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Interest rates have been considerably higher in the past though. What is different now is that people have gotten used to an endless supply of cheap credit and

by dazc 4y ago

Interest rates have been considerably higher in the past though. What is different now is that people have gotten used to an endless supply of cheap credit and thinking they are well off so long as the monthly payments can be maintained. Also, the social media pressure to have the apperance of a perfect life doesn't help.

ID1452319 4y ago
While that is true, house price inflation has massively outstripped wages. For example, my very first house in 2000 cost £105k. Today that same house would cost £220k. Therefore, what option do people have but to overextend themselves?
highwaylights 4y ago
I agree with all of this, and I’d argue that it’s even worse as I very much doubt anyone gave good advice to most of those people before they took out those mortgages. I mean, sure, some of us know better - but that’s probably because someone along the way made it clear in very stern terms that you never sign anything you don’t fully understand.
- Neil44 4y ago
  When you take out a mortgate now they do an affordability check which includes checking if you can afford the repayments if interest rates spike up, it's spart of the shpiel they have to go through.
burtness 4y ago
Yes, but those interest rates have been affordable. That context of affordability matters. The UK is also basically organised around the profitability of private home ownership. Its the fundamental basis of the current ruling party's support. Anything that threatens property value and rent yield is catastrophic for the economy (as currently organised) and the current government
raesene9 4y ago
You're missing a major aspect of the difference now, when compared to the 80's and before, which is house affordability. Even at peak in the 1980's you were looking at house prices being 5x income at most. (https://www.economicshelp.org/blog/5568/housing/uk-house-price-affordability/ https://www.economicshelp.org/blog/5568/housing/uk-house-pri...) Now at the UK level you're looking at 7x and in London 11x. That means that increases in interest rates have a far higher impact on affordability.

by dazc 4y ago

ID1452319 4y ago

While that is true, house price inflation has massively outstripped wages. For example, my very first house in 2000 cost £105k. Today that same house would cost £220k. Therefore, what option do people have but to overextend themselves?

highwaylights 4y ago

I agree with all of this, and I’d argue that it’s even worse as I very much doubt anyone gave good advice to most of those people before they took out those mortgages. I mean, sure, some of us know better - but that’s probably because someone along the way made it clear in very stern terms that you never sign anything you don’t fully understand.

Neil44 4y ago
When you take out a mortgate now they do an affordability check which includes checking if you can afford the repayments if interest rates spike up, it's spart of the shpiel they have to go through.

burtness 4y ago

Yes, but those interest rates have been affordable. That context of affordability matters. The UK is also basically organised around the profitability of private home ownership. Its the fundamental basis of the current ruling party's support. Anything that threatens property value and rent yield is catastrophic for the economy (as currently organised) and the current government

raesene9 4y ago

You're missing a major aspect of the difference now, when compared to the 80's and before, which is house affordability. Even at peak in the 1980's you were looking at house prices being 5x income at most. (https://www.economicshelp.org/blog/5568/housing/uk-house-price-affordability/ https://www.economicshelp.org/blog/5568/housing/uk-house-pri...) Now at the UK level you're looking at 7x and in London 11x. That means that increases in interest rates have a far higher impact on affordability.