Percentage of income spent on mortgage low compared to 40 years ago

Gemmie57

I took part in this week's poll on the percentage of income spent on mortgages or rent and I was surprised to see that the average for people in their 30s and 40s was about a third and the most was about 45%.  When my husband and I got married in 1980 we bought a house by saving hard and not spending a penny on anything that wasn't necessary and the mortgage and endowment (which we all had in those days) cost all my salary and I was the higher earner - we were paying 17% at one stage.  This was for a very modest house with second hand contents.  They say it's hard for people these days (which it is in London) and deposits take serious sacrifices to save up for as they used to, but it was hard for us as well, but there were very few rental opportunities available and parents tended to charge their children quite a bit to live with them, so there wasn't much choice.  The upside is that starting early and doing it tough in the early days meant that by the time we were in our mid 50s, our mortgage payment was insignificant, so there is hope for people who struggle at the moment - it should get better!

riotlady

I think a big difficulty is getting the mortgage these days, rather than paying it. With affordability checks I don’t think you’d get a mortgage that cost the entirety of the higher earners pay check (quite rightly as that sounds terrifying!) 

Snookie12cat

As above, the problem now is that people can't get mortgages that would take up 50%+ of their income. So it's harder for people to initially get on the ladder because prices are so much more than salary.

If the house costs 8or9x someones salary which it will in many places, but the bank will lend max 5x, you see the problem. 

crispy99

Agree with the replies, in the south east it’s far to difficult to get a mortgage so being motivated to sacrifice a lot of your income on a mortgage isn’t even an option. I need a 4 bed house, earn 75k with a 70k deposit and is not even half of what I need. If I move anywhere that’s remotely lower purchase price I’d need to find another job so I’m absolutely stuck paying 1900 a month in rent. 

fortgrange

Bought a flat in London in 1989 for £66000, sold it in 1995 for £36000 
15% interest rates made negative equity common place.

Nat West gave us a 120% mortgage on a 3 bed semi which we paid £85000 for.

They knew their onions, sold in 2015 for £425000. It’s just gone on the market again for £700000 

Despite 15% interest rates and negative equity I’m glad I got on the ladder then, rather than today.

GentleGiant01

fortgrange said:

Bought a flat in London in 1989 for £66000, sold it in 1995 for £36000 
15% interest rates made negative equity common place.

Nat West gave us a 120% mortgage on a 3 bed semi which we paid £85000 for.

They knew their onions, sold in 2015 for £425000. It’s just gone on the market again for £700000 

Despite 15% interest rates and negative equity I’m glad I got on the ladder then, rather than today.

That is a very scary thought - did the negative equity worry you? 

fortgrange

The 15% interest rates were more scary.

I always thought prices would bounce back and £85k for a 3 bed semi even in 1989 seemed like a bargain, even if we did have a £100k mortgage 

I don’t think a lender would even consider a 120% mortgage these days.

Just seems ridiculous that a house I paid £85k for is on the market at £700k 27 years later. Although I do think it is way overpriced.

MaryNB

fortgrange said:

The 15% interest rates were more scary.

I always thought prices would bounce back and £85k for a 3 bed semi even in 1989 seemed like a bargain, even if we did have a £100k mortgage 

I don’t think a lender would even consider a 120% mortgage these days.

Just seems ridiculous that a house I paid £85k for is on the market at £700k 27 years later. Although I do think it is way overpriced.

Max anyone will go to is 95%. For a period in 2020 (when people were particularly nervous about the economic impacts of covid) all but maybe two lenders wouldn't go higher than 85%.

Thrugelmir

riotlady said:

I think a big difficulty is getting the mortgage these days, rather than paying it.

In the days of building societies providing the bulk of mortgage funding. Wasn’t uncommon to go on a waiting list and have to save with the BS for a minimum of 2 years. Wasn’t the case of unlimited funding.

MovingForwards

That poll linked to the 'how much are your bills' poll and wasn't one about how much is rent / mortgage, therefore the data is wrong.

landsbeyondthesea

You saved hard and purchased - well done. But you should also have benefited from MIRAS for a long period, and applying today's affordability criteria you might well have been unmortgageable with payments greater than 50% of joint income. Lending criteria change and for some aspiring to buy today they could be harder times than you found them in 1983.