I am beginning to feel some nostalgia for the old-fashioned mortgage. I'm sure that some readers of this blog must remember what it was like borrowing money to buy a roof over your head in the old days. The old days? I mean a quarter of a century ago, which is when I bought my first flat, overlooking the main railway line just north of Euston. Jolly nice it was too; but jolly noisy.
Anyway, the old system went something like this. First of all, you had to show you were a 'regular saver'. That usually meant picking a Building Society some years before you thought you would ever want to buy a house, and paying 50 quid or so into a savings account. Unless your Mum and Dad were going to help out, you'd need to do that anyway, because 100% mortgages were quite unheard of. If you were very lucky, you might get 90% -- so my ??27,500 flat needed ??2750 from my own little nest egg of savings.
Then there was the basic rule of thumb that you could have two and a half times your annual salary, which JUST about worked for me. But more than that there was the scary interview . . . all about financial responsibility and being part of a mutual building society. Patronising and paternalistic it may have been. But this was not a questions of banks and shareholders and profits; this was about membership, and the symbiosis of investors and borrowers.
So I had a quick check on the Halifax's mortgage calculator website, to discover that the rule of thumb was now FIVE times your annual salary.
I tried entering my own annual earnings ' substantial by many standards, even if university teachers as a group are still woefully underpaid ' to see what I would have to pay each month, if I took the maximum. Suffice it to say that after I had paid the utility bills, the council tax, the food and (OK. . .I COULD do without it ) the car, there wouldn't be much left. Holidays would be the very cheapest, clothes-buying would be a rare event (not much different from now, you might say), and heaven knows how the central heating boiler or washing machine would be replaced.
True, it wouldn't exactly be the breadline, but then I'm lucky and earn a lot more than the national average. Try it on half the money.
The objection to my nostalgia is that things (ie house prices) have changed since the late 70s. The average house price in Cambridge is now ??300,000 ' which means that on the 'five times' calculation a newly arrived professor at the bottom of the professorial pay-scale (and I mean professor, not junior lecturer) could just about afford it, if they took the maximum mortgage. Junior lecturer, nurse, shop assistant, not a hope. And on a two and a half times mortage, you must be joking.
So what is the option? Honestly I haven't a clue. But I can't help thinking that some kind of effort to turn the clock back might be a good idea.
Meanwhile though, I have rather less sympathy than Brown and Darling seem to have with those coming off fixed rate mortgages and finding they have a big rise in their payments. Not that I wish repossession on anyone. But with a fixed rate you always reckoned it probably saved you money for the fixed term, on the understanding that it might well go up after that. The more you saved, the nastier the shock at the end. Wasn't that the point of it?
As for the banks, can anyone explain to me how they have gone from 'record profits' to needing a government bale-out in lass than a year?