Home Ownership: Did Earlier Generations Have It Easier?

[Billy soy]

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.

So it's pretty much a dead cert that govt policy will be to never raise rates for at least a generation and definitely not before the boomers have started to become irrelevant in the polls.

[Si1]

Deleted

Edited December 12, 2013 by Si1

[fluffy666]

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.

Well.. previously it was expected that the woman would give up work when kids came along, so the mortgage should be based on a single income.

Now, in the interests of equality you could say that either partner could give up work to do childcare. But saying that neither can, because of joint-income-based mortgages, seems to make us all worse off..

I think the most poisonous effect of the 1970s house buying conditions is the meme that you should 'stretch yourself to the limit' when buying a house - because when wage/price inflation is 10-20% a year, that is exactly the right thing to do. But then the parents who benefited from this - and think that they could have 'done better' by stretching more - encourage their children to do the same. Except that in a world of near-flat nominal wages, an onerous debt stays onerous for a lot, lot longer; the advice is wrong.

[long time lurking]

Edited December 12, 2013 by long time lurking

[Boomer Baby]

Bought our first house in 1970, a new-build, 2 bed semi-detached, price (I believe) £4k. I earned just under £1k pa, my wife just over £1k. Deposit found by a year or so of saving plus gift from BOMD.

Getting a mortgage involved proving income, itemising expenditure and demonstrating a record of saving plus building society manager warnings the maximum they would countenance to service a mortgage was a third of take home pay, a quarter was what we should be aiming for!

To say we were part of a lucky generation is woefully inadequate to describe the imbalance between the relative ease with which we could buy a house and the situation now.

Zoopla estimates cost of that 1970 property is currently £163k while same job I had in 1970 now pays £22.5k, i.e. income multiple has gone from 4 x salary to more than 7 x salary!

Central heating, washing machines, TV's, fridges and foreign holiday comparisons have more to do with technological and mass production progress than generational attitudes. If I could have bought an iPhone for £1.70 per month in 1970 I would have!

If the situation makes me angry and frustrated I can only imagine the feelings of people 30 or 40 years younger.

[Fromage Frais]

No so long ago before I went to university my girlfriend at the time owned her own house.

Salary 13,000 admin level job or so house cost 35,000 as a fixer upper but no structural issues.

Now same house probably 90-100,000

Her equivalent salary now maybe 14-16,000 and all the other bills and food doubled or so.

from 2/3 times salary to 5/6 times with all the other bills raised.

Imagine how good that would be for morale now get crap job = buy a crap house work hard and get a good job = buy a good house.

Edited December 12, 2013 by Fromage Frais

[geezer466]

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.

In the old days people had to save a deposit (usually in the region of 20 - 25%) to buy a house. Interviews with managers at the bank were common him behind a desk you and your partner sat in front like naughty school children. It mattered how long you had been saving with that bank and if you did not have sufficient deposit you were snookered before you even got started.

It stands to reason the debate will always drift back to consumerism. People had less things to spend money on back then so they saved it and saved it quicker.

They got larger deposits together such was the requirements of the bank. As someone else has already mentioned people were happy with quite ordinary houses something they could call their own. Property porn on the TV was yet to be invented.

On the other side of the coin affordability was the key there was not so much competition in the buying game values/prices were more stable.

Yes they were increasing but that was more to do with inflation and wages rising in response not the cut throat competition to buy and who can get the most from the bank we see these days.

[The Knimbies who say No]

In the old days people had to save a deposit (usually in the region of 20 - 25%) to buy a house. Interviews with managers at the bank were common him behind a desk you and your partner sat in front like naughty school children. It mattered how long you had been saving with that bank and if you did not have sufficient deposit you were snookered before you even got started.

It stands to reason the debate will always drift back to consumerism. People had less things to spend money on back then so they saved it and saved it quicker.

They got larger deposits together such was the requirements of the bank. As someone else has already mentioned people were happy with quite ordinary houses something they could call their own. Property porn on the TV was yet to be invented.

On the other side of the coin affordability was the key there was not so much competition in the buying game values/prices were more stable.

Yes they were increasing but that was more to do with inflation and wages rising in response not the cut throat competition to buy and who can get the most from the bank we see these days.

This isn't really true though, is it? People have wasted money since year dot. So saving for a couple of years got you a mortgage, fair enough. These days people have sometimes been accumulating what they can for a decade and are not close enough to give them an acceptable cushion. My old man stated that 'young people want it all now' a while back, only for my mum to point out that he was a resolute spender in his youth. Things could always be bought on the tick. Sure, you couldn't get into the absurd levels of debt people seem to enjoy these days but it was still possible to fritter money away.

Besides, if all these people were so prudent, why are there so many skint oldies today whose entire financial planning boils down to shifting one massively overpriced asset onto someone else?

Edited December 12, 2013 by The B.L.T.

[worried1]

As everyone else has mentioned, the standard arguments trotted out by the boomers are that interest rates were much higher and there was much less spending on gadgets etc.

The interest rates argument is valid, but still doesn't really explain the gap. If I could buy the average house for 3x the average salary on an 8% mortgages, I'd do it much more quickly than I would the same house fo 8x the average salary on a 3% mortgage.

Of course, my interest repayment would be exactly the same, but with the higher loan value, I'd still have to find almost 3 times as much to pay off the initial sum borrowed and I'd be much more exposed to rising interest rates than I would be if they were already historically quite high.

The gadgets argument is only valid if people are spending a third or so of their income on gadgets each month. The odd feww hundred quid here and there makes absolutely no material difference with house prices this much higher than 30 years ago.

[Austin Allegro]

As everyone else has mentioned, the standard arguments trotted out by the boomers are that interest rates were much higher and there was much less spending on gadgets etc.

The interest rates argument is valid, but still doesn't really explain the gap. If I could buy the average house for 3x the average salary on an 8% mortgages, I'd do it much more quickly than I would the same house fo 8x the average salary on a 3% mortgage.

Of course, my interest repayment would be exactly the same, but with the higher loan value, I'd still have to find almost 3 times as much to pay off the initial sum borrowed and I'd be much more exposed to rising interest rates than I would be if they were already historically quite high.

The gadgets argument is only valid if people are spending a third or so of their income on gadgets each month. The odd feww hundred quid here and there makes absolutely no material difference with house prices this much higher than 30 years ago.

Good point.

What people don't or can't accept today is that they are poorer than their parents' generation. The cracks have been papered over with IO mortgages, joint incomes, credit, consumer tat, foreign holidays, longer commutes etc, but things that our parents enjoyed, like owning a freehold, have become unattainable for most people now. That's why boomers are disliked, because they were a lucky blip in history who had enormous material advantages.

[Hold Fast]

Well.. previously it was expected that the woman would give up work when kids came along, so the mortgage should be based on a single income.

Now, in the interests of equality you could say that either partner could give up work to do childcare. But saying that neither can, because of joint-income-based mortgages, seems to make us all worse off..

Following on fom this and Austin Allegro's post, personally I think a lot of all this (HPI, HPC etc) comes down to the dual income argument applied to this lovely graph posted by Quicken on the fav charts thread:

Many pro HPI people would like to think that the big gap between those lines (2001 ish onwards) and it's failure to repeat the cycle shown in the late 80s, is due to households now being dual income by default. The famous "new paradigm!!!" stage as it were.

As many people on here have stated though, life isn't necessarily like that. Divorces, kids, lazyness etc all happen and maybe there was a reason banks used to only count one full income.

[Si1]

Following on fom this and Austin Allegro's post, personally I think a lot of all this (HPI, HPC etc) comes down to the dual income argument applied to this lovely graph posted by Quicken on the fav charts thread:

Many pro HPI people would like to think that the big gap between those lines (2001 ish onwards) and it's failure to repeat the cycle shown in the late 80s, is due to households now being dual income by default. The famous "new paradigm!!!" stage as it were.

As many people on here have stated though, life isn't necessarily like that. Divorces, kids, lazyness etc all happen and maybe there was a reason banks used to only count one full income.

The dependency ratio is higher, which implies less income generation per household on average

So for every working couple there is also a part time tax credits couple or a public sector pensioner to bring the averages down

[worried1]

Good point.

What people don't or can't accept today is that they are poorer than their parents' generation. The cracks have been papered over with IO mortgages, joint incomes, credit, consumer tat, foreign holidays, longer commutes etc, but things that our parents enjoyed, like owning a freehold, have become unattainable for most people now. That's why boomers are disliked, because they were a lucky blip in history who had enormous material advantages.

Exactly, and it was only a blip as well. The generations prior to them had less chance of owning a home than Gen X/Y do today.

The lifestyles are totally different, much more so than two directly descending generations in the same country should be.

As you say, the boomers had security by buying a house at a reasonable multiple of their income, fuller employment, better wage inflation and much better pensions. For Gen X/Y, the lifestyle side is definitely better with access to better holidays, more disposable income and less responsibility to settle down so young.

The latter two advantages are purely driven by the lack of affordable housing and jobs that pay enough to buy one. I like having disposable income, I'd much rather have a house to spend it on, but even saving every penny for 20 years isn't going to make much of a dent.

As you get older, those lifestyle benefits start to mean much less and a lot of people will start to resent the fact that they are paying more for their 2 bed flat in Woking than their parents paid for the 4 bed detached in Weybridge. That's what allows the boomers to accuse them of spending too much on their lifestyle in their early years, but the amounts really are immaterial unless someone has been REALLY stupid.

[Stainless Sam]

Yes, it was massively easier when we first bought in 1980. The mortgage, at eye watering interest rates, despite saving a 20% deposit, was a truly uncomfortable monthly hit but somehow we made it easy. I still have the stack of mortgage rate increase notifications, including the one where it went to 16.5% after Lawson screwed up so spectacularly.

We were blessed by having one, very old car that I could maintain myself. On the frequent occasions that is was out of action, or if we were short of money. I could walk to work. We were unable to take out equity for trinkets or foreign holidays but were able to get a small mortgage extension to pay for new windows and double glazing, which I fitted myself. Credit cards were used for petrol and a weekly shop and paid off in full every month.

There were no university fees to pay, because I did everything, including two degrees at night school for 12 years. Without that, I wouldn't have climbed the slippery pole to a well paid (private sector) job and a fine pension.

Although foreign holidays were available we didn't feel any need to take our first (an early Spring week in Crete) until the kids were in their teens. We didn't need to spend £40 a month on Sky or £35 on a mobile phone. Wine and beer was home brewed and pretty disgusting stuff by the standards of my now very mature palate. We went to the pub for the bonfire night display and maybe on New Year's Eve. We ate out a couple of times a year.

Things were so easy for us that we didn't even feel the need to move house until the very bottom of the market in the mid-90s, taking another uncomfortable mortgage but one which was payable, even if times got rough, before we were in our 50s. Once it was paid, we started to give the ball a kick and take two holidays a year.

Yes, it was a doddle back then. I'm amazed that my daughter and her husband, having bought a repo at the bottom of this particular cycle appear to be taking a similar apporach to life. It must be in the genes.

.

Edited December 12, 2013 by Stainless Sam

[iamnumerate]

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.

A post that sums up the situation and why we are in that situation.

[winkie]

A post that sums up the situation and why we are in that situation.

[Austin Allegro]

Exactly, and it was only a blip as well. The generations prior to them had less chance of owning a home than Gen X/Y do today.

The lifestyles are totally different, much more so than two directly descending generations in the same country should be.

As you say, the boomers had security by buying a house at a reasonable multiple of their income, fuller employment, better wage inflation and much better pensions. For Gen X/Y, the lifestyle side is definitely better with access to better holidays, more disposable income and less responsibility to settle down so young.

The latter two advantages are purely driven by the lack of affordable housing and jobs that pay enough to buy one. I like having disposable income, I'd much rather have a house to spend it on, but even saving every penny for 20 years isn't going to make much of a dent.

As you get older, those lifestyle benefits start to mean much less and a lot of people will start to resent the fact that they are paying more for their 2 bed flat in Woking than their parents paid for the 4 bed detached in Weybridge. That's what allows the boomers to accuse them of spending too much on their lifestyle in their early years, but the amounts really are immaterial unless someone has been REALLY stupid.

Yes. The gaping difference between the boomer and pre-boomer generation (as illustrated most graphically by Alf Garnett's fights with the Randy Scouse Git in 'Til Death Us Do Part', was ideological. The difference between the boomer and post boomer generations is more economical. The post -boomers tend to share the sixties ideology of their parents, in fact, follow it almost slavishly in many ways, but economically they are poles apart. I don't think this is so obvious because it isn't based on easy to understand differences like how long your hair is or what music you listen to.

[cybernoid]

That's why boomers are disliked, because they were a lucky blip in history who had enormous material advantages.

What is abhorrent about some of them is their firm denial of the fact they were lucky and had it easier, rather than the fact that they had it easier. You can explain it over and over until you are blue in the face, use glove puppets, cite studies, books, etc and they will argue that black is white until the grave. That is difficult to 'like'.

Those that accept it with humility and understanding of the next generations plight you can have no problem with, but sadly those are rare.

[Si1]

What is abhorrent about some of them is their firm denial of the fact they were lucky and had it easier, rather than the fact that they had it easier. You can explain it over and over until you are blue in the face, use glove puppets, cite studies, books, etc and they will argue that black is white until the grave. That is difficult to 'like'.

Those that accept it with humility and understanding of the next generations plight you can have no problem with, but sadly those are rare.

Indeed

It's having someone look down their nose at you, ridicule you, and insult you, who has half your intelligence, and barely subconciously acts and vote in a brazenly antisocial manner to maintain their advantage, that grates

[silver surfer]

Thats what I find incredible. That 100 years on, the elite of this country are far more cruel than they were 100 years ago.

Crueller than the elites who refused a National Health Service, or sanctioned capital and corporal punishment, or sent millions of men to their deaths at Passchendaele and the Somme?

[silver surfer]

I think the most poisonous effect of the 1970s house buying conditions is the meme that you should 'stretch yourself to the limit' when buying a house - because when wage/price inflation is 10-20% a year, that is exactly the right thing to do. But then the parents who benefited from this - and think that they could have 'done better' by stretching more - encourage their children to do the same. Except that in a world of near-flat nominal wages, an onerous debt stays onerous for a lot, lot longer; the advice is wrong.

+1

You've nailed it.

[renting til I die]

Following on fom this and Austin Allegro's post, personally I think a lot of all this (HPI, HPC etc) comes down to the dual income argument applied to this lovely graph posted by Quicken on the fav charts thread:

Many pro HPI people would like to think that the big gap between those lines (2001 ish onwards) and it's failure to repeat the cycle shown in the late 80s, is due to households now being dual income by default. The famous "new paradigm!!!" stage as it were.

As many people on here have stated though, life isn't necessarily like that. Divorces, kids, lazyness etc all happen and maybe there was a reason banks used to only count one full income.

Of course there have been dual incomes since the late 1970's. I would have thought the quick increase of house prices in the late 80's could be out down to that but not the increase in the 2000's?

Is there any more data on this from before 1987?

Edited December 12, 2013 by Matthew C

[Si1]

+1

You've nailed it.

Indeed

This is a key mechanism in super cycle currently playing out over multiple decades

[winkie]

Indeed

This is a key mechanism in super cycle currently playing out over multiple decades

It is true that the debt today will linger for much longer.....in other words debt got repaid quicker, people could move up the so called ladder faster and debt was repaid in full by the time of retirement, say 60-65 so then having an unencumbered house and a fair liveable pension plus often also a works pension for the rest of life, the rest of life can then be lived debt free.....less debt gives more choices.

The financial lending rules lead the behaviours......today there are few rules, further debt created and advanced from equity, debt allowed to mount up not always being reduced and large mortgages still outstanding when no work forthcoming, to old or sick to work....so the time span of debt or the term of debt (and the low interest rates) has extended further over the years to help keep the repayment or servicing affordable but not repayable.....

[Dorkins]

Yes, it was massively easier when we first bought in 1980. The mortgage, at eye watering interest rates, despite saving a 20% deposit, was a truly uncomfortable monthly hit but somehow we made it easy. I still have the stack of mortgage rate increase notifications, including the one where it went to 16.5% after Lawson screwed up so spectacularly.

How old were you? What was the income multiple? Were you and your wife both working full time?

Yes, it was a doddle back then. I'm amazed that my daughter and her husband, having bought a repo at the bottom of this particular cycle appear to be taking a similar apporach to life. It must be in the genes.

How old are they? What was the income multiple? Are they both working full time?