floors needed replacing, it needed rewiring, the bathroom and kitchen were in very bad condition. It was a condition of our mortgage that within six months we would replace all the above and redecorate and the manager of the building society arrived at my door to inspect the work exactly six months later. If he hadn't been satisfied we would have had to produce the other 5%.

We also had an endowment mortgage so were only paying interest on the mortgage, I don't think the insurance premiums would have been included as repayments.

I think when we compare "then" and "now" we need to define "then" as the picture is very different depending on when "then" was.

ManofLeisure_2

mumps wrote: »

It was also impossible to get a fixed rate deals when rates were 15% or for some time before that, well it was for us maybe other people managed it. I don't understand why people wouldn't get a fixed rate deal now. They have been commonly available for some considerable time.

We had a mortgage with Abbey National and 'fixed rates' at this time, were as you say, unheard of.
I also remember being tied-in to their buildings insurance which at the time was quite expensive.