Conspiracy Theory OAP

Jack, in the main I agree with your sentiments - it is utterly appalling that savings interest rates are so low, and as usual it is the hard working individual like yourself that suffers; and, I agree that the benefit situation has been subject to much abuse over the years - however, recent attempts to get those that can work but simply choose not to, back into employment would appear to be backfiring in two ways; firstly, there is an insufficient number of jobs available, and secondly the 'hardened line' appears to have only resulted in many of those who are truly in need being persecuted (Atos medical assessments spring to mind).

But, I have to disagree with:

I have no doubt that you had to work your socks off, and certainly endure some hardship whilst paying your mortgage with such high interest rates - however, in many ways, your generation was either subsidised (right to buy schemes), or have made a pretty packet at the other end of the deal.

For example, many years ago, I encouraged my mum to purchase the council house (Scottish Homes built, East Lothian Council as landlord) as she would get a fairly substantial discount, and that her mortgage payments would eventually look cheap as rents rose. She bought the house for £18k, and at the time it was valued around £34k.

That house is now worth approximately £120k, and although the value has stagnated in recent years, it isn't likely to drop by much, and in time is almost guaranteed to keep going up in value.

Then, there is a four bedroom semi-detached house with garage and gardens to three sides (it was a corner house) that I considered buying as a do-er up-er back in the mid nineties - - it sold at auction for £15k. The 20% deposit for the mortgage on it would have been £3k (plus fees of course); I was earning approximately £8k a year at the time, so its value was less than three times my annual salary. I missed the auction due to a family bereavement, so ended up missing out. It must also be worth around £120-£130k now - so someone has potentially made a nice wee packet out of it.

Even assuming an interest rate of 17%, I'd guess that the mortgage payments would have been around £260 a month including insurance. (I was paying £50 a week in digs at the time). The 17% interest rate would see the bank pocketing roughly £50k for their trouble (and I still agree that 17% is extortionate by the way!)

By comparison, the fairly small two bedroom house I currently rent is valued at £250k; for me to buy something similar would require a deposit of £50k, and assuming an interest rate of 5%, the mortgage payments would be up to £1500 a month. The 5% interest rate would see the bank pocketing roughly £250k for their trouble, and the house value of £250k is nearly eight times my salary.

Incidentally, the value of the house I am in has more than doubled in the past 15 years - my neighbours bought theirs for £95k in 1998, and it is now worth £280+ (four bedroom), so they have made a decent profit over 15-years.

The final big difference is that back in the day, council houses were far more abundant than they are now; if someone couldn't afford to buy (or was disinclined to do so), then they could get a council house that would be theirs for life as long as they paid their rent, and the rent wasn't all that much money. Nowadays, 'social housing' as it now gets called is few and far between, so those of us who cannot afford to buy have to rent privately and pay through the nose for the privilege - my rent is £1150 a month, so a kick on the behind off mortgage money, and one of the reasons that I regularly work 70 hours+ per week, for many weeks on end.

So yeah, you paying 17% was unfair, but please don't be under the misapprehension that it is any more fair nowadays - I can assure you it isn't.

 

I don't think Jack, like me, was either subsidized by the "

 

I don't think Jack, or myself, were subsidized by the "right to buy" or "made a packet out at the other end of the deal". When I bought my brand new house [not a council house] in 1978 it was a case of £50 down and "come back in a fortnight", as far as I know the "right to buy" wasn't popular with Councils then so very few people were able to use it. It certainly didn't apply to people like me buying a private house. With regard to "make a packet at the other end of the deal" that for me and many other people isn't true either. I bought my house to be a home where I could raise a family, live in relative peace and then when the mortgage finished after 25 years of "paying the rent" would have to do it no more. So since I have no intention of selling my house I really won't see that packet. What I have got after 25 years is freedom from paying to live in my house, the expense of keeping it maintained etc, and a house that is my home.
I have no problems with today's "low" mortgage rates as, to me, the ridiculously inflated prices of houses negates the low rates and still takes up a major portion of a families income. In the early years of buying my house my wages were low but we took the view of "pay the rent" and what was left was spent on the kids and food. I doubt if that situation has changed much today whether families live in rented accommodation or are buying their own house.
So basically I haven't made a packet at the end of the day as my house is the home I live in and the "right to buy" wouldn't have been applicable to me.

 

I think that whatever period of time someone tries to buy a house there will be good points and bad points. The "Right to Buy" started around 1970 (I think) which was very many years after we got our mortgage.

I think that the current property values are absolutely ridiculous and, in this area, makes it almost impossible to be a first time buyer. The low interest rates help them a little bit and, once on the ladder, are helping them pay. Unfortunately, it's also forcing the prices up - as well as the lack of affordable housing being built.

Our problems were high interest rates but it was balanced by the lower property prices.

I don't wish to get into the 'benefits' argument as the 'good' people always seem to lose out .

There's an economical and mathematical reason why the argument that a person's savings are reducing because of the difference between the inflation rates and cost of living increases, is wrong. But it certainly does appear to be so. The savings still remain the same but the cost of buying goes up. The effect this has depends on the difference between the amount of savings and the annual expenditure. I'm not sure that this is the right place to explain it as only a ridiculous example makes the principle understood.

 

I agree, Kristen

Of course, with the value of houses climbing quite steeply here over the last decade, it will take the estate into inheritance tax when it's just the home you bought to live in. Ours is just a three bedroom house that we've lived in for over 40 years - and slogged our guts out to pay for it. It's not a mansion (what about the proposed 'Mansion tax'? ) but because of soaring values it will be within the inheritance tax bracket!