I wonder what would happen today if the modern Generation were suddenly to face the Interest Rates hike that we had to endure back in the 80"s,?
I remember receiving the letters from the bank, almost every week saying,:- Sorry to inform you but from next week the interest rate on your loan will be increasing to 15 - 16 - 17 - 18%
I shudder to think when you hear of people getting into a new home on a minimum deposit and owing something like $500,000 or more,
the Banks would have to have a fire sale to get rid of all the repo's.
K.J.
Nomes said
07:58 AM Aug 12, 2015
I wonder also, we bought our house and the interest rates went up and up, we did not go anywhere or buy anything for 4 years, just went to work to pay the mortgage. We borrowed at 11% and the interest rate went to 18%.
During that time I worked in the mortgage lending department for an American finance company that is now a Bank, during the peak when values went down and the interest rate was up they made the customers pay for a new valuations and then hit them with letter ordering them to pay a lump sum to bring down the principal loan amount as their loan to security ratio was above the 90 percent allowed. A lot of these were in new housing estates and there were no previous sales of properties to set a value price. This was the same time that credit cards became very popular.
It was very sad as many could not pay and surrendered their property because they could not sell as the property value was less than the outstanding mortgage.
When the interest rates finally started to fall those on fixed rates had to renegotiate the loan and pay all the associated fees.
20 year loans were the maximum period, now I see 30 year loans.
The draw down facility keeps these newer loans high as purchases are made for cars etc.
The banks will never loose, many on high mortgages have mortgage insurance.
03_Troopy said
09:39 AM Aug 12, 2015
I was lucky enough to be refused a house loan at the time due to also being posted overseas. So I put the money I had into a cash management trust for a couple of years, and it worked out well for me. I was kicking myself that I didn't put money into gold in 1979 too, the price more than double in a year.
Desert Dweller said
09:43 AM Aug 12, 2015
Bought our house & land by the beach for $36,000. Had $18,000 deposit & the Bank would only lend us $12,000. Had to take a second mortgage out for $6,000 which we paid off with the missus's Superannuation when she left work to have our first child. Paid the Bank mortgage off completely with my Superannuation when I changed jobs in the 80's.
Still living in the same house 40 years later (updated completely), it's now worth around $600,000. Not a bad investment. LOL.
Feel sorry for the younger generation trying to buy a house & eventually raise a family.
Spydermann said
10:23 AM Aug 12, 2015
Keith. Was your house basic. I grew up in a 2 bedroom post-war rough-cast that was standard ar the time regardless of how many kids you had. My first house was a basic 3 bed house with no en-suite. My kids want a 4 or 5 bed, ensuite, spa, 2 car rolladoor garage central heating etc. in a prime location.
rockylizard said
11:55 AM Aug 12, 2015
Gday...
Spyderman's comments regarding buying/building a home today, unfortunately, have a truthful ring.
My first home was built in Sunbury VIC in 1971 when I was 24, wife 22, daughter 2, son 3 months.
I bought the land for $1,600 in 1970 with cash. The house cost $14,700.
In those days you needed to meet strict conditions - eg, needed 25% of value of the property as deposit, capacity to pay (mortgage repayments could not exceed 30% of your disposable wage), interest rate was 7%, loan term was 25 years.
My wife did not work and had to sign agreement to secure the mortgage that she would not fall pregnant within the next 3 years. My gross annual wage was $4,500.
We JUST scrapped in and were able to build the house - a 14square three bedroom, study, bathroom, ensuite to main bedroom, carport. The only external work was a concrete slab under the two-car carport and a path from that slab to the front door. There were no fences around the block. The remainder of the allotment was 'house just built mess'. No carpet, no curtains.
Then Labor got in and inflation went through the roof - interest rates climbed making it difficult to pay - we struggled until wife went to part-time work in 1975.The only plus was the inflation created a sudden increase in the value of the property - although that did not help us ... but it meant as an investment it became even more attractive.
We struggled for at least 10 years affording that first house.
It is certainly very hard for those today under 25 (perhaps even under 30 ) to save up a deposit against the cost of the home they want to purchase. However, the 'basic house' we bought is no longer being built for today's generation.
Houses now come with carpet, curtains, fully painted, concrete paths and some rudimentary landscaping, fencing and often some garden plants/bushes.
Even if the younguns today wanted to build a basic house there are none available.
However, the solution is for them to buy a small established house - maybe needing a bit of work - at a price they can afford. Spend some time, their labour and a bit of money 'improving' the property and then 'trading up' as their needs/family dictate.
Having said that, the biggest problem with so many younguns is they don't seem to have the ability/discipline? to limit their lifestyle to their income - they cannot live without credit - generally speaking.
It will always be difficult and a struggle - but as with everything in life - if there is no struggle there will be no challenge, no achievement and no progress.
Cheers - and I am glad I have made it to be a comfortable old fart - John
Radar said
02:39 PM Aug 12, 2015
Here in Brisbane we have a local rag called Northside Chronicle August 5th 2015 that ran story in there realistate section about a young person trying to save enough to buy there first home, I found it interesting written by a Mr. Peter koulizos who is a Property Lecturer.
He goes on to explain the difference between back then and now, wages, interest and cost to buy.
Like most of you our first home was pretty ordinary a tin roof, fibro walls, one bathroom, very little furniture and the loo out the back (not right out the back) on about 18 % ,just kept on working to pay for it. You know I really don't remember my work colleagues complaining about no money we all drove used cars, no fancy holidays, I do remember the man next door wanting money to put up a fence, that was a nightmare trying to jungle that.
Now I am enjoying my early years of retirement, worked until nearly 66 and now can do most things we want to do in the next 6 years or so before we need to slow down to a slower pace and best of all we paid for it all and have our good heatlh.
So enjoy. Ralph
Desert Dweller said
04:21 PM Aug 12, 2015
Spydermann wrote:
Keith. Was your house basic. I grew up in a 2 bedroom post-war rough-cast that was standard ar the time regardless of how many kids you had. My first house was a basic 3 bed house with no en-suite. My kids want a 4 or 5 bed, ensuite, spa, 2 car rolladoor garage central heating etc. in a prime location.
Our house was a basic 3 bedroom ''contemporary'' home around 15 squares. It had only been lived in for a few weeks as it was a builders holiday home recently built. No garage & a gravel driveway. Definitely nothing fancy! LOL. We slept on the floor in sleeping bags the day we took possession. Our area has now become extremely trendy as it has lots of parkland, is near the beach & has a Thai restaurant & posh cafe within 3 minutes walk. our vintage of houses are being bought up by developers, demolished & replaced by 2 story town houses. Lots of Mercedes, BMW's & Audi's in driveways, not ours though. LOL. Don't know where these young people get the money for an $800,000 town house, 2 posh cars & all new luxury furniture plus a boat or a caravan?
Spydermann said
06:13 PM Aug 12, 2015
Rockylizard. My second purchase was a block of land in Sunbury in 1979 at $16,000. Then built a $28,000 house on it. Our first purchase in Ballarat in 1974 was a modest house that increased rapidly in value but given that everything else increased we were no better off when moving to Sunbury.
kiwijims said
01:38 AM Aug 13, 2015
Our story goes like this, back in the 80's we were finding it getting harder and harder to make the monthly Mortgage payments,
We had only been in our home about two years when the interest rates hit 18% the house was very basic, built about 15 years before we bought it and consisted of lounge, kitchen / dining room combined and three bedrooms with and shower/toilet off the main bedroom.
Our greatest trouble came when the Building Society which we had the mortgage and all our savings with closed it's doors overnight, on top of all this, I also had my wagers going into this place as well, My wagers had gone in a Thursday night and the place closed on the Friday morning leaving us with nothing for food or anything else.
I had to do some very quick ringing around and managed to have my wages payed into another account but as for the money in the Building Society, it took around two years before we say any of it again, and then we only got 20c in the dollar back.
After the closure we were left in limbo with no-one to pay the monthly payments of the mortgage, and on top of that we couldn't get a loan off any bank as the only collateral we had was the house, so the only alternative I had was to go for a load at one of those sharks, the interest on this loan quickly got out of hand and things were looking very grim, about this time our mortgage was taken over by one of the big banks who promptly sent us a letter telling us to come up with the six months back payments on money owing within 30 days, well as money was so short, these back payments had been spent on just living,
I recall going down to the bank and walking in on the manager and throwing the keys to the house at him, telling him we couldn't find the back payments as we still had our money tied up with the de-funked Building Society, he might as well have the house.
The only saving grace we got at that time was that the Bank Manager refused to take the keys to the house and actually came up with a solution to our troubles by adding the back payments onto the end of the new mortgage with the bank, I think it took the best part of 10 years before we got over this bad run of luck, at least it set us back 10 years.
On the death of my Parents, I received an amount of money large enough to have the pleasure of going back to that bank and asking what the balance of the mortgage was, they told me and I said "Right" here's the balance !! give me the mortgage Papers, they even had the cheek to suggest I not pay off the balance as I would not have any collateral left for future loans, to this day I've cut up my credit cards, burnt the cheque book and only pay cash for any thing we want.
So ends the story of our experience of high interest rates.
K.J.
The Doo crew said
03:51 PM Aug 15, 2015
Property was cheap in the early eighty's in WA, newly married we paid cash for our first "fixer upper" 12 grand for a fibro holiday house in Mandurah on 3 acres, no internal wall linings just 4x2 framing. Spend all our spare time & with help from friends & family fixed it up a treat but SWMBO wanted something a little better.
Using the house as security we bought another & rented the original to a older couple with no kids, this process of buying, renovating & renting went on until we had 13 property's & two blocks on a new canal development, we thought we were going to be set for life with this plan.
Three children also boosted our family numbers during this period, then the "recession we had to have" loomed upon our plan. Our bank manager jumped through hoops to help ease the pain of loosing everything & as nobody could afford to buy at 18 percent interest the banks had a fire sale of all our property's & possessions leaving us with just an old Holden panel van & our personal effects, the old van was only valued at two hundred bucks so they didn't bother taking it.
I borrowed two hundred bucks from the bank manager himself that I paid back a year later with interest & left town heading north to the mining town of Port Hedland as a friend had told me I could get work their, we had no reason to stay in our little town any longer, no work, no house, no hope!!
We lived in a 20ft caravan for the first 2 years & I worked 14 hour days, six days a week for six & a half years to pay off what I still owed the bank, I proudly framed the letter that stated my debt had been cleared, after renting for so long we were now in a position to buy a house again or so I thought, NO bank would even talk to a discharged bankrupt about a home loan. I also ended up with the lending sharks for 1 year paying the most obscene interest just so I could then approach the bank for a loan as I had equity in the property & money in the bank.
Long story short, the mining boom was upon us & the house we bought for a pittance was now worth 750 grand when the wife decided that she was leaving me for her boss a renowned scoundrel in the town. I ended up with our 3 boys & more debt to fund her a huge payout of cash, once again provided by the bank as I had to re-morgage the house I once owned.
The mining boom was good to me & we sold our "old three bedroom asbestos sh#tbox on rusty poles" for over a million dollars, I now live in the NT & spend my time trying to convince my now adult brood that you must put away a little each pay for a rainy day & if you cant afford to pay cash, you cant afford it, unfortunately they are the "generation now" & possibly for the rest of their lives will be "generation rent" & give there credit cards a regular workout for the things they want.
The bank can give it to you, & they can take it away even quicker !!!!
Wombat 280 said
09:34 PM Aug 16, 2015
03_Troopy wrote:
I was lucky enough to be refused a house loan at the time due to also being posted overseas. So I put the money I had into a cash management trust for a couple of years, and it worked out well for me. I was kicking myself that I didn't put money into gold in 1979 too, the price more than double in a year.
Was in the same boat , I found out that my bank wouldn't lend to servicemen as we were consider a bad risk let alone back in the day the ADF was the only people ensured on a full time income rain hail or shine. In some cases banks wouldn't go second mortgage to a War Service loan and War Service Homes wouldn't bend on them having first bite if it went pear shaped and you got killed in the services . So much for sticking your neck out in places the pollies should not have sent us . Yes 17 - 18% was the norm for the time some got stuck with 22%
I wonder what would happen today if the modern Generation were suddenly to face the Interest Rates hike that we had to endure back in the 80"s,?
I remember receiving the letters from the bank, almost every week saying,:- Sorry to inform you but from next week the interest rate on your loan will be increasing to 15 - 16 - 17 - 18%
I shudder to think when you hear of people getting into a new home on a minimum deposit and owing something like $500,000 or more,
the Banks would have to have a fire sale to get rid of all the repo's.
K.J.
During that time I worked in the mortgage lending department for an American finance company that is now a Bank, during the peak when values went down and the interest rate was up they made the customers pay for a new valuations and then hit them with letter ordering them to pay a lump sum to bring down the principal loan amount as their loan to security ratio was above the 90 percent allowed. A lot of these were in new housing estates and there were no previous sales of properties to set a value price. This was the same time that credit cards became very popular.
It was very sad as many could not pay and surrendered their property because they could not sell as the property value was less than the outstanding mortgage.
When the interest rates finally started to fall those on fixed rates had to renegotiate the loan and pay all the associated fees.
20 year loans were the maximum period, now I see 30 year loans.
The draw down facility keeps these newer loans high as purchases are made for cars etc.
The banks will never loose, many on high mortgages have mortgage insurance.
Still living in the same house 40 years later (updated completely), it's now worth around $600,000. Not a bad investment. LOL.
Feel sorry for the younger generation trying to buy a house & eventually raise a family.
Gday...
Spyderman's comments regarding buying/building a home today, unfortunately, have a truthful ring.
My first home was built in Sunbury VIC in 1971 when I was 24, wife 22, daughter 2, son 3 months.
I bought the land for $1,600 in 1970 with cash. The house cost $14,700.
In those days you needed to meet strict conditions - eg, needed 25% of value of the property as deposit, capacity to pay (mortgage repayments could not exceed 30% of your disposable wage), interest rate was 7%, loan term was 25 years.
My wife did not work and had to sign agreement to secure the mortgage that she would not fall pregnant within the next 3 years. My gross annual wage was $4,500.
We JUST scrapped in and were able to build the house - a 14square three bedroom, study, bathroom, ensuite to main bedroom, carport. The only external work was a concrete slab under the two-car carport and a path from that slab to the front door. There were no fences around the block. The remainder of the allotment was 'house just built mess'. No carpet, no curtains.
Then Labor got in and inflation went through the roof - interest rates climbed making it difficult to pay - we struggled until wife went to part-time work in 1975.The only plus was the inflation created a sudden increase in the value of the property - although that did not help us ... but it meant as an investment it became even more attractive.
We struggled for at least 10 years affording that first house.
It is certainly very hard for those today under 25 (perhaps even under 30
) to save up a deposit against the cost of the home they want to purchase. However, the 'basic house' we bought is no longer being built for today's generation.
Houses now come with carpet, curtains, fully painted, concrete paths and some rudimentary landscaping, fencing and often some garden plants/bushes.
Even if the younguns today wanted to build a basic house there are none available.
However, the solution is for them to buy a small established house - maybe needing a bit of work - at a price they can afford. Spend some time, their labour and a bit of money 'improving' the property and then 'trading up' as their needs/family dictate.
Having said that, the biggest problem with so many younguns is they don't seem to have the ability/discipline? to limit their lifestyle to their income - they cannot live without credit - generally speaking.
It will always be difficult and a struggle - but as with everything in life - if there is no struggle there will be no challenge, no achievement and no progress.
Cheers - and I am glad I have made it to be a comfortable old fart
- John
Here in Brisbane we have a local rag called Northside Chronicle August 5th 2015 that ran story in there realistate section about a young person trying to save enough to buy there first home, I found it interesting written by a Mr. Peter koulizos who is a Property Lecturer.
He goes on to explain the difference between back then and now, wages, interest and cost to buy.
Like most of you our first home was pretty ordinary a tin roof, fibro walls, one bathroom, very little furniture and the loo out the back (not right out the back) on about 18 % ,just kept on working to pay for it. You know I really don't remember my work colleagues complaining about no money we all drove used cars, no fancy holidays, I do remember the man next door wanting money to put up a fence, that was a nightmare trying to jungle that.
Now I am enjoying my early years of retirement, worked until nearly 66 and now can do most things we want to do in the next 6 years or so before we need to slow down to a slower pace and best of all we paid for it all and have our good heatlh.
So enjoy. Ralph
Our house was a basic 3 bedroom ''contemporary'' home around 15 squares. It had only been lived in for a few weeks as it was a builders holiday home recently built. No garage & a gravel driveway. Definitely nothing fancy! LOL. We slept on the floor in sleeping bags the day we took possession. Our area has now become extremely trendy as it has lots of parkland, is near the beach & has a Thai restaurant & posh cafe within 3 minutes walk. our vintage of houses are being bought up by developers, demolished & replaced by 2 story town houses. Lots of Mercedes, BMW's & Audi's in driveways, not ours though. LOL. Don't know where these young people get the money for an $800,000 town house, 2 posh cars & all new luxury furniture plus a boat or a caravan?
Our story goes like this, back in the 80's we were finding it getting harder and harder to make the monthly Mortgage payments,
We had only been in our home about two years when the interest rates hit 18% the house was very basic, built about 15 years before we bought it and consisted of lounge, kitchen / dining room combined and three bedrooms with and shower/toilet off the main bedroom.
Our greatest trouble came when the Building Society which we had the mortgage and all our savings with closed it's doors overnight, on top of all this, I also had my wagers going into this place as well, My wagers had gone in a Thursday night and the place closed on the Friday morning leaving us with nothing for food or anything else.
I had to do some very quick ringing around and managed to have my wages payed into another account but as for the money in the Building Society, it took around two years before we say any of it again, and then we only got 20c in the dollar back.
After the closure we were left in limbo with no-one to pay the monthly payments of the mortgage, and on top of that we couldn't get a loan off any bank as the only collateral we had was the house, so the only alternative I had was to go for a load at one of those sharks, the interest on this loan quickly got out of hand and things were looking very grim, about this time our mortgage was taken over by one of the big banks who promptly sent us a letter telling us to come up with the six months back payments on money owing within 30 days, well as money was so short, these back payments had been spent on just living,
I recall going down to the bank and walking in on the manager and throwing the keys to the house at him, telling him we couldn't find the back payments as we still had our money tied up with the de-funked Building Society, he might as well have the house.
The only saving grace we got at that time was that the Bank Manager refused to take the keys to the house and actually came up with a solution to our troubles by adding the back payments onto the end of the new mortgage with the bank, I think it took the best part of 10 years before we got over this bad run of luck, at least it set us back 10 years.
On the death of my Parents, I received an amount of money large enough to have the pleasure of going back to that bank and asking what the balance of the mortgage was, they told me and I said "Right" here's the balance !! give me the mortgage Papers, they even had the cheek to suggest I not pay off the balance as I would not have any collateral left for future loans, to this day I've cut up my credit cards, burnt the cheque book and only pay cash for any thing we want.
So ends the story of our experience of high interest rates.
K.J.
Using the house as security we bought another & rented the original to a older couple with no kids, this process of buying, renovating & renting went on until we had 13 property's & two blocks on a new canal development, we thought we were going to be set for life with this plan.
Three children also boosted our family numbers during this period, then the "recession we had to have" loomed upon our plan. Our bank manager jumped through hoops to help ease the pain of loosing everything & as nobody could afford to buy at 18 percent interest the banks had a fire sale of all our property's & possessions leaving us with just an old Holden panel van & our personal effects, the old van was only valued at two hundred bucks so they didn't bother taking it.
I borrowed two hundred bucks from the bank manager himself that I paid back a year later with interest & left town heading north to the mining town of Port Hedland as a friend had told me I could get work their, we had no reason to stay in our little town any longer, no work, no house, no hope!!
We lived in a 20ft caravan for the first 2 years & I worked 14 hour days, six days a week for six & a half years to pay off what I still owed the bank, I proudly framed the letter that stated my debt had been cleared, after renting for so long we were now in a position to buy a house again or so I thought, NO bank would even talk to a discharged bankrupt about a home loan. I also ended up with the lending sharks for 1 year paying the most obscene interest just so I could then approach the bank for a loan as I had equity in the property & money in the bank.
Long story short, the mining boom was upon us & the house we bought for a pittance was now worth 750 grand when the wife decided that she was leaving me for her boss a renowned scoundrel in the town. I ended up with our 3 boys & more debt to fund her a huge payout of cash, once again provided by the bank as I had to re-morgage the house I once owned.
The mining boom was good to me & we sold our "old three bedroom asbestos sh#tbox on rusty poles" for over a million dollars, I now live in the NT & spend my time trying to convince my now adult brood that you must put away a little each pay for a rainy day & if you cant afford to pay cash, you cant afford it, unfortunately they are the "generation now" & possibly for the rest of their lives will be "generation rent" & give there credit cards a regular workout for the things they want.
The bank can give it to you, & they can take it away even quicker !!!!
Was in the same boat , I found out that my bank wouldn't lend to servicemen as we were consider a bad risk let alone back in the day the ADF was the only people ensured on a full time income rain hail or shine. In some cases banks wouldn't go second mortgage to a War Service loan and War Service Homes wouldn't bend on them having first bite if it went pear shaped and you got killed in the services . So much for sticking your neck out in places the pollies should not have sent us . Yes 17 - 18% was the norm for the time some got stuck with 22%