Anyone here had financial responsibilities 16/9/92?

[gzoom]

Good to hear other people's experiences. I bought my first house in 2008, so interest rates of 2% is what I've known most of my adult financial life....hence why I was always 'relaxed' about taking on nearly £500k of mortgage debt, but interest rates of 6-7-8%+ on a £500k debt is a totally different matter!!!

Am lucky as I think we are fine, but its amazing how things change and go around. There is a whole generation of house buyers whom have never seen 3% APR let alone 10%+ from the 1990s.

I see the BOE is now been forced into buying up government borrowing, who knows what's coming. Nationalise the BOE again when everyone else is looking at Putin is about to do next? The government can than control interest rates, but than surely no other country is going to the £ seriously?

 

[SpokeyDokey]

1978:

2-2.5 times main income + 1 times second was the order of the day.

As first time buyers we had to find 25% deposit.

Interest rates for mortgages was about 12% (and rapidly rising at the time).

No option to buy a car, have a holiday or consolidate other debt with a new mortgage - not that we wanted to.

***

Eventually the market ended up with ludicrous income multipliers, 10/5/0% deposit schemes.

Self-certification of salary for some job sectors.

Blind eye turned to the real purpose of equity-munching re-mortgaging.

And then stupid low interest rates and QE.

The perfect financial storm.

No wonder house prices have increased so much over the years and why some people are in stress positions re future mortgage rate rises.

 

[Slick]

Agree, thats why i said, its an interesting conversation but it does need the political element taking out , that's clearly in contravention of the forum rules.

Anyhoo...
When i first started my mortgage, endowment really was the only affordable route. I was aware it had pitfalls but repayment just wasnt affordable so, endowment it was. First annual statement was already telling me i was behind, ditto the next two .
Nah, time to dump it so we went back and renegotiated a repayment.
As it happened (and this might depend on financial markets at that particular time), when we cashed in the endowment, it paid back just about everything we had paid in so we effectively lived rent or mortgage free for three years. To his day, i'm not sure why or how this happened but we were mighty pleased at the time.

I also remember at that time while discussing the new mortgage, ours was very modest £17k, but still a big commitment given my wages at that time. I asked the advisor, how on earth do people manage to deal with 4, 5 times that amount i'm borrowing ? It's scary !!!
Her answer ?
People look at the figures, gulp....and sign anyway

That's what they wanted you to believe, but the truth is, it wasn't.

 

[Scoosh]

MOD NOTE:
Thank you all for keeping this on the Money Matters side of the discussion and not going into the DARK SIDE.
As long as it remains this way, it'll be fine.

 

[gbb]

That's what they wanted you to believe, but the truth is, it wasn't

It was a comment from someone within the business but at lower level, someone who knows what they've experienced and seen with their own eyes, no more no less. You wouldn't expect it to be known policy...even though we all know it happens
But your sentiment is right. Also, this was pre crash when they beefed up the requirements.
I make my own decisions and expect, suspect those telling me anything , they might have an agenda or a reason for doing so. Its a great defence mechanism. Either way, it was on off the cuff question with an off the cuff answer. No damage could be taken, given by her words.
In essence, trust no one, do your own homework.

 

[jowwy]

My first mortgage was back in 98.....it was 5.15% back then for me

Just had a call from halifax now and my new rate from 1st November will be 3.73% if i fix over 10yrs or 4.07% if i fix over 2

 

[Milkfloat]

This was a conversation Mrs C and I had when purchasing our first house this year, what would the implications of a considerable interest rate rise mean for us. In the short term we've fixed for 5 years, but I'm planning to try and make additional capital repayments over the next couple of years which should reduce the mortgage to a level which will be acceptable even if interest rates rise significantly.

One thing to keep in mind with the current interest rates rise is that whilst incomes have risen since 1992, they haven't risen in line with house prices. The average house price for the UK currently is circa £280k, anyone getting a mortgage now, even with a substantial deposit is likely to be paying more than £2k per month if interest rates rise to 10%, which is more than the median take home wage.

In 1992 the average house price was £55k and the average wage about £14k, so the gap between income and house prices has doubled in the intervening period. This means that any interest rate rises will have a far more acute impact than in 1992.

I heard on the radio earlier that a rise to 3% now would be the equivalent of 15% in the early 90s. I can see us busting through 3% very soon.

 

[Deleted member 1258]

I have no strong memories of that date in 1992, we brought our first house in 1982, £10500, £500 deposit and £114 a month, I was earning £50 a week as a storekeeper at the time, I had to work all the overtime the gaffer would let me to raise the deposit, me and my Good Lady were living a bedsit at the time, we had our own kitchen but the bathroom was shared with 5 other bedsits.

 

[Arrowfoot]

Up till the late 1980s, rates were up and down and lots of uncertainly. Bank folded, Building societies went under etc. 1979 was the worst.

Since the 1990s, it has been slow and steady move to historical low rates. Those in their 20s in the late 80s had the best ramp up to house ownerships. If you were reasonably disciplined and work was steady you were on the road to success. I guess our parents really struggled.

All indictions are that this is just blip and things would return to norm in 2 years time. Hang in there.

 

[a.twiddler]

What I found disheartening about the endowment mortgage was the annual statements. Endowment policy payments xxxx amount. Principal amount exactly the same as it was 10 years ago. You depended on the endowment policy to cough up enough (and perhaps a little extra) at the end of the term to cover the mortgage, which an increasing number began to find didn't work out that way at all leaving them in debt or maybe even losing their house. Hence the endowment miss selling compensation scheme which must have saved a goodly number of house buyers' bacon.

We were fortunate to be able to switch to a repayment mortgage and by scrimping and being able to overpay monthly (and in those days some mortgage schemes didn't allow that, or penalised you for it) we eventually escaped the clutches of these usurious swine.

Now we see our offspring getting caught in the same Catch-22 trap and having to do the best they can. We are fortunate in living relatively far north where house prices are still within spitting distance of affordable in relation to wages. I dread to think how we would have coped in regions further south.

 

[SpokeyDokey]

I heard on the radio earlier that a rise to 3% now would be the equivalent of 15% in the early 90s. I can see us busting through 3% very soon.

That seems like a bizzare piece of maths.

Was it some kind of equation based on interest rates, house prices and salaries?

 

[SpokeyDokey]

Good to hear other people's experiences. I bought my first house in 2008, so interest rates of 2% is what I've known most of my adult financial life....hence why I was always 'relaxed' about taking on nearly £500k of mortgage debt, but interest rates of 6-7-8%+ on a £500k debt is a totally different matter!!!

Am lucky as I think we are fine, but its amazing how things change and go around. There is a whole generation of house buyers whom have never seen 3% APR let alone 10%+ from the 1990s.

I see the BOE is now been forced into buying up government borrowing, who knows what's coming. Nationalise the BOE again when everyone else is looking at Putin is about to do next? The government can than control interest rates, but than surely no other country is going to the £ seriously?

Not a financial markets expert but they are notoriously knee-jerk.

In response to nervousness re our financial future following recent developments, investors dumped UK Gov' Bonds (probably shifted them to their US counterparts) ; precipitating the BoE intervention to stop as much outflow from the UK as possible as well as attempting to shore up confidence in the UK. .

Once the situation appears to (hopefully) stabilises and the shock dissapates then some, probably not all, reverse flow will occur.

Not understating the situation that we are in, there is risk, but the media (and another cohort but it would be political to mention who) are muck-stirring on a big scale, as is seemingly the way these days. Disaster scenarios are being hyped beyond belief and much is best ignored imo.

 

[Jenkins]

What I found disheartening about the endowment mortgage was the annual statements. Endowment policy payments xxxx amount. Principal amount exactly the same as it was 10 years a ago. You depended on the endowment policy to cough up enough (and perhaps a little extra) at the end of the term to cover the mortgage, which an increasing number began to find didn't work out that way at all leaving them in debt or maybe even losing their house. Hence the endowment miss selling compensation scheme which must have saved a goodly number of house buyers' bacon.

It was the endowment miss selling compensation and a massive drop in the interest rates from the highs in the 90s that enabled me to pay off my mortgage early. As the rates dropped on my variable mortgage (taken out in around 1990 or 91) and my wages slowly rose, I put the extra money into a savings account and, with about £6500 from the compensation sceme, I was able to pay off the capital sum about 5 years early while continuing the payments on the endowment. This gave me emough to buy a decent car and put some money into another proper savings scheme when it paid out.

 

[Milkfloat]

That seems like a bizzare piece of maths.

Was it some kind of equation based on interest rates, house prices and salaries?

As @si_c said, it is to do with the house price to salary ratio. For example if a house used to cost 10 times an average salary and now one costs 100 times the salary then a rise in interest rates will be more keenly felt.

 

[si_c]

As @si_c said, it is to do with the house price to salary ratio. For example if a house used to cost 10 times an average salary and now one costs 100 times the salary then a rise in interest rates will be more keenly felt.

Pretty much, because house prices have inflated so much an average 1992 mortgate of £55k would have meant a monthly payment of £700 at 15%, which is £250 less than my mortgage is now at 3%, and my house is worth significantly less than the national average.