Is It Harder To Buy a House Now, Compared To The 90s?

Interest rates in the 1990s were 15% and I've seen a lot of mentions saying that interest rates were worse in the 90s compared to today. But who had it more challenging? Boomers or millennials? With inflation of house prices, it's hard to compare interest rates like for like, so let's explore why this year is harder than 1990 with today's bank rate and interest rates.

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[MattBrighton]

If you're wondering why I used gross monthly income is mainly due to using post-tax is hard to compare for everyone for those that pay 20% VS 40%, different pension contributions, student loan etc. So easier to look at gross.

[AbraxasArcadia]

Wouldn't a bank only lend someone up to 4.5x their income though? So if the average income is £37, 100 they could only borrow up to £166, 950 and therefore need to save for longer for a deposit when compared to someone in the 90's?

[Lecia-lithium]

A simple 2 bed did not cost 12-15x the average wage. So no
Today is the worst it's ever been.

[timeforchange]

One in a village just on north London, started 550k last year, it went under offer, when rates were low, come back on the market dropped it, dropped it again and again, there asking 450k now and still not shifting. Even 100 grand less still costs more monthly with current interest rates than when they were 1% or so!

[WellbeTD]

Another factor from the 90's is that when you are controbuting a lesser % of your income you have the opportunity to over pay your mortage and reduce your interest costs. Five years of frugal living at the start of your mortgage would have huge impacts on the total amount paid over the term of the mortgage. People today don't really have this capacity as you're already dropping over 50% of your income on the mortgage already and overpayments are much tougher.

I would be interested to know the stats behind how quickly mortgages were being paid off in the 90's vs now.

[markkingproperties]

Good video Matt, just an observation, back in the early mid 1990s once you got above average income it was a lot easier to buy a ‘middle class’ area home, in 1995 my family income was £70k, being in the same jobs today would be £110k ish, we also had far less stealth taxes and perks such as higher tax band was in relative terms and a higher income point, company cars and enhanced pension. Our first home in 1995 cost only 2/3 of our joint annual gross income. The sweet spot for buying was just after the 1989 peak when prices declined along with a drop in interest rates. The problem now is with such high purchase prices small interest rate increases are magnified in payments. I’ve been a property developer over 25 years in the same city (Cardiff), the properties I used to sell to factory and retail workers I now sell to solicitors and Doctors, the factory and retail workers are sadly often pushed out of the market as the entry point has risen, sad times for young people.

[PercyJackson]

Would it be best to get a fixed or variable rate mortgage right now and if fixed, for how many years? Is there a good source for me to look into?

[andrewpowers]

In 1990 the average wage was not 20k, I had qualified as a Electrician 18 months earlier my wages was about 10k a year that data way out, but agree today house prices have gone crazy in the last few year which not good for the younger generation.

[FlyingFun.]

20k was not the average wage, more like 12k at most

[GraceMarieBarry]

Another great video! I’m in Melbourne and the house prices are nuts, we have an apartment here and will only be able to buy an actual house in the UK. Will have to come back some day!

[realtruths]

It's not just the mortgage comparison it's should be the cost of living comparison. Fuel, gas + electric bills. Food. Insurances have all massively increased

[timeforchange]

Large proportion of properties in South East are being reduced currently

[oktfg]

The Government is sitting on significant capital gains from Help to Buy equity loans. Houses have gone up 65% since those loans where funded.

[moneyAndSavings]

Thanks, Matt Brighton great video again!

[sohsueping]

Nice video Matt. Thank you for doing the scenario analysis and helping your viewers make more informed decisions.

[Noallegiance]

Yes, but only because prices haven't yet adjusted down to match the upward adjustment in rates.

Nominally 2002 rates should = 2002 prices. But we didn't have high inflation back then so add that into the mix.

Give it time.

Once the denial wears off...

[marcoducceschi]

You are wrong about interest you may have seen a second bank in America has closed SVB and was caused by low bond prices. USA will increase their interest rates much more to stop US banks from closing and UK will have to follow or they will import inflation.

[wonderingthoughts]

People who go on about how wonderful buying a house is are basically ignorant. Don’t beat yourself up if you think you’ll never buy a house, you’re not throwing money away renting, you’re living your life. Having said that don’t use the cost of housing as an excuse for bad financial behaviours. There are still great ways to build wealth for your future, buying a house and paying for it four times over in interest is not one of them.

[wpeter]

House buying has always been difficult for people without the bank of mum and dad. We were there in 1990, so here is a bit of info. Median wage was much lower than that average of £20, 000 for good jobs, even senior hospital doctors (google it). Average wage does not reflect ordinary peoples lives. The Chancellor had meddled with a policy that caused a massive increase in house price in 1989, mortgages were difficult to obtain and many of us were emotionally scarred by the housing situation of that crazy time (remember Poll Tax). Us oldies are on your side, we want you to have somewhere to live and not be stressed. It's a political problem and setting generations against one another is another dead cat.

[tonia]

I really like your videos. Please As a first time buyer, Would you advise to wait a while before buying now? Am just a bit confused