My main bug bear with money right now is housing. I need a bigger place to home an upcoming family. We are not yet in a position to buy. The housing market has surged into crazy anxiety-inducing prices. Just when I think it can’t get more expensive, prices go up another 10%. And one thing I really don’t like, is being in debt.
If credit is king; then debt is its bum-washing servant. You’d think. But in our lifetime, global economics has become increasingly reliant on the value of debt. Owing money has become normalised to the point where most people live their lives in some degree of debt. We accept to be in debt from college/university, perhaps from buying a car, and certainly unless you are super rich or a lotto winner, we expect to go into debt from borrowing a mortgage to buy a house.
The word “mort” means death, e.g. mortality rates. Back in the olden days, a “mortgage” literally meant “the grip of death”. Once upon another economic time, it was a great shame to have a mortgage on a property. It was seen as a death sentence unto someone who should be a free man. It was in very dire circumstances that mortgages were handed out – during a business collapse, crop failure, family death, and so on.
In 1900, only 5% of Brits needed a mortgage on their home, with the vast majority of people owning them outright. One reason we have so many mortgages today is because the financial contribution from housing debt props up our economy. But the increase in house prices hasn’t been a slow and steady rise. The most dramatic changes have taken place in the last 30 years, with prices rising faster than German soccer star Götze watching his girlfriend on the beach.
What hasn’t been erected, however, is affordable, sustainable housing. In the 1960s house building in the UK peaked at 400,000 a year. Britain’s past two governments, set off by Thatcher’s era in the 1980s, decided to sell off government-owned housing stock without building enough replacements, creating a shortage of supply. This housing shortage has seen housing become a luxury, only affordable to the more privileged in society. Normal people on average wages seem to only get the keys to their own home once a close relative dies.
|Year||Average House Price||Deposit needed||Mortgage Length||% Income spent on Mortgage|
|1930||£590||20 – 30 %||15 years||8%|
|30 – 40%||35 years||28% (recommended)
Worst of all, lack of supply is pushing people into real poverty. Shelter is a basic human right, right?
The cost of living rises faster than our wages, leaving us spending most of our money on rent, council tax, energy bills, water charges, food and travel to and from work. With no ability to save enough, losing a job, or a car breaking down, or a medical injury, or even a happy event like mine, of becoming a mum, requiring me to temporarily stop working, and life can quickly descend into immense struggle and stress.
Increasing house prices is a global city phenomenon – New York, San Francisco, Sydney, all have house prices going through the roof (excuse the pun). In Japan’s Tokyo there are grandparent mortgages where it takes more than one generation to pay off a property because of its price. I remember a friend telling me grandparent mortgages will never happen here in the UK because the public would be outraged but as mortgages increase to 35 years (a whole life time), what’s to say there won’t be 45 or 55 or 65 year mortgages in the future?
Already, housing is unaffordable. My own experience in London is one of fury and rage turned to anguish and despair. Not solely for me as I struggle to get a toe on the property ladder, but for the teenagers I work with. Many young people aged 18-25 are exposed to worse working conditions than ever before with many given zero-hour contracts where employers can decide on the day who is and isn’t coming in to work. Contract work alone is enough to lock people out of home ownership. Banks lend to steady incomes.
Friends on the European continent laugh at us Brits and say, “Why do you want to own your own properties anyway?” Well, in London it’s more expensive to privately rent. The rent I currently pay not only covers my landlord’s mortgage, but gives a nice profit margin on top. And while renting, it’s difficult to save money for a deposit for your own home.
The UK’s newly elected Conservative Government announced they will increase Right to Buy, which allows people to buy their social housing at a knocked-down cost. Sounds great, but the reality is that no further social housing is planning on getting built, meaning poor to average earners are pushed into the (already crowded) private renting market. I’m in this market and I can tell you, it is ugly.
Properties that become available for rent are instantly snapped up. One agency told me for every one property that goes on the market, there’s 10 potential renters. I’ve lost out five times in a row, for being too slow. We recently put in an instant offer after being first to see a two-bedroom flat. The only issue was that it came part-furnished and we have our own stuff. The estate agent told us that landlords get a tax break when they let a part-furnished place so we agreed to keep a table and some wardrobes but the bed frames are too small for our mattresses and the leather sofa was not comfortable. We offered to drive this furniture anywhere the landlord pleases at our cost, or sell it on their behalf and give them the cash. We also offered to paint the whole place. We got an email back to say that our offer has been accepted – we can paint the place and that the landlord will move the furniture on the condition that the rent is now increased by £50 per month. When I asked the estate agent the reasoning, since repainting increases value and removing furniture reduces any risk of wear and tear to the landlord’s stuff, he replied “the landlord doesn’t have to explain anything to you”. By asking that one question, the estate agent then retracted our offer for us! Back to square one.
The estate agent made it clear you get what you pay for. The landlord is king and the housing tenant is the bum-washing servant, and we’re paying handsomely for the privilege of washing that bum. My brain is still managing to navigate its way around the housing market. To me, it’s a distorted market with no real choice or healthy competition, engineered by poor housing policy (or clever policy depending on which side of the bricks you’re standing). It seems I have some romantic view that rent prices could be regulated like in Germany, or that landlords pay the energy bills as in Sweden, which sees well-insulated energy efficient properties, or that there could be a minimum size one can call a bedroom. I’ve viewed two-bedroom properties where the second bedroom can’t even fit a bed!