Article by Ceri Wheeldon
Is Cabinet Minister Sajid Javid right to blame Baby Boomers for the housing crisis, and describe us as selfish? (See the article in today’s Mailonline )
We all know that is hard for young people to get onto the property ladder – depending on where they live in the UK , but how can that blame be placed on the shoulders of our generation. Can we be blamed for the shortage of homes?
House prices are higher but so are interest rates
I appreciate that house prices are far higher today than they were when I bought my first home but interest rates were also significantly higher – in the region of 10%. My monthly repayment in 1989 for my first home in the UK, a 2 bedroom apartment, was £530, which is the equivalent of £1370 today, and in addition I had an endowment which I think cost in the region of £100 a month. When talking about how ‘lucky’ baby boomers were, the high interest rate and miss selling of endowments are never mentioned. I had saved a deposit of £20,000 (equivalent to £52k) to but that first apartment, which cost in the region of £80,000 I just looked on Right Move and found a flat in that very building for sale for £250,000.
What would it cost to buy my first apartment today?
To buy that same apartment today with a £20k deposit, an interest only mortgage would be in the region of £350 per month, and a repayment mortgage £950 – significantly less in real terms than my repayments 30 years ago.
Having made sacrifices to buy then, should we baby boomers be criticised for living in nice properties now?
This is not intended in any way as a criticism of young people looking to buy today – saving deposits is hard- even with the help of the bank of mum and dad ! But I think it should be recognised that it wasn’t necessarily that esay for baby boomers to get on the property ladder either. You can’t just look at property values , you have to look at the cost of funding those purchases too, and when you take that into account it might have been just as hard for us!
There is criticism of baby boomers holding onto properties larger than we need, but should we choose to downsize and free up larger family homes, the cost of moving when taking into account agency fees, legal fees , stamp duty, the physical move and purchases or decorating the new home are prohibitive. There is little motivation if we are comfortable where we are – much of the equity released is swallowed up in fees. And taking stamp duty aside, the government also benefits from the receipt of VAT on all of the other costs.
What do you think…are Baby Boomers being selfish when it comes to the housing market?