For those who think we had it easy...

meanmachine_2

Encouraging to see so many thoughtful comments in a thread that began with such a stupid ignorant post.

And if I read one more "but it's always been difficult and it's not a given right to own a home" I think I'll explode.

Back in 1999 interest rates were at 5%. House prices were a THIRD of what they are now.

So that's one point in recent history that blows that lazy comment out of the water.

I loved the comment about "boomers didn't waste all their money on ipods because there weren't any ipods around in those days". Quite true. I remember boomers WASTING their money on a VHS recorder that cost around £1000 (in today's money) and was a heap of junk.

But let's not burst the boomer's self-delusional bubble.

And it's funny that all of these hard-working postmen and bakers could buy THREE BEDROOM houses, with a bit of scrimping and saving.

In today's market they'd be scrimping and saving just to afford the £1999 mortgage product fee.

Running Horse and co need to get off their high horses and get into the real world.

Grogg

beingjdc wrote: »

A graph! I can do graphs!

Here's the mortgage payment you would face on the average property, on a mortgage at the BoE base rate, once inflation is factored out. The red line is as of July this year. The lines after that are if rates went up again.

What does the green line mean? Am i reading the graph right? Does it show that the most expensive time to buy a house was betweem 1989 and 1992 and that they are more affordable now than then?

lieutenant_dan

Wouldn't worry about the likes of running horse mean machine.

I challenged him in another thread to come up with equivalent figures for now as to when he bought in the late 80s, and guess what, he comes up short too in today's climate. Equivalent £20k salary, one bed flat in his area £80k, the two bed place he bought £110k.

He claimed he could still do a non standard (over 3 and a half times salary/mortgage multiple) 4 or 5 times salary mortgage, I pointed out he'd have nothing left from his wages and would be in the red every month after all outgoings taken into consideration. That's assuming he was able to save enough from his £20k salary for a deposit in the first place, if he wasn't stuck having to live in highly priced rental accomodation which would consume over 50% of his salary.

And that disregards any rate increases, falling house prices etc. He said when interest rates were high, most of his salary went on his mortgage payments in the 80s, well that was a temporary situation. That would be the NORM every single month if he was to buy in this climate (and the norm at best, as there's little prospect interest rates would go in favour now), he'd have nothing left to live on and would gradually accumulate debt.

Sums it all up when he said his mortgage payment is currently £200 per month!!!

beingjdc

Grogg wrote: »

What does the green line mean? Am i reading the graph right? Does it show that the most expensive time to buy a house was betweem 1989 and 1992 and that they are more affordable now than then?

The green line isn't very important, it's where we were at last time interest rates were at 5.75%

You're right that the initial mortgage payment (not the purchase price) was higher on average for a period of about 15 months in 1989 and early 1990, so on this measure 'less affordable' than now.

That said, they were high because of the interest rates, and in turn inflation was high, and interest rates then fell - so the initial pain didn't last nearly as long as it would now, and the income multiples were lower.

franklee

Thanks for the graph beingjdc.

beingjdc wrote: »

You're right that the initial mortgage payment (not the purchase price) was higher on average for a period of about 15 months in 1989 and early 1990, so on this measure 'less affordable' than now.

Also 15 months isn't that long given the time the graph covers. It clearly shows that now is the worst time in the last 33 years apart from that 15 months.

But does the graph take MIRAS into account? That was a tax relief on the mortgage interest payments that ended in the early 90's.

meanmachine_2

lieutenant_dan wrote: »

Sums it all up when he said his mortgage payment is currently £200 per month!!!

Ah, now that's because he's worked so incredibly hard, and didn't buy any ipods before they were invented.

Nothing to do with being born at the right time, in a high inflationary, low house price environment!

Yes, instead let's take ONE day in 1992 when interest rates were temporarily at 15% and use that to claim times were always hard (rubbish, see 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003 for times when it was much cheaper to buy property that it is today).

Saves having to actually look at the evidence.

michaels

Don't want to make this too complicated but the graph from my understanding strips out inflation but does not strip out the impact of rising real wages. A rough estimate is that these have risen by about 2% pa over the period and with the effect of compunding the earlier figures would have been a much higher burden as a percentage of income - yes the argument applies less to figures in the 90s and later and yes it turns out those were excellent times to buy - but that was partly because those already with houses had just been wiped out by house price falls so had no money to buy and those without had seen it happen to those with and did not want to risk the same thing happening.

I guess a lesson that while the graph is very powerful it does not tell the whole story.

And if we really want to get in to the cornflakes perhaps we should look at price elasticities - basically as having a place to live is a 'must' rather than a 'nice to have' there is a tendency for people to spend as much as it costs for this thus it should be expected that given the constraint on supply and increases in demand that the share of disposable income spent on housing will actually rise over time...so what does this mean in the real world...basically that generally housing will always take a large chunk of incomes requiring sacrifices on other items. The only remedy would be if supply were to outstrip demand. May sound far fetched but if the economy collapeses suddenly the pressure from immigration and young people wanting their own homes might dry up and we would see an early 90s cycle again

Sapphire

meanmachine wrote: »

Ah, now that's because he's worked so incredibly hard, and didn't buy any ipods before they were invented.

Nothing to do with being born at the right time, in a high inflationary, low house price environment!

Yes, instead let's take ONE day in 1992 when interest rates were temporarily at 15% and use that to claim times were always hard (rubbish, see 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003 for times when it was much cheaper to buy property that it is today).

Saves having to actually look at the evidence.

Well, I can remember buying my first one-bedroom flat in the early 80s (I was only allowed to buy on 2 1/2 times salary) and then really struggling to pay the mortgage every month. I even remember making Christmas presents for my family one year. At that time the majority of people didn't even think of buying property until they were in their late twenties or even early thirties. Nowadays it seems that as soon as kids leave college they are desperate to get on the property 'ladder'.

And 20 years ago most people certainly didn't spend in the way they do nowadays, but lived much more frugally. There wasn't all the advertising that there is in your face everywhere nowadays, and most people didn't look on vacuous celebrities as their gods and try to live their lifestyles – many of their heroes actually deserved being regarded as such.

Before you continue with your ageist rant, remember that many BTLs are quite obviously being bought by people of your age – and that some of these young speculators buy not just one or two, but dozens of properties at a time. They are the ones who are responsible for the rise in property prices, as well as lending institutions that have been allowed to lend money to people in a totally unregulated way, which is the government's fault.

Lomion

http://news.bbc.co.uk/1/shared/spl/hi/guides/456900/456991/html/nn2page1.stm

meanmachine_2

Sapphire wrote: »

Well, I can remember buying my first one-bedroom flat in the early 80s (I was only allowed to buy on 2 1/2 times salary) and then really struggling to pay the mortgage every month.

And 20 years ago most people certainly didn't spend in the way they do nowadays, but lived much more frugally. There wasn't all the advertising

Before you continue with your ageist rant, remember that many BTLs are quite obviously being bought by people of your age – .

One post - and a sea of inaccuracies.

The FTBer age has gone up from 27 to 34 in the last 10 years, so that destroys that nonsense argument.

Yes, of course, advertising was only invented in 2004.

The vast majority of BTLs are bought by people in their 40s.

etc etc etc

And if you only borrowed 2.5 times your salary you could only have been struggling if you were frittering your money away on nonsense like betamax machines, Hillman Imps and package holidays to Benidorm.

Because if you were "struggling" on a mortgage at 2.5 times your salary, you were doing something seriously wrong, especially with MIRAS to help you out.

Let's crunch the numbers, shall we?

Salary: £10,000
Borrowings: £25,000
Take home(approx) £750
Mortgage (at MAXIMUM of 15%): £322
MIRAS relief means actual mortgage: £240

As you can see, the plea of poverty is total rubbish.

And that 15% rate lasted a few months. I'd LOVE interest rates of 15%. That would bring prices right down.

Perfect.