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Home Ownership: Did Earlier Generations Have It Easier?

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A bit old, from the end of last month. Back couldn't find it anywhere on here.

http://www.bbc.co.uk/news/business-24660825

This is what I find shocking about the piece, from the last bit about the most recent buyer!

As it is, they struggle to afford the repayments, which amount to more than 40% of their joint income.

"Half of what comes in goes out in mortgage payments. It's a massive chunk," says Jo.

"We are taking a couple of hundred pounds a month out of savings," she says.

Jo and Eleanor Foy New arrivals like Jo Foy are finding mortgage payments difficult

Anne Hicks, a health visitor, is one of the latest arrivals, having moved in in September. She paid £335,000.

The only way she can afford to live here is on an interest-only mortgage, so may never own the house outright.

"To support three children, that's the only way," she says. "A repayment mortgage would be too much."

They bought in 2013... I didn't know IO mortgages were still about!

Edit: forgot link, and spelling mistakes.... as always! :D

Edited by Matthew C

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Did Earlier Generations Have It Easier?

Every generation after WW2 had it easier.

Fat stupid folk with gadgets and credit mumping about how miserable it is to be in a rented flat when their grandparents likely eeked it out in an unheated shack with another family, and the ones before that were in a hovel enjoying serfdom.

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A bit old, from the end of last month. Back couldn't find it anywhere on here.

http://www.bbc.co.uk/news/business-24660825

This is what I find shocking about the piece, from the last bit about the most recent buyer!

They bought in 2013... I didn't know IO mortgages were still about!

Edit: forgot link, and spelling mistakes.... as always! :D

As should perhaps be the case more often than not, I simply weighed the paths before me, without considering the path on which I had been.

Source:

What matters is not whether a previous cohort had it easier or not, what matters is how we move forward from here.

If we seek to defend the banks at the expense of the people who go out and work for a living so that we can continue to entertain the laughable idea that parts of the South East really have houses worth edging 20x local earnings then what comes next?

HRcWVjO.jpg

So much has changed. When these early boomers stretched themselves to buy then their estimation of the NOMINAL VALUE of their future earnings, given the then entrenched wage inflation, justified their willingness to sign on the dotted line for a mortgage with a nominal value that was intimidating compared to their nominal earnings at the time they took on the mortgage.

However now we have a central bank notionally independent from the political process and de facto captured by the financial services sector in which it is embedded which is de facto fighting wage inflation... and surprise, surprise wage inflation has been a little thin on the ground.

Further, the inflation of a particular asset class - houses- has been sustained first and foremost by an influx of cheap credit created by a globalisation of trade in goods and services unimaginable in the 1970s and allowed to slop around by virtue of a globalisation of capital which was similarly unimaginable back in the day.

Hence if you're asking who had it worse, then I'd ask who had it worse, someone dying of a trivial bacterial infection in 1580, or some old git dying of thirst in a geriatric ward in a sh!t NHS hospital. My answer would be, "Who cares?"

What matters is understanding where we are now, and how we move forward from here, without dwelling for too long on how we happened to get here. My answer is that we are subject to financial capture. We are working for the banks, which is nuts. By analogy, we could achieve the a similar situation by gifting sufficient monopoly power to Thames Water and then fighting like cats in a sack for the chance to get a glass of water not polluted with fecal matter.

Don't hate the players. Hate the game.

Edited by ChairmanOfTheBored

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Did Earlier Generations Have It Easier?

It's more complex than that. I had it way easier than the current generation of people in their 20s looking to buy a place to live. People who bought places two years before I did had it about as hard as people now (interest rates were way higher remember).

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Back 100 years ago a house cost £150... (only £10k today according to inflation calcs) but then wages were very low, or more to the point most people had very low level jobs...there was only a very small middle class. There seems to be a period (1960s) when rates were low and prices were low. 70s-90s still a lot cheaper than now, albeit with periods that were less affordable than the 50s/60s

I think the thing that I just find morally repugnant, just nasty, is that it doesnt need to be this way. We have this attitude that because one cohort of homebuyers overpaid, so should every generation hence forth. Its just cruel. Imagine denying people a cancer cure because people 10 years ago couldnt benefit from it. Thats what we have. Every one should suffer like a few idiots who bought 2003-2007. Take credit out, land values fall. Builders still build. The sky doesnt fall.

Back 100 years ago, my great great grandparents were able to buy a small parcel of land, build with very little state interference, and the semis they built still stand today. They didnt have much money to spend, and for sure it was probably a big investment for them. But the point was the market wasnt rigged against them by a nasty, hostile establishment. Thats what I find incredible. That 100 years on, the elite of this country are far more cruel than they were 100 years ago.

But no, the tories are too close to the big builders who overpaid for their land banks, and the big banks who need fantasy valuations to pretend theyre solvent.

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People who bought places two years before I did had it about as hard as people now (interest rates were way higher remember).

Generally speaking, interest rates were high because inflation was high, so the value of the debt rapidly decreased as wages rose.

My parents were working overtime to pay off their mortgage at the start, but it was the cost of a couple of pints of beer a week by the time they finished. Those taking out low-interest mortgages today won't see the same wage growth to pay it off for them, and will be completely ******ed when interest rates rise.

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Generally speaking, interest rates were high because inflation was high, so the value of the debt rapidly decreased as wages rose.

My parents were working overtime to pay off their mortgage at the start, but it was the cost of a couple of pints of beer a week by the time they finished. Those taking out low-interest mortgages today won't see the same wage growth to pay it off for them, and will be completely ******ed when interest rates rise.

This is the key point.

Back in the 80s of whenever, 5 years after you'd taken out a mortgage the repayments would be a lot more manageable because of wage inflation.

This isn't happening any more, people are stretching themselves and the repayments are still causing problems for them several years later.

This is all with historically low interest rates, so once rates start rising there will probably be people who bought 10 years ago unable to pay their mortgages.

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This is the key point.

Back in the 80s of whenever, 5 years after you'd taken out a mortgage the repayments would be a lot more manageable because of wage inflation.

This isn't happening any more, people are stretching themselves and the repayments are still causing problems for them several years later.

This is all with historically low interest rates, so once rates start rising there will probably be people who bought 10 years ago unable to pay their mortgages.

Yep, the people who bought 20, 30 years ago and say that it was a struggle for them to buy are quite correct. However they knew that they would have a difficult few years and then would be fine because of wage inflation. These were the days when the "property ladder" actually existed; the difficult bit was getting the deposit together to get onto that first step and managing to meet the payments in the first years, after that it was plain sailing.

Anybody who's bought since in the last ten years also had those difficult first years but after that it won't be fine, it will be repossession when mortgage rates go back to normal levels.

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Yep, the people who bought 20, 30 years ago and say that it was a struggle for them to buy are quite correct. However they knew that they would have a difficult few years and then would be fine because of wage inflation. These were the days when the "property ladder" actually existed; the difficult bit was getting the deposit together to get onto that first step and managing to meet the payments in the first years, after that it was plain sailing.

Anybody who's bought since in the last ten years also had those difficult first years but after that it won't be fine, it will be repossession when mortgage rates go back to normal levels.

Indeed, the prospect of a buyer from yesteryear hitting difficulties 10 years into a mortgage would be inconceivable due to wage inflation, but for buyers in 2004/5 it is a real prospect given real wages have gone nowhere.

And since buyers are on average older today, they are closer to peak earnings when they sign too.

The past was characterised by the oft-repeated wisdom that you should buy "the biggest place you can afford", which is a dangerous line to follow today. It should become "the smallest place you can cope with".

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Yep, the people who bought 20, 30 years ago and say that it was a struggle for them to buy are quite correct. However they knew that they would have a difficult few years and then would be fine because of wage inflation. These were the days when the "property ladder" actually existed; the difficult bit was getting the deposit together to get onto that first step and managing to meet the payments in the first years, after that it was plain sailing.

Anybody who's bought since in the last ten years also had those difficult first years but after that it won't be fine, it will be repossession when mortgage rates go back to normal levels.

wage inflation was replaced with lower borrowing costs.

All would have been fine but the clever clever, did I say clever, banks decided to lower the borrowing criteria too...so actually, borrowing costs never went down, prices went up to match the new leverage.

Lately, (since 2000 I would guess), the criteria became ever more lax...hence, buy with a friend, parents joint mortgage and every other scheme to support a price by any financial theivery the Banks could get past the regulators....who were "light touching"..ie, doing nothing.

Hence we now "need" Government help for normal people to even move, let alone get on the ladder.

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<br />I got my first home in the early 90's in my 20's with my then partner, it was a wonderful 3 bedroom terraced in an ok community in Cambs  <img src='http://www.housepricecrash.co.uk/forum/public/style_emoticons/default/smile.gif' class='bbc_emoticon' alt=':)' />   It turned out to be my best (not most expensive) home of the lot.<br />I have a big family Irish descended catholic family with many close cousins and close friends of similar age who ALL got their own places, life just seemed so much easier then.<br /><br />I look at the younger members of the family now along with the grown up kids of my friends and I see just about all of them at home or renting some dump.<br />Sadly the wonderful types of homes we used to buy are now BTL owned with some unmarried woman with a handful of kids on HB living there or migrants who cram as many as they can in.<br /><br />I despair for aspirational young working adults, and even for those that have just thrown the towel in. I just scrape reluctantly into the baby boomer generation and am sadly ashamed of that take it all i'm allright mentality.<br />
<br /><br /><br />

Respect

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I got my first home in the early 90's in my 20's with my then partner, it was a wonderful 3 bedroom terraced in an ok community in Cambs :) It turned out to be my best (not most expensive) home of the lot.

I have a big family Irish descended catholic family with many close cousins and close friends of similar age who ALL got their own places, life just seemed so much easier then.

I look at the younger members of the family now along with the grown up kids of my friends and I see just about all of them at home or renting some dump.

Sadly the wonderful types of homes we used to buy are now BTL owned with some unmarried woman with a handful of kids on HB living there or migrants who cram as many as they can in.

I despair for aspirational young working adults, and even for those that have just thrown the towel in. I just scrape reluctantly into the baby boomer generation and am sadly ashamed of that take it all i'm allright mentality.

I know exactly what you mean...

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Indeed, the prospect of a buyer from yesteryear hitting difficulties 10 years into a mortgage would be inconceivable due to wage inflation, but for buyers in 2004/5 it is a real prospect given real wages have gone nowhere.

With the rise of IO mortgages (half of all oustanding mortgages in London are IO) and a low wage inflation environment they could still be having problems 25 or 30 years after taking out the mortgage.

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With the rise of IO mortgages (half of all oustanding mortgages in London are IO) and a low wage inflation environment they could still be having problems 25 or 30 years after taking out the mortgage.

But doesn't everyone know that renting is dead money ?

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My old man (RIP) bought his first place in 1972/3 I think, a small but reasonable terrace in a West London postcode (W7) for £6499 if memory serves me right. (it was certainly around this figure). Can't recall what the deposit was but there was one, and both parents had to have at least two interviews with the Bank Manager to secure the mortgage

Peanuts you may think but he had just left the RN (after a 22 year stretch) and was working as an assistant manager in Marks and Sparks at the time so higher end retail. His wages at the time were about £40 a week.

Looking at the multiples they were sensible cost was around 3 times main breadwinner earnings, back then was a different time, I an my brother were still at school so mum was expected to be the home maker and other than child benefit has no income (if I can call it that of her own).

So was it harder? Probably not but there are key differences. Interest Rates fluctuated and could be punitive (I myself had a mortgage some years later on Black Wednesday and just managed to hang in there with my fingernails), banks performed proper due diligence and the crux there were not dozens of people chasing the same property!!

Different times indeed and they cannot really be compared.

Edit to add,

I secured my first mortgage around 1986, wage inflation certainly played a huge part in paying it down, but as I have already pointed out there were significant bends in the road. Much higher interest rates and unforeseen events like Sterling crashing out of the ERM.

I knew quite a few people around that time who had borrowed sensibly, were not behind (at the time with their mortgages) who would go on to lose their properties as a result of that episode!!

Edited by geezer466

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just to add. we were just finishing apprenticeships, nurse training, a few years in jobs, and one or two were coming out of uni, we were all just average people with a working class background with a hard work mentality. normal job.

corrected.

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Yep, the people who bought 20, 30 years ago and say that it was a struggle for them to buy are quite correct. However they knew that they would have a difficult few years and then would be fine because of wage inflation. These were the days when the "property ladder" actually existed; the difficult bit was getting the deposit together to get onto that first step and managing to meet the payments in the first years, after that it was plain sailing.

Anybody who's bought since in the last ten years also had those difficult first years but after that it won't be fine, it will be repossession when mortgage rates go back to normal levels.

Also....going back 30 odd years there were not all the things we have now that people want to spend money on, a huge choice of electrical gadgets, wonderful places to visit, all kinds of different foods and drinks, really good restaurants and a huge choice in both clothing and cars.......so people travel further, there are all manner of different entertainments laid on to spend money on, more electricity is used per person and more fuel is used per person and we are spending on eating and drinking more......cut out much of what we have been used to getting at lower prices and then more could be diverted into paying down the home loan debt.....choices. ;)

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With the rise of IO mortgages (half of all oustanding mortgages in London are IO) and a low wage inflation environment they could still be having problems 25 or 30 years after taking out the mortgage.

Well, lets put it like this: The (repayment) mortgage we took out in late 2001 - 3x joint salary at the time - is, 12 years on, still significantly over 1x joint salary; add in the second mortgage for moving in 2006 and we are at about 2x joint.

Even with epic low interest rates, repayments are about 24% of take home pay.

The other problem with low IRs is that overpayments make much less difference.

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Also....going back 30 odd years there were not all the things we have now that people want to spend money on, a huge choice of electrical gadgets, wonderful places to visit, all kinds of different foods and drinks, really good restaurants and a huge choice in both clothing and cars.......so people travel further, there are all manner of different entertainments laid on to spend money on, more electricity is used per person and more fuel is used per person and we are spending on eating and drinking more......cut out much of what we have been used to getting at lower prices and then more could be diverted into paying down the home loan debt.....choices. ;)

I'm not sure about this.. if I add up all the electric appliances in my house, I'm still looking at less than a month's take home pay.

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I'm not sure about this.. if I add up all the electric appliances in my house, I'm still looking at less than a month's take home pay.

......Yes I agree, but it is not only the gadgets it is the electricity cost and subscription costs to use those gadgets....on top of all the other items people want and need that they have to pay for....many of them they expect and demand because we over the years now have a better quality of life materially, but in other ways our quality of life has got worse. ;)

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I'm not sure about this.. if I add up all the electric appliances in my house, I'm still looking at less than a month's take home pay.

No it is a valid point. 40 years ago most people only had a telly and a radiogram for entertainment (if they were lucky). A lot of houses would not have had central heating, Holidays were a week in Cornwall or something very exotic on a plane like Benidorm or Ibiza. There was also no such thing as the Internet or mobile phones.

Same token when I left school (1976) only around 11% of those leaves went on to college and or Uni, on the plus side this did mean less debt was in the system.

Consumerism has taken it's toll it stands to reason it will take a larger proportion of the take home wage than it did back then.

It has still not finished, they are forever upgrading our TV sets, latest laptop, mobile phone ect. General Motors have just spent $560Millions sponsoring Man Utd's shirts for the next 7 years.

Such is the power of the modern media today many will base their decision on a choice of motor or bank from a logo on a bloody footballers shirt?

It's all part of the game.

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Different times indeed and they cannot really be compared.

Home ownership rates were rising then and are falling now. Either people no longer want to live in owner-occupier housing or it's harder to buy.

Edited by Dorkins

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Also....going back 30 odd years there were not all the things we have now that people want to spend money on, a huge choice of electrical gadgets, wonderful places to visit, all kinds of different foods and drinks, really good restaurants and a huge choice in both clothing and cars.......so people travel further, there are all manner of different entertainments laid on to spend money on, more electricity is used per person and more fuel is used per person and we are spending on eating and drinking more......cut out much of what we have been used to getting at lower prices and then more could be diverted into paying down the home loan debt.....choices. ;)

I have to disagree with this - it's one of the boomer straw man arguments as to why housing is not affordable. Even if the average family lived like paupers and put all their money towards housing, it would still be inordinately expensive compared to average salaries.

What has changed, perhaps, is the expectation that a family should have a semi or a detached house, with at least three bedrooms. This wasn't the norm before the 1970s, lots of families lived in two or just one room.

The expectation that women will work as well has been a factor. I'm not saying women shouldn't have equal opportunities with men - but the feminist dogma that said women MUST work helped create larger family incomes and IMO drove house prices up.

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It seems impossible for this conversation not to drift towards central heating, foreign holidays and electronics every time it pops up anywhere, as if any of those things are related to home ownership.

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