by Ken Gibb
Today was a milestone day in our household. We finally paid off our mortgage. Our journey is probably not too different to many of our vintage and trajectory but certainly it now looks like a housing career much less likely to be possible or typical for many folk starting out now wanting to buy a home.
As many did in the high water mark of mortgage deregulation, we started in the late 1980s with a 100% endowment mortgage. This was for a two bedroom interwar four in a block or cottage flat purchased a couple of months after I started my first full time job as a research fellow. Mortgage rates were 15%. It needed a lot of work, much of which family and friends assisted with and we stayed there, in hindsight, too long. There was a dodgy roof and a comparatively large garden, which were both in their different ways time-consuming and stressful.
I really wanted out of that house by the time we moved- I still occasionally have a recurring dream that we have to move back there (and to be clear I wake thinking I have had a nightmare). We moved about half a mile into a new home and watched it being built, which was an exciting time. This was a semi-detached three bedroom house, our larger mortgage was in two parts (a legacy of that earlier endowment). The new house was an incredible contrast to its predecessor and we had a little more than five years there. We would probably have stayed longer but an attractive, detached house around the corner came on the market and we managed to get it (the vendors also moved to another house in the immediate vicinity).
We have been in the present house more than 11 years now and we were able to use the redemption of the endowment (at nothing like its original supposed value) to pay off one bit of the mortgage and then overpay the other part till we could clear it today. A combination of very low interest rates and two jobs made this possible.
We know we have been fortunate working in comparatively secure jobs while escaping the vicissitudes of economic turmoil both in the early 1990s and late 2000s. We were able to secure a 100% loan in 1989 and make incremental progress thereafter. This is now a much more challenging problem for would-be buyers because of the binds of higher entry level house prices, weaker earnings growth, greater job insecurity and the much more significant down payment constraint.
If people cannot access funds, build savings or inter-vivo transfers or other financial support from family or friends, and do so when it is required or opportune, the average age of first time buyers will remain high except for the lucky few. As an aside I think there would be much merit in detailed and extensive independent research in the binding nature of these down-payment constraints and the effectiveness of policies that try to relax them. While there is much to be said for not returning to 100% mortgage loans the industry may have gone too far in the other direction but it is a complex multidimensional problem and simple pat answers about how to safely increase mortgage lending should be viewed with suspicion.
So, it is no more ‘I owe, I owe, so it is off to work I go’. However, to be honest I never really felt like that about work. Still, it is a rite of passage to close the mortgage account, and, as so many aspects of life increasingly do these days, it does make one feel old. The future will be about maintenance rather than a mortgage. We will just have to plan it ourselves.