Buying a home then vs now

‘It wasn’t like this in our day!’ Does this sound familiar? Maybe your parents aren’t saying this exact phrase, but the chances are, if you’re trying to buy your first home, it’s likely you’ll hear this sort of thing from the

As frustrating as it can be, they have a point. Times really have changed. Today, a loaf is over double the price it was in 1990. A pint of milk is more expensive too. And house prices in 2022 are now at a record high.

So, what exactly is it that’s making buying a house today so different to when your parents bought it? And how does Swindon shape up?

Low-interest rates

The interest rate on your mortgage – like other types of interest – is the amount your lender charges you for borrowing money. It affects how much you pay off each month. The lower the interest rate, the smaller the amount you pay back each month.

Before the 1980s and 90s, interest rates were low, hovering around 5-10%. By the end of the 1980s, however, this had leapt to 17% in a bid to reduce inflation. After some fluctuation in the 1990s, there was a significant fall in rates by the 2010s.

After the events of the last two years, interest rates are below 1%, rising from 0.10% in 2020 to 0.75% in 2022 in an attempt to tackle rising inflation in the UK.

Low-interest rates sound good as we’re paying less to the lender. However, economists have argued that interest rates need to be higher – as they were in the 1980s – to create a demand for lending. But expensive borrowing means households have less disposable income, therefore they don’t spend as much. This basically means that the problem is redirected from housing to other types of household spending

High inflation

Additionally, low-interest rates might not make much difference if inflation is high. High inflation means the cost of living goes up and the cost of the mortgage itself could increase significantly in line with this rise in costs.

This can be good news if you’re already a homeowner looking to sell as you could make a significant profit. And if you’re staying put, the value of your house has gone up but if you’re on a fixed mortgage you’ll be paying the same as before.

For those trying to get on the housing ladder, however, it can mean that their dreams of getting their own home are out of reach until inflation falls. In autumn 2021, it was expected that inflation would rise to 5% – over double the target rate of 2%. By February 2022, it was at 7%.

Higher mortgage repayments

If you’re on a variable mortgage, the high inflation rate can impact your repayments. If you have a tracker mortgage, you’ll be paying in line with the base rate as it goes up.

And should you be on a standard variable rate, you pay whatever the lender decides to charge. Some lenders have skipped the recent increases, while others, such as Nationwide and Halifax, skipped the last two increases in full.

Buying local

So, what does this mean for house buyers today? This can be a good time to sell but a tricky time to buy your first home. Plus, if you’re on a variable mortgage, it’s worth keeping an eye on the changes in inflation and interest rates.

Although, while these numbers seem concerning, there is still the opportunity to buy a house that suits the budget. As has always been the case, the area you’re buying in can affect house prices.

If you’re looking for a new home, it’s worth considering buying a new build here in Swindon. We’re seeing a surge in interest as people want great quality housing in a popular location.

Are your parents telling you that it was easier to buy a home in the past? What type of mortgage will you need?