Interest rates up again

I can't find data that goes back that far, but in the early 80s when interest rates were c.10% mortgage payments were still a lower proportion of income than they have been in recent years with interest rates at 0.1%.

And now interest rates are starting to rise...

 

If houses weren't affordable then people would stop buying them. Unfortunately, it's those who buy more than one that is the problem - pushing up affordability beyond those who only want one.

 

We’ve been here 16 years nearly and were in a good position at the time, though the mortgage payments were a huge jump from what we paid in Sheffield. We’ve been fortunate since then so we’d be able to afford it on current income, but the deposit would have been more of an issue. But incomes when we were in our mid 20s trying to buy this now, no way.

I don’t see how it can be undone though. You can’t crash a whole housing market by 60-70% to make it more sensibly affordable.

 

People are stopping buying them. That's literally the point.

 

Then why is there a shortage?

 

I fixed for 5 years at 5.65% the month before the 2008 crash ...

 

It’s a high percentage, certainly, but it’s of a much, much lower figure. At the peak, it would have been more than people are paying now, proportionately, but not by any where near as much as it sounds and who knows where today’s levels are going.

 

Ok, private owners aren’t buying them, landlords are for the rental income.

 

In the interest of balance and fairness - what was the purchase price of the property relative to your salary at the time?

And what would the same house be sold for today, compared to the current equivalent salary for your job role at the time? (if it still exists).

Interest rates were shockingly high in both the late seventies and again late eighties I believe - but even with those facts, something I don’t dispute, it was still markedly easier to get on the housing ladder in those times. You could buy a house with one full time wage then. Yes it wasn’t necessarily easy, but possible.

Now a couple both working full time will find it exceptionally difficult. And that’s before you factor in the cost of living changes relative against average pay as well.

 

I’d also say that developers take a chunk of the possibly cheaper end of the market too, before wiping its bum and adding a premium to then make it more unaffordable.

 

This is why not-for-profit organisations ought to be able to build and sell houses for people to live in, not rent out or be second homes. Not everything should be left to the greed market.

 

Luxury

 

Tbf 1% is sod all historically, and it was always going to go up .
It’s obviously magnified now by the recent rises in what feels like everything else.

 

Same here, plus rents will rise to pay off landlords mortgages.

 

It is, but it’s still another added cost for people in difficult economic times. And house prices are so high now that 1% can still be quite a lot. I know rates historically were insane, but house prices were about a fifth of what they are now, so it’s swings and roundabouts.

 

It's the deposit. My first mortgage (less than 25 years ago) was 9.75%
The house i was in has roughly tripled in value. If you calculate the mortgage repayments at last year's rates vs what I was paying then, counter in inflation and it's not much difference. The difference is that I'd have needed triple the deposit to start with, which would have been entirely infeasible.

The big problem will come for those who've somehow found the deposit and bought a house in the last few years at a price inflated by chronic low interest rates. If interest rates were to hit 3 or 4 percent - more than feasible within the lifespan of their mortgages - the cost of servicing it would rapidly become totally unsustainable.

 

that’s true, the other side though is, when interest rates go up , many peoples thoughts automatically turn to mortgages but while lots of people have been enjoying the rates for that, many others have been suffering as their savings, that they were reliant to live on were worth basically their base value.
As you say swings and roundabouts,

 

I've got to admit, for about a year, we've been discussing if we could buy a second home and split our time between London and there. The main influence being having a place that we know is safe and away from people that's in the countryside, a different place that is more connected to nature.

But morally, we've struggled getting past talking about it for the reasons you've mentioned, it just doesn't feel right.