Anyone concerned by interest rates rising re mortgage?

[gant]

Goodnight.
It would have been interesting to know if you think we should go back to having large council housing estates and whether they'd work second time round.

 

[albaPhenom]

Goodnight.
It would have been interesting to know if you think we should go back to having large council housing estates and whether they'd work second time round.

I think the government should be and should have been investing in adequate social housing. What good arguments are there against this?

 

[Mottie]

Goodnight.
It would have been interesting to know if you think we should go back to having large council housing estates and whether they'd work second time round.

With the huge number of different 'communities' in this country nowdays, I reckon it would be gang warfare on a massive scale.

 

[motorbiking]

Don’t have any mortgages, paid both off when I was in my early 30s.

There is another side to this…

House price growth will slow and savers will be subsiding borrowers less.

 

[noseall]

With the huge number of different 'communities' in this country nowdays, I reckon it would be gang warfare on a massive scale.

They haven't all disappeared. Some are still privately owned, other houses are not. Alternatively, more affordable homes could be slotted in with other housing perhaps.

 

[motorbiking]

That’s supposedly how it works now. New housing estates are a mix of private ownership and buy/rent housing association stock.

 

[Mottie]

Alternatively, more affordable homes could be slotted in with other housing perhaps.

After working hard, buying your own home and paying a mortgage to choose where you live, would you like an affordable home next door to you with housing association tenants?

 

[cwhaley]

It depends a lot on which years you look at, and which region. House prices round here are only about 30% higher than their mid 2000s peak. Earnings in this region are meant to be about 45% higher since then. At that time, the average mortgage rate was about 5.5%. So, if anything, mortgage costs are still cheaper right now than in the mid 2000s.

Oh no I'm talking about the eras people have mentioned to me -- everything from the late 1960s to the late 1990s.

For example, my home sold for £26k in 1996 and - before we did the extension in 2021 - it was valued at £185,000, so an increase of over 600%. Have wages increased that much?

My Dad's first house in 1973 was purchased for £7.5k with an interest rate of 9%. That rate sounds very high (many on here keep referencing the days of double figure rates), but when the house was only around 2.5x his annual salary the repayments would be much smaller in comparison. The mid-2000s is fairly recent, and not an era anybody has referenced when telling me things are getting back to normal.

 

[Mottie]

Oh no I'm talking about the eras people have mentioned to me -- everything from the late 1960s to the late 1990s.

For example, my home sold for £26k in 1996 and - before we did the extension in 2021 - it was valued at £185,000, so an increase of over 600%. Have wages increased that much?

My Dad's first house in 1973 was purchased for £7.5k with an interest rate of 9%. That rate sounds very high (many on here keep referencing the days of double figure rates), but when the house was only around 2.5x his annual salary the repayments would be much smaller in comparison. The mid-2000s is fairly recent, and not an era anybody has referenced when telling me things are getting back to normal.

IMO that's still the wrong way to look at it. Assuming a 10% deposit, on the £7.5k house, that left a mortgage of £6.75K @ 9%. What was that mortgage percentage in relation to the average wage compared then to the percentage that it would have been using the same method a few years ago when the base rate was 0.5%? Average wages compared to houses can only be fairly compared if the base rate hasn't moved. You can bet that if the base rate had remained at 9%, since 1973, none of our houses would be priced anywhere near the silly prices they are now.

Also, when we bought our house in 1984, you could only get a mortgage from a building society as long as you had a 10% deposit and you had to be saving with them for a good time and even then, you went on a waiting list for the mortgage to become available. The days of no deposit and 125% mortgages made houses more expensive.

 

[JonathanM]

For example, my home sold for £26k in 1996 and - before we did the extension in 2021 - it was valued at £185,000, so an increase of over 600%. Have wages increased that much?

It depends on where you are and there are always outliers. Round the corner from where I grew up, there is a long road of bog standard 1930s 3 bed suburban semis. I have always used them as a sounding board for house prices in this region. In 1992, just after prices had fallen back from the boom, they sold for £58K. In 2019 they sold for £170K. At the peak, last autumn, they were selling for £210K. Before that last spurt upwards, I was actually thinking they weren't bad value.

This article from full fact puts things into perspective. Yes, house prices have outstripped wages, but not by a huge amount. And bearing in mind mortgages were more like 8.0% in the 1990s, overall affordability will not be that different if mortgages now reach 6.5%. I'm not saying it's not tough, just that it's not so different to what we've been through before. What is very different this time is the rate of change.

In cash terms, in 1990, the average household would therefore have had a disposable household income of £12,353, at a time when the average house cost about £57,726.

By comparison, in 2020, the average household income was £37,108 and the average house price was about £234,947.

During the last 30 years, therefore, the average household income has tripled, but the average house price has quadrupled. This may have made buying a house less affordable (although this is also affected by changing interest rates), but not to the extent that the chart on this post suggested.

 

[jeds]

The 16% or 17% rates were as much an aberration as the 0.5% rates. Taking those extremes out of the equation, the average rate always hovered somewhere around 4% or 6%. I hear a lot of people on the radio asking; 'when will rates return to normal'? It isn't nice and you may not like it, but you need to get used to it because the rate over the last 4 or 5 months is more 'normal' than when it was a percent or two. And I'll bet that by the end of 2024 it won't have dropped much.

Back in the day, when the mortgage got so high and left no income at all, we extended the term, took mortgage holidays, took on extra work/jobs - anything to grind through it. And even then it was extremely hard and many people weren't able to survive it. A lot of people won't survive this, but those that do won't do it by moaning and complaining and waiting around for a hand out.

 

[cwhaley]

Also, when we bought our house in 1984, you could only get a mortgage from a building society as long as you had a 10% deposit and you had to be saving with them for a good time and even then, you went on a waiting list for the mortgage to become available. The days of no deposit and 125% mortgages made houses more expensive.

Yes I will say a few have told me that. It sounded like an endless cycle of going to the building society only to be told to come back when they have a bit more.

If we not longer have that worry then that's progress which is good! I'll still stand by belief that outgoings for mortgages (or rent) now represent a greater chunk of the household budget, and what goes in/out each month is all that matters.

 

[SirGalahad]

UK Core inflation is still too high -

 

[Ivor Windybottom]

The stupid decision to give pensioners a 10% pay rise was definitely inflationary. Almost nobody else's pay has kept up with inflation, everyone else is now poorer.

The younger people will now have to endure higher rates on their mortgages to balance the actions of pensioners swanning about blowing their money on tat all over the place.

The intergenerational situation is completely out of balance, if there's any justice in this stupid country then next year's pension rise will be zero.

The current lot of oldies need to recognise that they're THE luckiest generation to have ever lived, and probably will remain so well beyond their own lifetimes, possibly for ever. Many have taken far more out than they ever paid in. They need to pull their fair share of the weight.

Cue the cries of "But I paid my stamp!"

 

[gant]

I think the government should be and should have been investing in adequate social housing. What good arguments are there against this?

What the commie councils tend to do despite having all the infra structure to support their tenants is to offload the ones that are a handful into private sector rental housing.
The theory I had explained to me by a labour councillor, was the homeowners would set an example too these tenants who are a handful to mend their ways.
So much for the theory as in practice it's known not to work.
By all means have your social housing, just keep it in house rather than share the burden.