DEBT

[Andyg]

When I was a lad, you could only borrow 3x your income for a morgage and still had to shell out 10% desposit. When I got married I paid for the reception myself (about £250) and the honey moon was 3 nights in the Royal Bath Hotel before returning to the DIY. With the exception of a £150 quid for my first car, never borrowed money and as a result went without or ended up driving crap.

However now (I am 49), I own my own house, have 3 cars (inc a Porsche 911), pensions provisions (whatever they will be worth :roll: ) all credit cards are paid in full each month and perhaps more importantly NO debt.

I accept that I am lucky - however as many people say you make your own luck through hardwork.

Mr. Micawber, in Charles Dickens' David Copperfield, summed it up by saying:

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

However he forgot to mention that there is always someone who will bail out the feckless. Which perhaps is the biggest problem we face.

Andy (now stepping down from his high horse :))

[jonny]

[quote="Andyg"]
Mr. Micawber, in Charles Dickens' David Copperfield, summed it up by saying:

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

quote]

Thats it !

I read that savings per wages ratio has fallen from around 10% in 1997 to 5% in 2009 !What about a rainy day or retirement one day ! Im in my twenties and already save a nice proportion of what i earn because of the wonders of compound interest! If folks only realise that with a few decades a small amount of money and compound interest. :drunken: :drunken:

I blame labour :D after all they just spent ,spent and spent esp after the IMF warned Brown to stop making such lavish spending commitments in 2001 ,The country is bankrupt a a result of spending and debt and so is the labour part almost bankrupt .Im not blaming the government enitrely , its really the individuals responsibility ,if you borrow money you have to pay t back ? so why keep on borrowing?
IMO interest rates are really low but they will rise and this will cause more defaults etc

The amount of credit people have been taking on i think the stats are the average Britain has £24k (or something like that in debt other than the mortgage :shock: ) Also look at house prices one would have to take on massive amounts of just debt/mortage just too buy one ! Lets hope socety goes towards a lower debt and higher saving ratio.

I would only take on debt to expand a business or buy an investment or a mortgage as long it was affordable.

[Andy H]

No debt apart from a mortgage and the car. I have never owned a credit card, and I probably never will.

[dtdukok]

I would not want to be the OP's mate.

It was all brought home to me some yeas ago when I was made redundant. (don't get me wrong we didn't have huge debt - just a bit on credit cards, car loan and mortgage.) However the realisation of the income stream potentially stopping was sobering. We used the redundancy money plus our savings to pay off the mortgage. As soon as I was employed again we more or less saved the equivalent of all the money I was earning either into pensions or ISA's or jusr plain savings accounts. Within 5 years we were in a position where we could pay cash for everthing we needed when we wanted it. It changed a lot of out habits as well. We just don't waste money at all if we can help it. We buy quality, not quantity it always pays off. Our holidays are modest and we have developed a much greener approach to life including getting an allotment. It sounds aweful to most people (I'm sure some think we are boring) but you know what - it's great, simple and much less stressful.

It's also taught us a lot about money and investing and spreading risk and the markets. No bad thing in these uncertain times!

Far from sounding awful - your setup sounds great to me! You have your head screwed on. :)

[Brian]

I have always had one axiom at the back of my mind where money is concerned.

Compound interest is a good friend when you save money but it is a bad and dangerous enemy when you borrow.

How many schools teach about compound interest today.

I know my son's Grammar school didn't!! His university course in business didn't even refer to it - in the first year, anyway.

RBS going into schools - don't teach of the perils of compound interest as a borrower, so I'm told.

How many youngsters today even know what or why AER is different from the headline rate ?? very few from our figures.


B

[NikosF]

Unfortunately with current interest rates, compound interest isn't what it used to be. Many savings rates are less than inflation - so you might be worse off saving.

There is a sound (but risky) logic that says with the ability to borrow at less than 1.25% (my current morrgage rate is 1.24%) - you should leverage up and invest in equities or something, which should hopefully return at least 5%.

[andrew e]

This *may* make sense: I'm in the catagory of mid 30's, two daughters at school, mortgage etc, I bought my first flat for £46,000 in 1997.

That's where I beat the system. Not knocking you old fellas (hey I'd love someone give up their seat on a bus for me :bom: ) but your single biggest outlay at this age was possibly your home. In 98/99 on property rocketed to the extent that the average person who has bought a house in the last decade has at least a £100,000+ mortgage... on a 2 bed property more often than not - that's £1000 of salary "gone" every month minimum. Luckily I erschewed that nice Audi A4 for 5% deposit of a flat in 1997 - it sold for £157,000 in late 2002. (£110,000 in Just 5 years) It cost £187,000 to buy my current gaff. But if I wanted the same house today its £300,000...

The question is how do you raise a family WITHOUT debt in the 21st century, not how do you run up debt.

Luckily I was ahead of the tide for once, but I have mates who have massive debt from just surving, not living a playboy lifestyle...

[andrew e]

Shit.

I've turned into my dad :lol:

[Brian]

Unfortunately with current interest rates, compound interest isn't what it used to be. Many savings rates are less than inflation - so you might be worse off saving.

There is a sound (but risky) logic that says with the ability to borrow at less than 1.25% (my current morrgage rate is 1.24%) - you should leverage up and invest in equities or something, which should hopefully return at least 5%.

I would avoid most equities with all this HFT (High frequency Trading) taking some 72% of trades at the moment (so I'm led to believe). Some high yield equities seem appealing (via a fund to mitigate some risk)
I would never borrow to invest unless I had limited liabilities and very little risk.

If you tie money up for a period you can get 5% (gross) and if you "invest" in an asset class within a tax umbrella (ISA) then it's tax free....yippee. I am currently yielding nearly 7% tax free with corporate bonds held within an ISA.

The headline interest rates I agree are appalling and that is because the cash ISAs the bank are selling on their retail stalls are just a plain rip off, mainly because there are more debtors than savers so it is not politically expedient for those bastrads in government to help those small to medium savers out (either side of the atlantic).

Being debt free is freedom :) :) :)

That is only my personal view BTW. Each to his own.

B

[Scotteh]

I only have a very low limit on my credit card for emergencies and I owe £10k on a loan, which is through a credit union and not a bank so the rates are great and I only end up paying slightly more than that back in total.

I wouldn't get into debt like the OP mentioned unless I had to, I know from personal experience with my parents that sometimes it's unavoidable if you want to keep your house etc after unforseen circumstances. Although getting into that type of debt just to indulge myself doesn't even cross my mind, if I can't afford it, I don't get it.

[johncoote69]

A lively debate i see......
Good stuff.

[welshwatchman]

A friend of mine accumulated £57,000 of CC debt, nice house, large mortgage with little equity, nice leased Audi.

His extremely healthy salary of £73,000 was all gobbled up and more.

He wanted me to lend him £XX to "get him over the worst of it".

Whilst I was pondering the whole thing his wife slipped out that they were planning a jaunt to New York later that month. That was my get out.

He doesn't talk to me any more but there again he didn't get the chance to burn my cash.

[Mutling]

Doesn't sound like a great loss

[deryckt]

He wanted me to lend him £XX to "get him over the worst of it".

Whilst I was pondering the whole thing his wife slipped out that they were planning a jaunt to New York later that month. That was my get out.

He doesn't talk to me any more but there again he didn't get the chance to burn my cash.

There is a saying "never lend money to family - they will consider it a gift" (it is something that I have learnt the hard way :( ) I think the same applies to lot of "friends" too.

Cheers,

Deryck

[Pink Floyd]

Absolutely spot on !!

Been seen here before, but this is quite good THE SIMPLE DOLLAR

Cheers, a great read!
I study at uni ATM and have friends who spend their student loans in the first weeks/ month of receiving it.
Crazy way of dealing with finances, in my opinion

Furthermore, I thought I had heard that the average student racks up something like £30k by the time they're finishing uni... Sounded astronomical to me. Unfortunately, another thread on TZ confirms this:

First, a general comment on debt:

Whilst its true some money sense needs to be 'earned', the average debt for someone leaving university now is over £30K: http://www.belfasttelegraph.co.uk/op...-14536482.html.
I imagine many students may have to pull out of University, or won't bother applying, because of that astronomic debt level.

Secondly, if he does live in your house surely there's some things you can insist on? Maybe you could work with him to show him how to do a budget so he can see what's happening with his finances?

But I remember being 20. Didn't listen to anyone as I knew it all. :wink:

[100thmonkey]

There is a saying "never lend money to family - they will consider it a gift" (it is something that I have learnt the hard way :( ) I think the same applies to lot of "friends" too.

Cheers,

Deryck

Agree totally Deryck, never a lender nor a borrower be, everytime I have lent soemone cash to 'help out' i have felt or been made to feel like satan when asking for it back, just the act of asking makes me feel bad and Im the one doing the favour. So i refrain from doing it now.

[Paneraiseeker]

Lent my best friend 20k for a business venture. loan was interest free for a 12 month period only....2 years later a received back my cash....never again.

[Mrcrowley]

Been there, done that, to the tune of 5 figures.

I'm sorted now but that's all i'll say.

[Ari]

Don't know if it's changed recently, but the average UNSECURED debt (ie not mortgages) for every household with debt is £20,000

Twenty grand each spread across every household with debt in the land, not including mortgage!!

And we wonder why we're up financial sh*t creek..?

Incidentally, one thing I have learned in life is this. Managing your money is easy. Provided you have enough of it... :?

[raysablade]

Quite why my wife decided to do it like this is beyond me but since our kids were born the vasty majority of our regular savings have gone notionally to them by standing order at the start of each month. Then if we have needed to buy anything new or take a holiday that we can not fund out of salary, we have "borrowed" from the kids "accounts" at commercial rates of interest. The upshot is that both will easily have the £30,000 they need to go to University, we drive a 7 year old Honda Civic and it feels like I am permanently in debt with tens of thousands in the bank.

It is however good to know that there are few conceivable financial crisis we could not overcome. I guess that the built in challenge is that it would have to be quite a crisis to take money from the kids that we could not pay back.

In my view the key to managing “real” debt is to only borrow to fund things that will clearly enhance your earnings potential. It is easy to pontificate about never getting into debt but I can't see a problem with a short-sighted man borrowing money to pay for a basic set of glasses. Solvency is infinitely worse than a minimal level of debt in those circumstances.

[Ari]

My personal motto has been, never save until the debts are gone.

Clearly access to some money for the proverbial "rainy day" is necessary, but why people have "savings" whilst they're paying debt on loans, credit cards, or even a mortgage is beyond me. You wouldn't re-mortgage £5K to stick it in a savings account and call it your "savings", so why save up £5K and put that into a savings account when you could pay off some of a loan or even a mortgage with it instead.

I've always gone for a flexible mortgage and put everything spare into it, never had more than a grand in savings (and usually much less than that) until the mortgage was gone (and what a great feeling that was!).

The perfect example of people with false savings was a mate of mine who borrowed £8K at some fairly high interest rate (15% or something) for a car when he had £10K in the bank. I asked him why he didn't take it out of his savings account and simply pay the loan repayment amount back into it till it was "paid off" and avoid all the interest charges? To which the answer was because he "couldn't possibly touch his savings". He genuinely could not grasp that whilst he owed £8K and had £10K in savings, he only really had £2K of savings. I even tried asking him whether if I borrowed £20K and put it into a savings account with £2K in it I'd have £22K of savings? He said not but still couldn't (or perhaps wouldn't) see that that was what he was effectively doing... Mad.

[twhp101]

Im in my twenties and already save a nice proportion of what i earn because of the wonders of compound interest! If folks only realise that with a few decades a small amount of money and compound interest. :drunken: :drunken:

Makes me think of the song in Mary Poppins about what to do with tuppence (prudently) invested in the bank. Always makes me chuckle :D . http://www.allthelyrics.com/lyrics/mary ... 77799.html

Personal debt wise I only have student loans (just finished) and a mortgage. I learnt my lesson with credit cards 10 years ago (aged 20). Thankfully only a £500 limit. Stern words from my parents and having to pay it off by transferring $300pm from Australia meant I won't be doing that again.

[Mrcrowley]

At 25 I had 5 cards - one with a £10,000 limit.

I know it's up to you to watch your spending. However i found as i paid on time etc, the bank just threw money at me. Temptation as i had just got into watches.

[Pink Floyd]

At 25 I had 5 cards - one with a £10,000 limit.

I know it's up to you to watch your spending. However i found as i paid on time etc, the bank just threw money at me. Temptation as i had just got into watches.

:shock:
Why would you EVER need FIVE cards..
I understand 2 or 3, if you move between countries twice yearly (like me)..

I have family, who also had 5 cards, but that doesn't help comprehension for my part.
So you maxed one out and payed the interest with the next one? :|

[jonny]

My personal motto has been, never save until the debts are gone.

Clearly access to some money for the proverbial "rainy day" is necessary, but why people have "savings" whilst they're paying debt on loans, credit cards, or even a mortgage is beyond me. You wouldn't re-mortgage £5K to stick it in a savings account and call it your "savings", so why save up £5K and put that into a savings account when you could pay off some of a loan or even a mortgage with it instead.

I've always gone for a flexible mortgage and put everything spare into it, never had more than a grand in savings (and usually much less than that) until the mortgage was gone (and what a great feeling that was!).

The perfect example of people with false savings was a mate of mine who borrowed £8K at some fairly high interest rate (15% or something) for a car when he had £10K in the bank. I asked him why he didn't take it out of his savings account and simply pay the loan repayment amount back into it till it was "paid off" and avoid all the interest charges? To which the answer was because he "couldn't possibly touch his savings". He genuinely could not grasp that whilst he owed £8K and had £10K in savings, he only really had £2K of savings. I even tried asking him whether if I borrowed £20K and put it into a savings account with £2K in it I'd have £22K of savings? He said not but still couldn't (or perhaps wouldn't) see that that was what he was effectively doing... Mad.

I think thats a bit shallow what your saying! I agree with you people should have 6 month rainy day deposit with enough money to cover exspenses for 6 months like food,mortgage,utilties ,car etc

Though you are forgetting that sometimes saving is a better return than paying off debt. Interest rates are very low so why pay of your mortgage at 3% when you are currently getting or can get 7-8% yields iin corperate bonds or yields on stocks or other assets yielding returns higher than your debt percentage(so why hurry to pay off ones mortgage !).I understand your aversion to debt however debt is not necessarily a bad thing well it is if you are ubying a 42% Sony tv at 28% on a store card! However debt in the right context of investment or for business it is part of the process of building growth/wealth.

[Mrcrowley]

At 25 I had 5 cards - one with a £10,000 limit.

I know it's up to you to watch your spending. However i found as i paid on time etc, the bank just threw money at me. Temptation as i had just got into watches.

:shock:
Why would you EVER need FIVE cards..
I understand 2 or 3, if you move between countries twice yearly (like me)..

I have family, who also had 5 cards, but that doesn't help comprehension for my part.
So you maxed one out and payed the interest with the next one? :|

Never maxed them.

When buying just used one with lowest amount.

[swanbourne]

I think I've mentioned before that because my parents never had much money when I was growing up, I have a healthy respect for money and a phobia about debt. My parents never borrowed, they saved until they could afford it and every luxury was hard-won and very much appreciated. They finally borrowed to buy their first house when my father was 39 and my mother 37, having saved a 30% deposit.

I'm grateful for the financial lessons I learnt as a child; I still won't take on debt and if I can't afford something then I go without until I can. I took out my first mortgage in 1981 at the age of 32 and paid it off in 1989, always paying more than the minimum mortgage payment. I use credit and debit cards for convenience but always clear the balance at the end of each month.

I see friends living off credit cards and loans, constantly shuffling money around to avoid red letters and the bailiff's knock at the door and whilst it might work for them, it's not for me. I may not have had all the foreign holidays, big houses and fancy cars but I don't have the worry either. It works for us.

Eddie

[Pink Floyd]

That's my sentiment too: "phobia about debt".
Couldn't imagine a life without the debit card :arrow: carrying cash everywhere and no hole-in-the-walls. In this way, we have come a long way. But the credit cards are beyond me. No wonder all this is happening -- one knows that they COULD bag that PLOPROF, even though they have no cash flow to back it up later.

Kind of feel for b11ocx's son though (see Rant about my son) Many people haven't got the skills to cope with the credit-on-demand system, especially the youth. It's not exactly their fault that this has not been instilled through the school system. They get scorched and learn... :|

[PADDYS]

Some of the figures mentioned on here are incredible, I don't know how these people can sleep at night without wakening up in a sweat every 10 minutes. ( perhaps they do I suppose )

Paddy

[Paneraiseeker]

I think I've mentioned before that because my parents never had much money when I was growing up, I have a healthy respect for money and a phobia about debt. My parents never borrowed, they saved until they could afford it and every luxury was hard-won and very much appreciated. They finally borrowed to buy their first house when my father was 39 and my mother 37, having saved a 30% deposit.

I'm grateful for the financial lessons I learnt as a child; I still won't take on debt and if I can't afford something then I go without until I can. I took out my first mortgage in 1981 at the age of 32 and paid it off in 1989, always paying more than the minimum mortgage payment. I use credit and debit cards for convenience but always clear the balance at the end of each month.

I see friends living off credit cards and loans, constantly shuffling money around to avoid red letters and the bailiff's knock at the door and whilst it might work for them, it's not for me. I may not have had all the foreign holidays, big houses and fancy cars but I don't have the worry either. It works for us.

Eddie

Plus the fact it wont send you to an early grave with worry.

[Paneraiseeker]

My ex partner was about 20k in debt and she worked in a bank giving out the loans..... :D

[Pink Floyd]

My ex partner was about 20k in debt and she worked in a bank giving out the loans..... :D

It's like the casino employees. One told me that most of them were pretty much avid gamblers themselves, straight after work off to another casino to spend the dough.. They see others come and waste inordinate amounts, but this has no effect to restrain them from similar behaviour :roll:
I like casinos myself and have no bad feelings towards the idea of a casino, but the stories of how some lose...
The house always wins in the long run and that goes for banks as well IMO

[gibbon]

Sign of modern times im afraid, people buying shit they dont need with money they dont have. People blame the bankers? I blame the regulators and the 'have to have' culture. Nobody forces people to take these loans, stop spending, start saving, prices will return to logical levels (guess im talking major investment here/real estate) people will be able to actually afford to buy what the NEED again. Problem lies in the 'not on my watch' political attitude to price corrections.

Rant over. :lol:

[Paneraiseeker]

My ex partner was about 20k in debt and she worked in a bank giving out the loans..... :D

It's like the casino employees. One told me that most of them were pretty much avid gamblers themselves, straight after work off to another casino to spend the dough.. They see others come and waste inordinate amounts, but this has no effect to restrain them from similar behaviour :roll:
I like casinos myself and have no bad feelings towards the idea of a casino, but the stories of how some lose...
The house always wins in the long run and that goes for banks as well IMO

Mugs game.

[Pink Floyd]

people buying shit they dont need with money they dont have.

:lol: :lol: :lol:
So true.

Right now, I'd love to buy a used PRS-22 (black), have the money, but nobody's selling :|

[johncoote69]

Here's an update - the guy has just booked 2 weeks away in the Maldives via KUONI for his honeymoon...... :lol:

[langtoft lad]

Sign of modern times im afraid, people buying shit they dont need with money they dont have. People blame the bankers? I blame the regulators and the 'have to have' culture. Nobody forces people to take these loans, stop spending, start saving, prices will return to logical levels (guess im talking major investment here/real estate) people will be able to actually afford to buy what the NEED again. Problem lies in the 'not on my watch' political attitude to price corrections.

Rant over. :lol:

Unfortunately our whole economy is based on that culture :roll:
Of course it would be so much better if the population only bought what they needed, when they'd saved for it... but getting there from where we are now would be very painful for the nation's economy.
For one brief moment when the banks collapsed, I thought we might see such a correction but unfortunately our politicos decided the banks (very sensibly imho) had stopped lending so gave them bundles of our money (which the nation doesn't have) to said banks to encourage them to lend it back to us.

It's like a Dad borrowing money from a loan shark to lend to his kids, so they can 'pay' room & board in their family home - all that has been achieved is a net outflow to the money lender!

[raysablade]

Sign of modern times im afraid, people buying shit they dont need with money they dont have. People blame the bankers? I blame the regulators and the 'have to have' culture. Nobody forces people to take these loans, stop spending, start saving, prices will return to logical levels (guess im talking major investment here/real estate) people will be able to actually afford to buy what the NEED again. Problem lies in the 'not on my watch' political attitude to price corrections.

Rant over. :lol:

Unfortunately our whole economy is based on that culture :roll:
Of course it would be so much better if the population only bought what they needed, when they'd saved for it... but getting there from where we are now would be very painful for the nation's economy.
For one brief moment when the banks collapsed, I thought we might see such a correction but unfortunately our politicos decided the banks (very sensibly imho) had stopped lending so gave them bundles of our money (which the nation doesn't have) to said banks to encourage them to lend it back to us.

It's like a Dad borrowing money from a loan shark to lend to his kids, so they can 'pay' room & board in their family home - all that has been achieved is a net outflow to the money lender!

I have a year's salary in the bank, i've always been prudent and,apart from my mortgage and a few interest free credit offers, I've managed to avoid debt. But i'm part of the system as much anyone else and the idea that you could stand by and gleefully watch it collapse is insane.

I might loose my livlihood and my savings but I sometimes think it would be worth it to see the faces of the "correction" and punishement fantasists if their dreams come to fruition.

[voodoo]

Here's an update - the guy has just booked 2 weeks away in the Maldives via KUONI for his honeymoon...... :lol:

Most likely to "get away from it all" and to "de-stress" - he'll need two holidays in the Maldives when he gets back and opens his first credit card bill.... :roll:

[Ari]

I have a year's salary in the bank, i've always been prudent and,apart from my mortgage and a few interest free credit offers, I've managed to avoid debt. But i'm part of the system as much anyone else and the idea that you could stand by and gleefully watch it collapse is insane.

Just on a practical note, if your mortgage is flexible (a lot are now) then it might be worth giving serious consideration to putting most of that into your mortgage and reduce the amount you're paying interest on. With many mortgages you can get it back out if you need it in an emergancy.

I used to put everything I could into my mortgage and eventually cleared it but with zero in the bank. But better that than (say) fifteen grand in the bank earning me sod all, and fifteen grand out on a mortgage costing me interest every month.

Just a thought.

[andrew e]

Here's an update - the guy has just booked 2 weeks away in the Maldives via KUONI for his honeymoon...... :lol:

I did that almost 10 years ago, but using cash. Since then (2 daughters later, No1 actually came to Mali too) this year is my first posh holiday for the 4 of us in Havana. I have had nice camping holidays across the continent inbetween, but never went wild because, er, I couldn't.

[langtoft lad]

Indeed, a few years back I had £17k in an ISA paying 9% and a 7% fixed rate mortgage balance outstanding also £17k.
It was obvious common sense that when the fixed rate ended, and the savings rate plummeted that one should pay off the other - but it was hard to do... seeing my "savings" wiped out... but of course I did & have enjoyed the feeling that my house is now my home & no-one can take it away.

Of course being debt free, it is easy to be smug as others around you continue to exhibit financial recklessness but I guess they enjoy the fruits of their consumerism and if the sh*t does hit the fan, I'll be in no better position than they, and actually may have to pay a share of their debts!

National economic mismanagement is actually quite frightening as history tells us it can lead to war.
(Hyperinflation following depression & instability allowed the rise of the Nazis)

[Mutling]

Recently become debt free, not feeling smug just relieved that I owe no one anything.

[Ari]

It's a hell of a feeling aint it..?

[raysablade]

I have a year's salary in the bank, i've always been prudent and,apart from my mortgage and a few interest free credit offers, I've managed to avoid debt. But i'm part of the system as much anyone else and the idea that you could stand by and gleefully watch it collapse is insane.

Just on a practical note, if your mortgage is flexible (a lot are now) then it might be worth giving serious consideration to putting most of that into your mortgage and reduce the amount you're paying interest on. With many mortgages you can get it back out if you need it in an emergancy.

I used to put everything I could into my mortgage and eventually cleared it but with zero in the bank. But better that than (say) fifteen grand in the bank earning me sod all, and fifteen grand out on a mortgage costing me interest every month.

Just a thought.

I agree and I did pay off the mortgage ASAP. I have found that interest free credit is always a debt worth incurring if they won't give you a discount for cash. In that along with a great many other things I've thought that I, or more accurately my wife, have run our finances very well. However my interest in economics stopped at my own front door and now I realise that in that I made a tragic mistake.

My kids are facing a far greater challenge than we ever did and will need to get into enormous debt to buy even a humble house, on top of their student debts. We bought the one we are in now in our twenties for 2.5 times our joint salary. I still don't get how 20 years and many promotions later it is worth more than 3 times our current joint salary.

That insane rise in house prices isn't the banks fault, after all we told them what we wanted to borrow and if they refused we went to somebody who would. It isn't politicians fault because if they had tried to curtail our profligacy we would have kicked them out and brought in people who would condone it.

It’s my fault. Even though I could not afford to buy a £350,000 house it felt good to live in one, especially when it had cost me £60,000. I knew it was a stupid, I think we all did, but we acted as though we'd all found a money tree at the bottom of the garden. When I consider the mess that we collectively had made for our children, I really do feel ashamed.

[Glamdring]

^
Interesting thoughts. The one thing I'd say is different about today's young compared to when I bought my first house in '82 is expectation. I bought at the top of the then market, interest rates at over 15% which meant I was in the red each month for years until gradual salary increases and lowering rates meant I could eat again. I did not buy a house for as much as the bank was prepared to lend me even then.
Are today's young prepared to do that or do they want it all at once?

[Ari]

My kids are facing a far greater challenge than we ever did and will need to get into enormous debt to buy even a humble house, on top of their student debts. We bought the one we are in now in our twenties for 2.5 times our joint salary. I still don't get how 20 years and many promotions later it is worth more than 3 times our current joint salary.

It isn't. It's worth what the banks will lend to, and they won't lend what they once would so it isn't. it's just that reality is taking a long time to "kick in" as people would rather not sell than accept their properties new reality value. Give it a while, and prices will drop.

I remember friends desperately jumping on the property bandwagon at the end of the eighties, buying crappy one bed flats for (what was then) mega bucks and thinking I was priced out for good. Five years later when reality kicked in I bought a three bed house for less than they paid. Not because I was clever, just because I was lucky not to have been able to afford a poxy flat when they could, i would have bought if i could have.

That insane rise in house prices isn't the banks fault, after all we told them what we wanted to borrow and if they refused we went to somebody who would. It isn't politicians fault because if they had tried to curtail our profligacy we would have kicked them out and brought in people who would condone it.

It is directly the banks fault. House prices are a direct result of what the nation is earning and what the banks will lend on that income. If all the banks decide to lend twice as much, we don't all get twice as good houses, we get the same houses but at twice the cost. That's what happened, banks came up with "clever" ways to borrow more, higher salary multiples, 40 year mortgages, self cert, interest only. That gave everyone three times the spending power so house prices rose to fit what the banks were lending. People didn't have more money nor were they better placed to pay it back, it's in great part why the banking system nearly collapsed.

It’s my fault. Even though I could not afford to buy a £350,000 house it felt good to live in one, especially when it had cost me £60,000. I knew it was a stupid, I think we all did, but we acted as though we'd all found a money tree at the bottom of the garden. When I consider the mess that we collectively had made for our children, I really do feel ashamed.

Don't get that. You spent £60K on a house, irresponsible lending made it possible for people to spend £350K on it. That's not your fault.

Thing is that kind of lending is gone, so house prices must eventually adjust to fit. The money simply is no longer there.

My house is worth 15% less than it was 2 years ago, and I reckon it's still way overpriced. I reckon it's worth half it's peak value in reality. But so what? Whether it's worth a pound or a million tomorrow it keeps the rain off the same....

I hope reality kicks in sooner rather than later, about time house prices got sensible again and people could afford to buy and afford to live as well.

[Spencer Lee]

I've got a mate of mine in the mob. He's living in quarters and has £47K in debt and rising. No house, no savings, and he's just been told his application to sign on has been rejected!

[Parabola]

^
Interesting thoughts. The one thing I'd say is different about today's young compared to when I bought my first house in '82 is expectation. I bought at the top of the then market, interest rates at over 15% which meant I was in the red each month for years until gradual salary increases and lowering rates meant I could eat again. I did not buy a house for as much as the bank was prepared to lend me even then.
Are today's young prepared to do that or do they want it all at once?

Please don't lump an entire generation into one stereotype, I find it infuriating when an older generation passes judgement on a younger one.

[Glamdring]

Not quite the whole generation. I've worked with and alongside enough young people to know their expectations are different from ours 30 years ago.