Criteria for getting a mortgage in the 70's or 80's.

rightwingdub

I was just wondering what sort of guidelines do the banks lay down when couples or single people applied for mortgage in the 1970's or 1980's.

I was speaking to my mam the other day and she told me that in 1971 she and my dad had to put down an 18% deposit on a mortgage over 20 years repayments for the mortgage.

Also with the recession is it possible that the banks could go back to the old rules of having to take down a minimum 15% deposit, 20 year mortgage and only been allowed to take out a mortgage 3.5 times a couple's personal salary.

The_Conductor

My parents were offered an 80% mortgage, over 20 years, at 10.5% (they qualified for a lower interest rate as dad worked in a bank). The max they could borrow was 3 times his earnings (if Mum earned money it wasn't taken into account- the bank only counted one income).

Freddie59

smccarrick wrote: »

My parents were offered an 80% mortgage, over 20 years, at 10.5% (they qualified for a lower interest rate as dad worked in a bank). The max they could borrow was 3 times his earnings (if Mum earned money it wasn't taken into account- the bank only counted one income).

Sounds about right. We bought a house in 1981 (year we were married) and it cost €17,000. €12k from the Council, and €5k from the bank (over 5 years). We asked for €6k - it was the difference between where we were buying (wasn't bad) and a really upmarket spot. They politely told us to eff off. There was a credit squeeze on, and they wouldn't even look at us only for my late Dad was a long-standing customer with a few quid on deposit.

We paid €9,200 back on the €5,000. It was truly nuts. And yes, there was a mini property bubble at the time also. A 3-bed semi-d in Waterford City cost around €11k in 1979. Two years later it was €23k.

rightwingdub

Thanks for providing that information, it certainly shows that the banks were a lot stricter when it came to been accepted for a mortgage than at the height of the Celtic Tiger madness.

So 20% deposits were common then in the 70's and 80's, what about 25%?

kippy

rightwingdub wrote: »

Thanks for providing that information, it certainly shows that the banks were a lot stricter when it came to been accepted for a mortgage than at the height of the Celtic Tiger madness.

So 20% deposits were common then in the 70's and 80's, what about 25%?

In all fairness, there were a serious amount of differences in a serious amount of aspects of life in the 70's and 80's compared with the Celtic Tiger era.
Income, fuel, inflation, cost of living in general, interest rates, the currency and its control, the political landscape etc etc.

stepbar

My parents borrowed directly from the local county council just like Freddy59 did, also in 1981. Borrowed 10 thousand pounds from what I remember. However I don't think they got a mortgage through the bank as it was a self build (and that sure was a disaster and all - I can see the Hymac having to come in about 20 years time to demolish as it was that bad of a job).

About 20 years later, the loan was still around the 10k mark and at a ridiculous interest rate. The loan was finally cleared with a 10k loan over 5 years.

rightwingdub

kippy wrote: »

In all fairness, there were a serious amount of differences in a serious amount of aspects of life in the 70's and 80's compared with the Celtic Tiger era.
Income, fuel, inflation, cost of living in general, interest rates, the currency and its control, the political landscape etc etc.

The standard of living was a lot lower in the 70's and 80's compared to today, it seems to me that people were willing to accept a lower standard of living in the 70's and 80's compared to today's pampered generation. Most people in the 70's couldn't afford two foreign holidays per year in the 70's as airfares were absolutely obscene.

I agree with you interest rates were very high in the 70's and 80's compared to today, maybe if Ireland hadn't surrendered its control over interest rates would interest rates have been kept at 6-7% during the celtic tiger madness.

I do think that people these days are unwilling to accept a slightly reduced standard of living, after all apparently the standard of living is till over 20% higher than the UK.

ricman

I think wages are higher here,taxes are lower, theres no poll tax here,even welfare payments here are almost 2x times uk rates.
I THINK the uk has alot of immigrants which tends to drive down wages.And theres actually a shortage of housing there.
Some people might say the uk is full .

Jo King

banks rarely gave mortgages at all until the late 80's. If they did it was to very high grade customers. Most home loans came from building societies. In the mid 80's it was 2.5 times one income and half the 2nd income. 20 years was the usual term. Most building societies wanted a 20% deposit, some 90%.
In a falling and difficult market the lenders will revert to the old ways.
I remember being offered 2.3 times annual income in 1987 plus half of another income provided the other income was permanent. In 1988 2.5 time joint income with no permanency required was offered. House prices doubled within a year of the new regime coming into force.

bog master

In the mid 80's you had to have a minimum of £3,500 in your building society account, preferably for 3 years. The 3 year rule was slowly being eroded, I got away with less than 2.

This money was intended to pay for all legal fees, and stamp duty. Then the buyer had to pay his/her own legal fees and the Building Society.

Freddie59

bog master wrote: »

In the mid 80's you had to have a minimum of £3,500 in your building society account, preferably for 3 years. The 3 year rule was slowly being eroded, I got away with less than 2.

This money was intended to pay for all legal fees, and stamp duty. Then the buyer had to pay his/her own legal fees and the Building Society.

That was right. In 1978 we were told by (I think) EBS that we had to have IR£800 on deposit for 12 months or something like that. The only route was Council+bank personal loan. And you were literally treated like dirt by some.

stepbar: yep, your parents were in the same plight as the rest of us. Very sorry to hear about their house. Did they get sorted in the end?

rightwingdub: yep, the living standards were WAY lower. We were earning IR£100 per week (net) between the two of us. Council repayments were IR£37 p/w and the bank was IR£23 p/w. We literally could not figure out at the end how IR£5k tuned into over IR£9.5k.

So IR£40 p/w to live on. And we did. But it meant doing the house room by room, bits of carpet here, borrowed TVs there, self-install of a DIY kitchen from MFI, etc. No car (I had a company van with limited use at the time). We couldn't afford one anyway.

Holidays were a TOTAL no-no. As rightwingdub said, air fares were obscene. Only the privileged could enjoy them.

Not looking for a medal, we knew what we were going into. That was the way things were. But it was tough, no two ways about it. And there were many like us.

But, our generation were among the first to be able to afford homes (It really only became possible in the 10-15 years before) and the generations prior to us (our parents) would have viewed OUR lifestyle as completely extravagant. My late father-in-law at the time asked his wife 'why are they talking in thousands'? My God, if he had seen the years 1994-2006.......

OMD

Freddie59 wrote: »

rightwingdub: yep, the living standards were WAY lower. We were earning IR£100 per week (net) between the two of us. Council repayments were IR£37 p/w and the bank was IR£23 p/w. We literally could not figure out at the end how IR£5k tuned into over IR£9.5k.

So IR£40 p/w to live on. And we did. But it meant doing the house room by room, bits of carpet here, borrowed TVs there, self-install of a DIY kitchen from MFI, etc. No car (I had a company van with limited use at the time). We couldn't afford one anyway.

Holidays were a TOTAL no-no. As rightwingdub said, air fares were obscene. Only the privileged could enjoy them.

Not looking for a medal, we knew what we were going into. That was the way things were. But it was tough, no two ways about it. And there were many like us.

But, our generation were among the first to be able to afford homes (It really only became possible in the 10-15 years before) and the generations prior to us (our parents) would have viewed OUR lifestyle as completely extravagant. My late father-in-law at the time asked his wife 'why are they talking in thousands'? My God, if he had seen the years 1994-2006.......

Or looked at another way, you totally overextended yourselves. 60% of your income went to finance your property. You were saved by a massively rising housing market and a high rate of inflation. On this site people who did the exact same thing as you in the last 10 years (although perhaps less recklessly) are protrayed as idiots who got what they deserved when the market fell.

rightwingdub

Freddie59 wrote: »

That was right. In 1978 we were told by (I think) EBS that we had to have IR£800 on deposit for 12 months or something like that. The only route was Council+bank personal loan. And you were literally treated like dirt by some.



rightwingdub: yep, the living standards were WAY lower. We were earning IR£100 per week (net) between the two of us. Council repayments were IR£37 p/w and the bank was IR£23 p/w. We literally could not figure out at the end how IR£5k tuned into over IR£9.5k.

So IR£40 p/w to live on. And we did. But it meant doing the house room by room, bits of carpet here, borrowed TVs there, self-install of a DIY kitchen from MFI, etc. No car (I had a company van with limited use at the time). We couldn't afford one anyway.

Holidays were a TOTAL no-no. As rightwingdub said, air fares were obscene. Only the privileged could enjoy them.

Not looking for a medal, we knew what we were going into. That was the way things were. But it was tough, no two ways about it. And there were many like us.

But, our generation were among the first to be able to afford homes (It really only became possible in the 10-15 years before) and the generations prior to us (our parents) would have viewed OUR lifestyle as completely extravagant. My late father-in-law at the time asked his wife 'why are they talking in thousands'? My God, if he had seen the years 1994-2006.......

I think a lot of my generation would collapse with horror if they were transported back in time to the late 70's- early 80's:rolleyes:, there is far too much of an entitlement culture amongst my generation, (don't subscribe to it myself though), I only have to pay just over 16% of my monthly salary as rent and I'm still able to save 15% of my salary each month into a savings account although I'm aiming to increase that to 20%.

I also suppose people in the 70's and 80's didn't spend their money on unncecssary crap like a lot of younger people do these days.

kippy

rightwingdub wrote: »

I think a lot of my generation would collapse with horror if they were transported back in time to the late 70's- early 80's:rolleyes:, there is far too much of an entitlement culture amongst my generation, (don't subscribe to it myself though), I only have to pay just over 16% of my monthly salary as rent and I'm still able to save 15% of my salary each month into a savings account although I'm aiming to increase that to 20%.

I also suppose people in the 70's and 80's didn't spend their money on unncecssary crap like a lot of younger people do these days.

In fairness how much unnecessary crap was out there for them to buy? They didnt have the disposable income so there was no point marketing it to them.
Most of the unnecessary crap nowadays is technology based. Mobile devices, MP3 players, a new video (DVD/BLUERAY/HD/3D/LCD/PLASMA) device every few years, home entertainment systems, games and portabale games consoles). Then you've got your Coffee shops, BOTTLED WATER, generic fast food joints, etc.
Personally I wouldnt have liked to have been in my prime in those decades, mainly for those reasons. As some poster has already point out almost every older generation is shocked at the levels of relative extravagence of the next generation, its no different for us.

Freddie59

OMD wrote: »

Or looked at another way, you totally overextended yourselves. 60% of your income went to finance your property. You were saved by a massively rising housing market and a high rate of inflation. On this site people who did the exact same thing as you in the last 10 years (although perhaps less recklessly) are protrayed as idiots who got what they deserved when the market fell.

:rolleyes: Exactly the type of comment I would expect. We lived within our means. That IR£40 went a very long way. Because we were careful and cautious. There is a considerable difference between us and people who completely overextended themselves. Surely you don't need to be educated as to the difference?

And oh - ACTUALLY overextending yourself would be loaning BILLIONS of Euro to people who couldn't afford it in the first instance. Then being bailed out by the very people they're trying to screw to restore 'profitability'!

So the banking 'system' you're so busy defending ended up a failed, bankrupt, entity. While my wife or I were never bankrupt. Kinda says it all really.

OMD

Freddie59 wrote: »

:rolleyes: Exactly the type of comment I would expect. We lived within our means. That IR£40 went a very long way. Because we were careful and cautious. There is a considerable difference between us and people who completely overextended themselves. Surely you don't need to be educated as to the difference?

And oh - ACTUALLY overextending yourself would be loaning BILLIONS of Euro to people who couldn't afford it in the first instance. Then being bailed out by the very people they're trying to screw to restore 'profitability'!

So the banking 'system' you're so busy defending ended up a failed, bankrupt, entity. While my wife or I were never bankrupt. Kinda says it all really.

I have no idea where you are getting the idea I am defending banks. I am not.

My point is that the very thing you were doing is the very thing people are now being critised for. People who took out comparatively large mortgages in last 10 years. It worked for you it didn't for them. That is the only difference.

If someone came on this site and said they were going to spend 60% of their take home income on a mortgage everyone would tell them they were mad.

When my first husband:p and i got married..it was strictly 2.5 the first income plus the second income and you had to have a large deposit and saving record..interest rates were about 10%!!!!...our house cost 25 thousand we thought that was a fortune with in two years the same house would have cost you 45 thousand.

I remember someone telling me in the mid seventies they were saving with a building society and then applied for a mortgage...they were interviewed by the building society manage...who told them it was very peculiar for a single person to be buying a house!

JuliusCaesar

I went looking for a mortgage in the late 80s. 2 1/2 X one income, 1/2 the other even though we were sisters. 10% deposit. No exceptions. But in those days, people bought a house and gradually furnished and did repairs. There was no skip outside the door the minute someone bought a house!

Freddie59

OMD wrote: »

I have no idea where you are getting the idea I am defending banks. I am not.

My point is that the very thing you were doing is the very thing people are now being critised for. People who took out comparatively large mortgages in last 10 years. It worked for you it didn't for them. That is the only difference.

If someone came on this site and said they were going to spend 60% of their take home income on a mortgage everyone would tell them they were mad.

OK - I'll make this simple for you. The bank loan was over 5 years. The Council loan over 15. Wages rose, and, after 5 years, my wife resigned her job and we started a family. Most modern (100%) mortgages were given over 30 to 35 (even 40 years). So any pain we suffered was in the very short-term. And planned to be so.

Yes, things were tight, but our children were in the (nowadays and even then) unusual, and beneficial, position of having their mother with them all the time.

60% of the net. Yes. But no other outgoings. If you read any of the property websites, many young couples in the past 10 - 15 years had up to 80-85% of their net going on the mortgage, crèche, two cars (and the associated horrific costs), and dual holidays. So, in every sense of the word, we were financially better off - with a very much less stressful lifestyle. Because, ignorant and all as some were, the banks had strict lending criteria.

Unlike their modern counterparts, who can only be described as buffoons, to put it mildly. So, OMD, before you go casting aspersions, have a little think. It'll work wonders for you!:p

stepbar

Freddie59 wrote: »

stepbar: yep, your parents were in the same plight as the rest of us. Very sorry to hear about their house. Did they get sorted in the end?

Well the house is still standing anyhow

Ah shur the ould man went off and build another house in good times. I'm sure they'll move into it in good time.

dearg lady

Freddie59 wrote: »

OK - I'll make this simple for you. The bank loan was over 5 years. The Council loan over 15. Wages rose, and, after 5 years, my wife resigned her job and we started a family. Most modern (100%) mortgages were given over 30 to 35 (even 40 years). So any pain we suffered was in the very short-term. And planned to be so.

Yes, things were tight, but our children were in the (nowadays and even then) unusual, and beneficial, position of having their mother with them all the time.

60% of the net. Yes. But no other outgoings. If you read any of the property websites, many young couples in the past 10 - 15 years had up to 80-85% of their net going on the mortgage, crèche, two cars (and the associated horrific costs), and dual holidays. So, in every sense of the word, we were financially better off - with a very much less stressful lifestyle. Because, ignorant and all as some were, the banks had strict lending criteria.

Unlike their modern counterparts, who can only be described as buffoons, to put it mildly. So, OMD, before you go casting aspersions, have a little think. It'll work wonders for you!:p

I think this is a bit harsh, OMD is referring specifically to your mortgage repayments. I believe you are the one making assumptions, about people who bought recently.

Of course there is people who went crazy with not just mortgages, but various personal loans, but there's also people who got a large mortgage but didn't go crazy buying cars and expensive holidays etc. THESE people are in the exact same situation as you were, except prices are still falling now.

Freddie59

dearg lady wrote: »

I think this is a bit harsh, OMD is referring specifically to your mortgage repayments. I believe you are the one making assumptions, about people who bought recently.

Of course there is people who went crazy with not just mortgages, but various personal loans, but there's also people who got a large mortgage but didn't go crazy buying cars and expensive holidays etc. THESE people are in the exact same situation as you were, except prices are still falling now.

No they weren't. Read my post. NO OTHER OUTGOINGS. Full stop.

How am I making assumptions about people who bought recently. What I said was that banks lent billions of euro to people, in a lot of cases, who could not afford it. Compare the two situations:

When we bought we were earning around IR£7,000. So the house was around
2.5 times what we earned. Yes we could have bought a bigger one, but we cut our cloth, so to speak.

The mortgage was only 60% of the net for five years. After that it was around 15-20%. We decorated and finished our home one room at a time; we did not have (or could afford) a car or holidays. That was the way it was.

However, I saw a case in 2007, where someone earning €30k per year was give a mortgage of €270,000.:eek: Yes, two hundred and seventy thousand euro. Nine times their income.

This says it all really:

http://www.independent.ie/national-news/courts/repossession-ordered-of-multimillion-euro-home-2153501.html

In another case, Judge McGovern questioned the practices of sub-prime lender Start Mortgages after it emerged a loan had been defaulted on less than six months after it was granted. The €250,000 mortgage is now over €43,000 in arrears. It was drawn down in August 2007 but was in default from January 2008.

The judge said the loan was almost immediately in arrears "which makes one wonder what stress tests" were used to get the money.

Yes overexposed. Our wonderful 'banking' "system".:rolleyes: While the banks can argue that people availed of the money, the reckless lending practices, and pure greed, are at the bottom of it all. The dogs in the street saw this coming. I'd say those same dogs are now shaking their heads in disbelief at what's going on now:

http://www.rte.ie/news/2010/0428/banks.html

dearg lady

Freddie59 wrote: »

No they weren't. Read my post. NO OTHER OUTGOINGS. Full stop.

How am I making assumptions about people who bought recently. What I said was that banks lent billions of euro to people, in a lot of cases, who could not afford it. Compare the two situations:

When we bought we were earning around IR£7,000. So the house was around
2.5 times what we earned. Yes we could have bought a bigger one, but we cut our cloth, so to speak.

The mortgage was only 60% of the net for five years. After that it was around 15-20%. We decorated and finished our home one room at a time; we did not have (or could afford) a car or holidays. That was the way it was.

However, I saw a case in 2007, where someone earning €30k per year was give a mortgage of €270,000.:eek: Yes, two hundred and seventy thousand euro. Nine times their income.

This says it all really:

http://www.independent.ie/national-news/courts/repossession-ordered-of-multimillion-euro-home-2153501.html

In another case, Judge McGovern questioned the practices of sub-prime lender Start Mortgages after it emerged a loan had been defaulted on less than six months after it was granted. The €250,000 mortgage is now over €43,000 in arrears. It was drawn down in August 2007 but was in default from January 2008.

The judge said the loan was almost immediately in arrears "which makes one wonder what stress tests" were used to get the money.

Yes overexposed. Our wonderful 'banking' "system".:rolleyes: While the banks can argue that people availed of the money, the reckless lending practices, and pure greed, are at the bottom of it all. The dogs in the street saw this coming. I'd say those same dogs are now shaking their heads in disbelief at what's going on now:

http://www.rte.ie/news/2010/0428/banks.html

I fully agree that plenty of banks loaned too much money to individuals who couldn't afford to repay and who readily accepted this without thinking.

That doesn't change the fact that spending 60% of your income on your mortgage would not generally be recognised as a wise financial decision, then or now. That is all, sheesh.

OMD

dearg lady wrote: »

I fully agree that plenty of banks loaned too much money to individuals who couldn't afford to repay and who readily accepted this without thinking.

That doesn't change the fact that spending 60% of your income on your mortgage would not generally be recognised as a wise financial decision, then or now. That is all, sheesh.

There is no point arguing. He believes that he was financially aware of what he was doing but others were not. He believes he was frugal with his money but others just spend freely. Then he says he is not making assumptions. :rolleyes:

If unemployment had trebled within 2 years when he got his mortgage like now he may well have been in trouble. If he and/or his wife had lost their jobs he would have been in trouble. It is pretty much the same now. Yes some people made silly decisions but the vast majority did not extend themselvesto 60% of their takehome pay on mortgage (even if they only planned to do so for 5 years) . People now are no sillier than Freddie59 but he was luckier.

rightwingdub

Anyone who took out a mortgage with a sub prime lender needs to be medically assessed by a pyschitarist, they would have been better off renting but instead the old Irish mantra of "Rent is dead money" prevailed over common sense.

Freddie59

OMD wrote: »

There is no point arguing. . People now are no sillier than Freddie59 but he was luckier.

Ha ha! You're not a hubby/wife team by any chance? For lucky write wise. You persistently ignore the core points:

1. Extremely short-term personal loan (five years)

2. Council mortgage 15 years.

3. Mortgage less than 20% of net after five years.

4. House only 2.5 times our combined income.

5. No crèche fees.

6. No transportation costs.

7. We're 50. We're solvent.

8. The banks have collapsed due to greed and stupidity - and you call US silly?!

And the list goes on. Yeah. We will really silly.:D

And yet - inexplicably - people like you defend the bailout, citing that people 'don't fully understand things':rolleyes:. What's there to understand? Bankrupt, failed entities were rescued by the taxpayer when they should have been left to collapse. You're swimming against the tide to put it mildly OMD.:)

BTW OMD, how much are YOU in for - and over what time period? (and you DL;)) Will your children have their mother at home full-time?

OMD

Freddie59 wrote: »

Ha ha! You're not a hubby/wife team by any chance? For lucky write wise. You persistently ignore the core points:

1. Extremely short-term personal loan (five years)

2. Council mortgage 15 years.

3. Mortgage less than 20% of net after five years.

4. House only 2.5 times our combined income.

5. No crèche fees.

6. No transportation costs.

7. We're 50. We're solvent.

8. The banks have collapsed due to greed and stupidity - and you call US silly?!

And the list goes on. Yeah. We will really silly.:D

I never said you were silly. I said people made similar decisions to you and are no sillier than you. You constantly assume everyone else wasted everything. You assume they all got 100% mortgages. You ignore the reason people are in trouble is they lost their jobs or had major paycuts. You were lucky. They were not. Are you honestly telling me that if both you and your wife lost your jobs and the value of your house dropped 40% then you wouldn't have been in trouble?

As it was after 5 years you paid off one loan leaving the other making up 37% of the combined salary of you and your wife. Your wife then quit work after these 5 years and suddenly you say this loan was now 20% of your own salary.

Freddie59 wrote: »

"We were earning IR£100 per week (net) between the two of us. Council repayments were IR£37 p/w and the bank was IR£23 p/w."

Freddie59 wrote: »

Wages rose, and, after 5 years, my wife resigned her job and we started a family.

Freddie59 wrote: »

"Mortgage less than 20% of net after five years."

That means you got a massive, massive pay rise. A loan that was 37% of your combined salary became less than 20% of your own salary after your wife quit work. So you must have had a pay rise of about 300%. Now well done on that, but, what would have happened if instead of this massive pay rise you had a pay cut as had happened many mortgage holders now?

Freddie59 wrote: »

BTW OMD, how much are YOU in for - and over what time period? (and you DL;)) Will your children have their mother at home full-time?

We both work part time by choice (hence the reason I can post on this website in the middle of the day). Our children grow up with both their parents at home. But hey, good to see you don't make assumptions.:rolleyes:

Freddie59

OMD wrote: »

I never said you were silly. I said people made similar decisions to you and are no sillier than you.

:rolleyes::D

OMD wrote: »

As it was after 5 years you paid off one loan leaving the other making up 37% of the combined salary of you and your wife. Your wife then quit work after these 5 years and suddenly you say this loan was now 20% of your own salary.

My wages increased substantially. We planned according to that.;) Another silly thing.:)

OMD wrote: »

That means you got a massive, massive pay rise. A loan that was 37% of your combined salary became less than 20% of your own salary after your wife quit work. So you must have had a pay rise of about 300%. Now well done on that, but, what would have happened if instead of this massive pay rise you had a pay cut as had happened many mortgage holders now?

It didn't. Our risk was well manageable. Over five years. NOT 40.

OMD wrote: »

We both work part time by choice (hence the reason I can post on this website in the middle of the day). Our children grow up with both their parents at home. But hey, good to see you don't make assumptions.:rolleyes:

Well done to you and your wife. Your children will really appreciate this when they mature. Believe me. I make no more assumptions about you than you do about me.:p

How many years are you in for? At what rate. And are you in NE?

OMD

You don't seem to get what I am saying. I do not think you are or were silly. However if you think people who made similar decisions to you are silly then that implies your decisions were silly.

Freddie59 wrote: »

My wages increased substantially. We planned according to that.;) Another silly thing.:)

Again no. But you were lucky that your wages went up. In the last few years people made the same decisions based on their wages going up. However their wages did not go up they went down. Many public sector workers (of whom I have been critical of) believed their pay would go up well above inflation as it had done for the previous 15 or more years. They also believed pay increments would increase their wages even more so like you believed they could manage higher repayments believing that as their pay went up the repayments would become much easier (and like you that one part of a couple could quit work and have children). Their pay had never been cut before so it was reasonable to assume it would continue to rise. These were not silly decisions based on the situation at the time, in much the same way yours were not silly in your time.

Freddie59 wrote: »

It didn't. Our risk was well manageable. Over five years. NOT 40.

Again only because you got that massive pay rise. If you did not, after 5 years, and your wife had quit working then your repayments would still have been over 50% of your takehome pay with a 20 year mortgage.

Freddie59 wrote: »

How many years are you in for? At what rate. And are you in NE?

This is not about me. I am not in financial difficulty. I would not be working part time if I was. I have some sympathy for people who made rational decisions given the situation they were in at the time. In much the same way as you made your decisions.

Freddie59

OMD wrote: »

But you were lucky that your wages went up. In the last few years people made the same decisions based on their wages going up. However their wages did not go up they went down. Many public sector workers (of whom I have been critical of) believed their pay would go up well above inflation as it had done for the previous 15 or more years. They also believed pay increments would increase their wages even more so like you believed they could manage higher repayments believing that as their pay went up the repayments would become much easier (and like you that one part of a couple could quit work and have children). Their pay had never been cut before so it was reasonable to assume it would continue to rise. These were not silly decisions based on the situation at the time, in much the same way yours were not silly in your time.

Luck had no part in it. We had no other outgoings. With a basically decorated home. And we were happy with it.

OMD wrote: »

Again only because you got that massive pay rise. If you did not, after 5 years, and your wife had quit working then your repayments would still have been over 50% of your takehome pay with a 20 year mortgage.

The mortgage was over 15 years.:) And because the time frame was short we could still have covered it.

OMD wrote: »

This is not about me. I am not in financial difficulty. I would not be working part time if I was. I have some sympathy for people who made rational decisions given the situation they were in at the time. In much the same way as you made your decisions.

OK, so taking out a 100% mortgage (and being granted it by those banking idiots) over 40 years at SEVEN times your annual income was a rational decision?:eek:

astrofool

Paying a mortgage for the first few years has always been difficult historically, even when the multipliers were lower, interest rates were higher, and there were lots of rules on how to get a mortgage. We definitely went too far the other way, but I don't think we'll ever get to the stage where taking out a mortgage means no financial sacrifice (no matter how low house prices go.

As an aside, I took out a 35 year mortgage. I have the means to pay it back over 20 years if I wanted to, and am currently overpaying, reducing the term by near to a decade. However, I am getting a better return on my money elsewhere, than I would by paying extra off the mortgage to bring the term down. I plan on having a lump sum saved to pay it all off after 15 years.

But the best bit for me, as a family man, if worst comes to worst, and our income goes down, or we lose our incomes completely, we can always revert back to the payments making the mortage over 35 years, without penalty. Had we taken a 25 year mortgage, we wouldn't have this option.

Taking a long mortgage is a very good thing, if it's because it gives you a safety net.

It is not a good thing if it's being used to increase the amount you can borrow to it's breaking point.

Freddie59

astrofool wrote: »

It is not a good thing if it's being used to increase the amount you can borrow to it's breaking point.

Great point. Pity all those who borrowed weren't as sensible as you.

Goesague

The housing market goes in cycles. People who buy at the bottom of the cycle generally do well no matter how ill advised their purchase might have been in terms of their income at the time. people who buy at the top of the cycle do badly no matter how clever the purchase may have seemed at the time. Many people buying their first house do not consider the cycle. In the recession of the 80's the sensible thing was to borrow as much as possible and then sit out the downturn.
People should not congratulate themselves on the benefits of market movements. Very few people call the cycles correctly. Buying in bad times and selling in good.

Freddie59

Goesague wrote: »

The housing market goes in cycles. People who buy at the bottom of the cycle generally do well no matter how ill advised their purchase might have been in terms of their income at the time. people who buy at the top of the cycle do badly no matter how clever the purchase may have seemed at the time. Many people buying their first house do not consider the cycle. In the recession of the 80's the sensible thing was to borrow as much as possible and then sit out the downturn.
People should not congratulate themselves on the benefits of market movements. Very few people call the cycles correctly. Buying in bad times and selling in good.

What happened in the 80s bears absolutely NO resemblance to what went on here between 1996 - 2006.

Jo King

Freddie59 wrote: »

What happened in the 80s bears absolutely NO resemblance to what went on here between 1996 - 2006.

Who said it did? The mid 80's was a time of recession and dropping house prices. Just like now. People who saved deposits and bought houses in the mid 80's soon found themselves with low repayments and avoiding high rents during the boom years and now have their loans paid off. The tactics then are the tactics to be employed now.

rainbowtrout

To be honest in the main, I'd agree with Freddie59's sentiments. I understand what people are saying about his high mortgage repayments but aside from that the mindset people were in buying a house in the 70s/80s is completely different to what it is now.


I bought my house in 2003, I was 24 and the first of my friends to buy. I bought it as a long term home, somewhere I could live comfortably for the rest of my life if I choose to do so. I bought the very basic essentials for the house and then added stuff bit by bit when I had saved the money for it. I had a 3 piece suite, a cheap TV and my cd player in my sittingroom when I moved in. Nothing else. The TV was on the ground for 5 months because I didn't have a table to put it on. I had old curtains in the sittingroom and my bedroom until I could get new ones (that matched) etc etc. I'm sure some would say I overextended myself if I couldn't afford any of that stuff. I was well able to afford the mortgage and I put by money each month or bought one item every month that I wanted for the house.

Having said that most of the people I know that bought houses since had showhouses from day one. When i visited some of these houses, they looked like the person had been living there years. They were fully furnished right down to pictures on the walls. Most of them were always barely able to meet the mortgage because on top of it, they had various loans and repayments to furniture stores and electrical shops for all the stuff they bought on credit so the house was in showhouse condition on moving in. Credit cards maxed out with stuff that wasn't absolutely necessary.I wasn't jealous of any of that if that's what people are wondering, but where as Freddie59 might have overextended himself on the mortgage, many people today not only overextended on the mortgage but took on lots of lifestyle debt for what really amounts to instant gratification.

I also think when Freddie59 bought his home, it was a home, it wasn't a starter home. I doubt the concept existed. People bought houses and lived in them for life. My home place is in an estate that was built in 1970 and most of the houses are still occupied by families that moved in back then. Hopefully the starter home mentality that has existed in the country will diminish in the next few years, but also that people will look at what they have and realise that it is enough. A three bedroom semi-d IS enough space to bring up 2 children.

The_Conductor

rainbowtrout wrote: »

A three bedroom semi-d IS enough space to bring up 2 children.

Certainly it is.
The big problem is that over 300,000 of the most recent builds over the past 15 years are apartments without adequate facilities for children or for people who intend to live there longterm.
How many 3 bed semi-d's were built since late 1994?

rainbowtrout

smccarrick wrote: »

Certainly it is.
The big problem is that over 300,000 of the most recent builds over the past 15 years are apartments without adequate facilities for children or for people who intend to live there longterm.
How many 3 bed semi-d's were built since late 1994?

I know and I agree with you, I've just never understood why people bought apartments (1 or 2 bed) knowing that they would want to start a family within a few years and would need to move. I know thousands did it, I just don't understand the thinking behind it. I suppose it goes back to the whole starter home mentality again v. buying a home that you could live in for the rest of your life if needs be

Freddie59

Jo King wrote: »

Who said it did? The mid 80's was a time of recession and dropping house prices. Just like now. People who saved deposits and bought houses in the mid 80's soon found themselves with low repayments and avoiding high rents during the boom years and now have their loans paid off. The tactics then are the tactics to be employed now.

Rubbish. House prices ROSE in the 80s (here in Waterford anyway). Typical 3-bed semi-D cost €23k in 1981. 2nd-hand was worth €27k in 1987 - new build was then €35k). By 1994 the 2nd-hand 3-bed semi was costing €35k (makes an annual appreciation of €1k a year) and the new build was costing around €45k.

Regarding 'who said it did' read the post about cycles.:p

Freddie59

rainbowtrout wrote: »

To be honest in the main, I'd agree with Freddie59's sentiments. I understand what people are saying about his high mortgage repayments but aside from that the mindset people were in buying a house in the 70s/80s is completely different to what it is now.


I bought my house in 2003, I was 24 and the first of my friends to buy. I bought it as a long term home, somewhere I could live comfortably for the rest of my life if I choose to do so. I bought the very basic essentials for the house and then added stuff bit by bit when I had saved the money for it. I had a 3 piece suite, a cheap TV and my cd player in my sittingroom when I moved in. Nothing else. The TV was on the ground for 5 months because I didn't have a table to put it on. I had old curtains in the sittingroom and my bedroom until I could get new ones (that matched) etc etc. I'm sure some would say I overextended myself if I couldn't afford any of that stuff. I was well able to afford the mortgage and I put by money each month or bought one item every month that I wanted for the house.

Having said that most of the people I know that bought houses since had showhouses from day one. When i visited some of these houses, they looked like the person had been living there years. They were fully furnished right down to pictures on the walls. Most of them were always barely able to meet the mortgage because on top of it, they had various loans and repayments to furniture stores and electrical shops for all the stuff they bought on credit so the house was in showhouse condition on moving in. Credit cards maxed out with stuff that wasn't absolutely necessary.I wasn't jealous of any of that if that's what people are wondering, but where as Freddie59 might have overextended himself on the mortgage, many people today not only overextended on the mortgage but took on lots of lifestyle debt for what really amounts to instant gratification.

I also think when Freddie59 bought his home, it was a home, it wasn't a starter home. I doubt the concept existed. People bought houses and lived in them for life. My home place is in an estate that was built in 1970 and most of the houses are still occupied by families that moved in back then. Hopefully the starter home mentality that has existed in the country will diminish in the next few years, but also that people will look at what they have and realise that it is enough. A three bedroom semi-d IS enough space to bring up 2 children.

Thanks RT. You've said it better than I ever could. There was no such thing as a 'starer home'. It was a home. Full stop. And we reared three children in a three-bed semi with one bathroom and loo. And there was never any problem.:)

ricman

LOADS of apartments were bought by single people,its easier to get a loan on a 1 bed ,or i wanna live in area x, its posh.How many houses were built in the docklands?Zero,Remember ,people were deluded up til 2007,
sure i can buy this 1bed for 200k,and sell it in 5 years for 250,prices will go up forever, it was a property bubble.
The average buyer is not a super financial expert,like stocks when prices
go up even the fools think i can make money.
SO theres loadsa people in negative equity in apartments ,are they gonna marry and have kids .Who knows.
Making mistakes is a human trait.
ITS the job of the central bank,regulators , dept of finance to protect the public.
OBVIOUSLY some people were ignorant,corrupt,incompetent or simply
not doing their jobs.
You cant trust the banks to regulate ,they seem to operate on,
sell anything ,loan as much as possible , get a nice bonus at the end of the year.

johndaman66

astrofool wrote: »

As an aside, I took out a 35 year mortgage. I have the means to pay it back over 20 years if I wanted to, and am currently overpaying, reducing the term by near to a decade. However, I am getting a better return on my money elsewhere, than I would by paying extra off the mortgage to bring the term down. I plan on having a lump sum saved to pay it all off after 15 years.

But the best bit for me, as a family man, if worst comes to worst, and our income goes down, or we lose our incomes completely, we can always revert back to the payments making the mortage over 35 years, without penalty. Had we taken a 25 year mortgage, we wouldn't have this option.

Out of curiosity astrofool are there any penalty fees associated with paying off a mortgage early such as you plan to do?

Jo King

Freddie59 wrote: »

Rubbish. House prices ROSE in the 80s (here in Waterford anyway). Typical 3-bed semi-D cost €23k in 1981. 2nd-hand was worth €27k in 1987 - new build was then €35k). By 1994 the 2nd-hand 3-bed semi was costing €35k (makes an annual appreciation of €1k a year) and the new build was costing around €45k.

Regarding 'who said it did' read the post about cycles.:p

House prices FELL in the mid 1980's. There was a rise in prices from 1978tp 1982. There were falls from 1982 to 1987. There were rises from late 1988 to 1992. I know a man who bought a house in 1986 for 38k. He had paid 48k for the house next door 18 months before. There was an estate in Rathmines where a house sold for 64k was sold on again for 46K. Considering that there was inflation during this period real prices fell substantially. It was extremely difficult to raise finance.

The_Conductor

ricman wrote: »

LOADS of apartments were bought by single people,its easier to get a loan on a 1 bed ,or i wanna live in area x, its posh.How many houses were built in the docklands?Zero,Remember ,people were deluded up til 2007,
sure i can buy this 1bed for 200k,and sell it in 5 years for 250,prices will go up forever, it was a property bubble.
The average buyer is not a super financial expert,like stocks when prices
go up even the fools think i can make money.
SO theres loadsa people in negative equity in apartments ,are they gonna marry and have kids .Who knows.
Making mistakes is a human trait.
ITS the job of the central bank,regulators , dept of finance to protect the public.
OBVIOUSLY some people were ignorant,corrupt,incompetent or simply
not doing their jobs.
You cant trust the banks to regulate ,they seem to operate on,
sell anything ,loan as much as possible , get a nice bonus at the end of the year.

First of all- the vast majority of properties were not bought be single people- even the bizarre income multiple loans on offer were insufficient for this- it became the norm to have two income earners per house, one of whom serviced the mortgage- while they lived on the salary of the second earner. This is what was normal. Sure you had some people buying on their own- many of whom thought Wexford/Portlaoise/Athlone/Mullingar/Dundalk were dormer towns of Dublin and willing to commute these distances twice daily. It was crazy...

Not all people were deluded- and suggesting the majority of people didn't have the intelligence to sit down and work out their finances for themselves, is doing a lot of people a disservice. It suits to find someone else to blame for any mistakes we make- there is a culture in Ireland of people not stepping up to the plate and saying Mea Culpa- someone else always has to be responsible for any bad that may happen. Sure the central bank did not regulate properly- but no-one had money rammed down their throats- they actively sought out loans, and if they are now incapable of servicing those loans- they have to accept that this is of their own doing. I took a lower paying job well before the peak- because of the security it offered- and was laughed at by family and friends, now they'd kill for my job...... People have to accept responsibility for their own actions- and indeed why should the person who didn't subscribe to economic madness be expected to bail out their foolish neighbours?

You are saying people aren't financial experts- no they are not- but why did everyone have to subscribe to the property mania that is almost uniquely Irish in nature? Its seen as a badge of shame to admit that you rent- why is this? Most other countries accept that normal practice is to rent indefinitively- and nowhere else on the planet is buying a property seen as planning for your retirement........

It is not the job of the central bank to protect the public- they are concerned with monetary policy, nothing more, nothing less. It could well be argued that the Financial Regulator does indeed have a duty of care to inform the public- and so they did- we're all familiar with their 'I don't know what a tracker mortgage is' add set on a bus- and doubtless their office on Dame Street etc. But who listened to anything they said? Very few people..... It wasn't cool to be prudent- it was cool to get your hands on as much loot as you possibly could, to remortgage every year or two to always have that years car reg in the drive way, to go on multiple holidays every year- and not to Spain or Portugal- thats where the social welfare recipients go......... People lost the run of themselves- and want someone to blame. Exuberance is part of human nature- trying to blame someone else for our own mistakes has however been taken to a whole new level here in Ireland.....

Banks are (or were) private institutions answerable to their shareholders, whose primary business was the generation of as much profit as possible. Thats not a bad thing- its how capitalism works. Even with our peculiar brand of lax regulation- things were fine- until Anglo started to shovel money out the door- in a manner that BOI and AIB simply couldn't compete with. It was a case of ape the brat, or toss in the towel. One bad apple spread to another- and before you know it- you have a rotten barrel.

Why does someone else always have to be to blame- why are people so loathe to accept they screwed up and accept the consequences of their actions?

Jo King

The banks have managed to ruin their shareholders as well as leaving a lot of their customers in a nightmare of unsustainable debt. boom has followed bust since the middle ages. The role of regulators is to limit the effects of the cycle.
What happened was the most pro-cyclical policies being pursued. If the regulator had moved sooner to limit 100% mortgages a lot of grief would have been avoided. Similarly if proper security had been demanded of developers.
Allowing banks to have 50% of their business exposed to the property sector when the norm in Europe is 15% was also asking for trouble.
Many people went along with the "get on the ladder" mentality.
Long term renting is avoided in Ireland because the private rented sector is in terrible state.
Larger institutional investors such as banks and insurance companies are reluctant to invest in residential property because of the legal regime which is blatantly anti-landlord. Individuals who opt for long term renting are at the mercy of the individual landlord and all his or her caprices. A person can't rent from a company who will maintain a standard.

Freddie59

Jo King wrote: »

House prices FELL in the mid 1980's. There was a rise in prices from 1978tp 1982. There were falls from 1982 to 1987. There were rises from late 1988 to 1992. I know a man who bought a house in 1986 for 38k. He had paid 48k for the house next door 18 months before. There was an estate in Rathmines where a house sold for 64k was sold on again for 46K. Considering that there was inflation during this period real prices fell substantially. It was extremely difficult to raise finance.

So because they fell in a part of Dublin they fell EVERYWHERE?:rolleyes: I've quoted you the figures for Waterford/South East. They're fact.

Freddie59

Jo King wrote: »

The banks have managed to ruin their shareholders

Should the shareholders not bear some responsibility? What was the disclaimer: the value of shares may fall as well as rise. Caveat emptor.

astrofool

johndaman66 wrote: »

Out of curiosity astrofool are there any penalty fees associated with paying off a mortgage early such as you plan to do?

There is a maximum payment of 10% of the value of the fixed portion, and the tracker portion can be paid back at any stage. When the fixed portion ends, it can all be paid off without penalty.

Blackjack

Jo King wrote: »

Larger institutional investors such as banks and insurance companies are reluctant to invest in residential property because of the legal regime which is blatantly anti-landlord. Individuals who opt for long term renting are at the mercy of the individual landlord and all his or her caprices.

is that not a contradiction of itself?

Jo King

Freddie59 wrote: »

So because they fell in a part of Dublin they fell EVERYWHERE?:rolleyes: I've quoted you the figures for Waterford/South East. They're fact.

There are lies, damned lies and statistics. You have quoted prices that are six years apart and claimed that the price was rising at all points in between. The price of new houses is irrelevant. At that time the price of new houses was distorted by grants subsidies and stamp duty on second hand houses for all buyers. House prices fell all over the country in the MID 80's with the low point being in 1985-86. There were rises at each end of the 80's. Overall house prices rose between 1980 and 1990. The conditions in the middle years are similar to market conditions now.

Jo King

Freddie59 wrote: »

Should the shareholders not bear some responsibility? What was the disclaimer: the value of shares may fall as well as rise. Caveat emptor.

The banks were supposed to be delivering for their shareholders. In fact they did anything but. The company is run by the directors not the shareholders.Share prices can rise as well as fall and will certainly fall if the directors adopt lunatic business practices.