Evelin

You were better off then with 16.5%, than today with eg 7.5% because the house prices were soooooo much lower (make your own calculations). I profitted at that time because I had money in Australia in savings accounts. On top of it, the Aus$ floated in 1983 which was in my favour too when exchanging to another currency.

stuckinblighty

Agreed 4.25% is low but the borrowers dont get that rate ! We're paying about 7 % now....not so low !!!!
If really bugs me when all the 'experts' say that borrowing is at an all time low.....we dont get the friggin low rate after the banks put their whack on top and just to think how low the interest would be now on my old UK mortgage *crying smilie*

pomtastic

Absolutely Evelin!! Spot on!!!

Today's young home buyers are up to their necks in it as they've been conditioned into thinking that buying a house is a fast track to riches. Any small rate rise is a killer and the banks are to blame for high mulitples of income lending but I'm sure the taxpayer will bail the banks out if it all goes tits up.

renth

Absolutely, it will be the sensible bailing out the foolish, just like in the UK.

JAJ

Lower interest rates = more money chasing the same quantity of real estate = higher prices = less "affordability".

Higher interest rates = the reverse.

ABCDiamond

April 1990 the Interest Rate was 16.5%
Assume 16.5% on the $74,303 average First Home Mortgage, and the interest paid in the year would be $1,021.67 or 35.4% of the average wage.


April 2010 the Interest rate is 6.58%,
Assume 6.58% on the $277,854 average First Home Mortgage, and the interest paid in the year would be $1,523.57 or 26.1% of the average wage.

coolshadows

I think the big problem there is that the average wage has gone up, but the median wage has gone down (relatively speaking).

(must be all those fat bankers)

Fly Away

You beat me too it. I was just going to say that salaries were considerably lower too. Also mortgage conditions were more stringent, we had to put a minimum deposit of 10% which took us a long time to save.

We bought our first house on my husband's salary alone as I was a Masters student, (no grant, paying my own fees) so we had additional expenses of that too. I seem to remember that in 1990 our mortgage was £600 pcm and my husband earnt about £16K pa. We had very, very little left over. The house was a reno and we lived without central heating or double glazing until the following year when I started work. In fact it was so cold in the house that I remember the milk freezing when it was left out overnight.

I wouldn't say that we had it easy and we certainly didn't expect a perfect house full of new furniture. We spent £300 on second hand furniture to furnish the whole house and lived with that until we could afford to replace it. Which was about 10 years before we had all our own stuff!

At the same time many of our friends were suffering with negative equity and job losses - a double whammy. It wasn't quite cardboard box in the road time but it was a very tough time and I don't think people who didn't live through it can appreciate it. Websites full of house crash rhetoric are written by 20 year olds with no life experience who want a cheap house as a God given right.

This said, I know we had it easy compared to our parents and grandparents. Hell my grandparents were refugees from Nazi Germany and were never able to afford their own home in the UK.

coolshadows

Of the handful of home loans we've looked at they've asked for 20% deposit.

ABCDiamond

I recall the day when we were able to buy carpet for our first house. It was a momentous occasion New furniture didn't come till my third house.

I wish I could recall the exact cost of the repayments and my wage, but the figures escape me. I do recall the deposit 20%.

I almost remembered my wage... I sued someone at that time, and got the equivalent of 50% of my annual salary. I can almost remember the figure... but not quite.. maybe it will come to me later.

coolshadows

Looks like rates may heading towards 5.5% sooner rather than later, with bank rates pushing 8%.

pomtastic

Errrm, how about Steve Keen, professor of economics at the University of Western Sydney, I'd put him at about 55 years old and he's looking at a 40% fall in real terms, over several years.

http://www.debtdeflation.com/blogs/

So are you saying The Economist, Demographia and the IMF are run by a load of 20 year olds with no clue? These economic entities are all saying Aussie house prices are 30-50% overpriced. Do some proper research.

I think you have it the wrong way round. It's the 20 year olds who believe that getting the biggest mortage and buying the most expensive house they can afford leads them to a life of riches as they have only experienced boom times and easy lending practices by the banks. It's the older ones with life experiences will tell you that current house price rises are unsustainable unless wage inflation catches up.

pomtastic

25 year loan at 17% interest rate and payments of £600 pcm would of meant you had a loan of about $40K back then. This would of been 2.5 times your husband's salary of $16K. (I'm persuming that the £600 a month repayments were at a time of high interest rates as you went on to explain how tough everyone was having it back then, so I can only asume 17%)

Was $16K the average wage back then? If it was, then 2.5 times the average wage in Aus now would be $65K giving you an equivilent mortgage today of $162K. Only $162K!!!!

Unfortunately, First Home Buyers are needing almost double that amount of $162K to get a home thesedays, so I can't see the 'how it was so much harder back then' story washes?

pomtastic

Thanks to cheap labour in China and Asia and evolving technology, goods are ALL relatively cheaper than even 10 years ago.

My Dad had to save up a whole weeks wage to buy me a bike back in the 70's, now you can buy one in Kmart for a couple of hours of labour.

We were the only one's in our street with wall to wall carpeting at one stage, now people change their carpets every few years because they can and it's cheap.

People have more stuff because it's cheaper. If it gets even cheaper then we'll have even more stuff. If Iphones get down to $20 a piece then perhaps I'll even get one.

Fly Away

No it was 16k pounds not dollars... so whatever the exchange rate was in 1990 would give you the salary in dollars. Houses were MUCH cheaper in Aus than the UK in 1990. By just doubling the wage to get an approximate figure of $32K.

The house was a tiny terrace with no front garden (right onto the road) and a back yard big enough for the bins. It had an outside toilet and we put a bathroom in. Don't tell me this sort of house would be expensive in Aus.. it's the cheapest thing you get and we struggled. My husband had been working for a few years to get a salary of 16K and it was above average as he is a graduate and yet we struggled. I am not saying youngsters don't struggle, just that we struggled too, you can't look at house prices being less and say oh that's cheap because it's all relative to the conditions at the time. My parents paid £300 - about $600 dollars for their house in 1960. That's laughable now but they struggled to pay their mortgage.