80's house prices & 15% interest..

[454697819]

Because I am no good at working out maths problems like this I would like some .org help.

The number of times I get sick of hearing "oooh you dont know your born, in the 80's we had 15% interest on our mortgages"

What I want to know is if my house in the 80's was worth 30k if that, would I be better of with 15% interest on a 30k mortgage or my mortgage of £150k @ 5.9%?

if it helps I dont remeber the 80's as such as I was born in 85...:p

I know wages comes into it because they have gone up with inflation but not the same rate as houses, (thats another discussion I have had with oldies) :smt071

Cheers all

Alex

[timwilky]

Alex

The mad rates didn't last too long, My mortgage hurt when it went to 15% but 2 years later it was back down, more importantly I had raised my payments when it went up, and never reduced them when it went down. Consequently I paid off my mortgage 8 years early.

So really your requirement should be based on the average annual mortgage rates applicable from 1980. I am sure the rates must be published somewhere. So not just a simple compound interest problem

[kitkat]

I remember my mum and dad really struggling when the mortgage rates went up to 15%. They had just bought a brand new house and things were tight anyway. Got to point where mum was considering selling house, when the rates started dropping again. as for actual figures - not a clue sorry

[Bri w]

The problem for people back then was if you got your mortgage based on what you could afford when the rate was lower. When it went up it really hurt. Wages tracked the interest rates but there was always a time lag between whilst they played catch up.

In truth, apart from an opportunity to sign on to a fixed rate mortgage every few years with a sign on fee, you take whatever mortgage you can afford irrespective of how much you may pay back over x many years.

And as Tim says you will get opportunities to pay it off earlier anyway. Its amazing how much difference there is even if you pay off just an extra £10-£20 a month.

[keith_d]

Yep, bought my first house with a girlfriend just before the interest rates skyrocketed. We went from having a decent amount of disposable income to being completely skint within a few months.

Keith.

[L3nny]

My parents bought a 4 bed detatched house in the cotswolds in 1984.

My dad was a school teacher and my mum took time off to look after us kids.

I don't know what he was earning then or how much the mortgage was but I know there is no way a teacher would be able to afford a house like that these days.

[Swin]

my house in colchester went from under £300 per month mortgage to around £550 - completely ruined me for a good few years

[Dave20046]

if you google (would do it for you but I'm posting from my phone) mortgage calculator either Bbc or money saving experts site has one. you can also work out what rate would wipe you out-15%s not quite as bad as you'd think.(but still crippling!)
mse also has a overpayment calculator, like Bri says big differences can be made. obviously dependant on the loan but £50 a month could reduce the loan term by around 5 years (20% of the average term).

my dad bought his first house in the late 80s for less than £30k he did it up himself and sold it a couple of years later for around £80k -sickening!

[454697819]

if you google (would do it for you but I'm posting from my phone) mortgage calculator either Bbc or money saving experts site has one. you can also work out what rate would wipe you out-15%s not quite as bad as you'd think.(but still crippling!)
mse also has a overpayment calculator, like Bri says big differences can be made. obviously dependant on the loan but £50 a month could reduce the loan term by around 5 years (20% of the average term).

my dad bought his first house in the late 80s for less than £30k he did it up himself and sold it a couple of years later for around £80k -sickening!

thanks for that I just googled it and I would be £250 a month better off on 80s house prices and 15% interest than I am on 2008 house prices and 5.59 % interest.

put that in your pipe and smoke it "in my day" gramps

[Biker Biggles]

I recall rates going to 15% on "black Monday" when Norman Lamont took us out of the EU exchange rate monetary system to avoid economic collapse(think Greece and the Euro) but that rate never actually happened as they cancelled it the same day.Im convinced that 15% interest rates are an urban myth.It may have gone over 10% briefly but never 15.

[simesb]

thanks for that I just googled it and I would be £250 a month better off on 80s house prices and 15% interest than I am on 2008 house prices and 5.59 % interest.

put that in your pipe and smoke it "in my day" gramps

Ah, But have comparable earnings gone up by more or less than £250/m in the same period. Is the same job really only paying £3000pa more now?

[L3nny]

I recall rates going to 15% on "black Monday" when Norman Lamont took us out of the EU exchange rate monetary system to avoid economic collapse(think Greece and the Euro) but that rate never actually happened as they cancelled it the same day.Im convinced that 15% interest rates are an urban myth.It may have gone over 10% briefly but never 15.

On Fri, 06 Oct 1989 rates hit 14.88%

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp

[Luckypants]

thanks for that I just googled it and I would be £250 a month better off on 80s house prices and 15% interest than I am on 2008 house prices and 5.59 % interest.

put that in your pipe and smoke it "in my day" gramps

But you are comparing 80s prices with 2010 wages :rolleyes: I think a more reasonable comparison is the multiple of your salary required to buy a house. For me at the time I bought my first house (1985) I had a 10% deposit and needed to borrow 4.5 times my salary. This got me a heap semi in a poor area which I needed to do up (needed to borrow money from parents and in-laws to do it though!). When interest rates went to 15% (or whatever it was) I remember having something like £10 a month that was not allocated to living expenses. It was scary at the time but luckily my job was secure even though our major program was cancelled and many folks lost their jobs.

I think the current climate in the housing market is very similar to back then. The biggest difference is that mortgages are harder to come by and the deposit expected is higher these days. There are folks with negative equity now like there was at the back end of the 80s.

When starting out on the housing ladder, the first 5 years are always tough financially, but you get through it.

[kitkat]

i bought my first property in 1986. It was a studio flat and cost me £6000. I was a legal secretary earning £23 a week. My mortgage payments were about £18 a month, rates were about £5. After paying my bills I had about £20 a month to live on. I walked 5 miles to work to save bus fare, lived on dry cornflakes for breakfast and mashed potato for tea. i went to my mums every sunday for a huge meal and she sent me off with a bag of groceries. I have owned 3 other properties at various times. Im now in rented accomm and would not bother buying again, even if i could get a mortgage. I personally feel times were harder back then as there were not the vast amount of benefits available to everyone. Not that I would like to go back to those days

[timwilky]

A bit of an old document (http://www.assetsure.com/mortgage-interest-rates.htm), but it shows rates back then.

Back when I bought in 85, the rate peaked at 14.7 and dipped, then when whooooooooooosh in 89/90. I have just looked at my old mortgage statements and I ended 90 owing more than I did in 89.

[Biker Biggles]

On Fri, 06 Oct 1989 rates hit 14.88%

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp

You are right.It was even higher at 17% in 1979 I notice as well.It must be that as inflation was so high at the time those rates didnt appear so alarming.

[454697819]

But you are comparing 80s prices with 2010 wages :rolleyes: I think a more reasonable comparison is the multiple of your salary required to buy a house. For me at the time I bought my first house (1985) I had a 10% deposit and needed to borrow 4.5 times my salary. This got me a heap semi in a poor area which I needed to do up (needed to borrow money from parents and in-laws to do it though!). When interest rates went to 15% (or whatever it was) I remember having something like £10 a month that was not allocated to living expenses. It was scary at the time but luckily my job was secure even though our major program was cancelled and many folks lost their jobs.

I think the current climate in the housing market is very similar to back then. The biggest difference is that mortgages are harder to come by and the deposit expected is higher these days. There are folks with negative equity now like there was at the back end of the 80s.

When starting out on the housing ladder, the first 5 years are always tough financially, but you get through it.

correct, its a comparison that is unbalanced but i dont have that information available too me,

I do remember having the discussion with an old boss of mine when he said that his first house was 2 times his wages, I made the point that the average house price now is 20 times my wages (as was then)

I think its irrelevant anyway, I can afford my mortgage and life at the moment so its ok, I dont pretend to have it hard I was just intersted.

[Dave20046]

believe they're (generally) not loaning over 4x your salary at the moment, what were they lending when the rates were 15%??

[timwilky]

Well I took a mortgage back then of twice my salary, but also put down a 25% deposit. As in saved for 7 years before I bought.

[DaveyF]

The two simple comparisons are house price v salary and % of salary used to pay the mortgage. The second is probably most important when comparing as you would need to work out what mortgage terms were available, what type of mortgage was being advertised (endowment potentially), etc, etc.

My parents house was bought for about £15k in the 70's and is a three bed. I have a one bed flat which cost me £165k. This incidentally is only £20k less than my parents house value now! I don't kow what wages were like back in the 70's but I'd be surprised if my dad's pay had increased 12 fold as the house has done.

The top table here is very interesting though, it shows that in 2001 you were actually slightly better off on average than in 1985. However given the property boom and 110%+ mortgages during the noughties I would suggest that todays figure would show that we are slightly worse off now

http://www.york.ac.uk/inst/chp/hfrtable/up02040ab.PDF (http://www.york.ac.uk/inst/chp/hfrtable/up02040ab.PDF)

[benji106]

This table is quite interesting but only goes up to 2001, does show average mortgage repayments as % of salary.
http://www.york.ac.uk/inst/chp/hfrtable/up02040ab.PDF

EDIT: Doh, just realised Im 20 mins late with this post.

[Dicky Ticker]

I must have been earning decent money then as I have just looked up and I was paying £682p.m.owned a 34ft yacht and drove a new Mercedes

HOW TIMES HAVE CHANGED--------not necessarily for the better:(