Text for today is this Tweet:
I'm guessing that it's some sort of 'subtweet' - directed to one or other 'boomer' on social media but not bravely enough to actually identify them. As one of those 'baby boomers', I find this sort of myth-making fascinating, especially given none of us spend our time fantasising about fighting in WWII.
The first observation in the Tweet does rather miss the point (and, of course, grants were means tested with the result that I got a full grant and my brother didn't) since in 1970 only 6% of school leavers went to university - nearly all of them male. Most of the 'middle class baby boomers' being complained about didn't go any where near a university education, they left school at 16 or 18 and went to work. Today approaching 40% of school leavers go to university despite those terrible loans (and well over 50% of those heading to university are women). So baby boomers can't remember getting a grant for a university education they didn't receive!
The next comment is about housing affordability. It's true that housing, especially in London, is less affordable now, but we should also remember that back in 1970 something like 45% of people lived in council houses. A fair load of the people our tweeter is dismissing as 'middle class baby boomers' were born and raised in council houses. It was only the glorious initiative of right-to-buy that gave loads of boomers the chance to own.
There's folk out there who want to lay the blame at the door of sixty-somethings rather than respond to the actual problem. For sure, the 'green belt' is second only to the NHS as a national sacred cow and the boomers (or at least the ones in the south) have done very nicely out of the house price gains. But this is no excuse for the sort of nonsensical 'old people are horrid and have stolen our future' comments this tweet illustrates.
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5 comments:
The trouble is a generation of young people from the early 90s through to 2007 managed to leave university, get jobs and buy houses with small or even no deposits and make a packet as prices rose consistently from the nadir of early 90s recession, all the while remortgaging and spending the equity, thus being able to live far beyond their true means. This went on for so long that it became the norm for those following behind, and of course the whole model crashed and burned post 2007. But its accepted that is what should be the case - you walk out of school or uni into a job, you can immediately buy a house no money down, it makes you money and you can afford to live the high life on the back of it.
Whereas in the supposed Golden Years of the 60s and 70s, the reality was somewhat different. Getting a mortgage in those days was hard. You had to open a savings account with your building society, and start saving hard, to prove to the manager that you were a good risk, that you had stable employment and were able to make the repayments (no interest only then, repayment only). Then eventually when you had saved enough for the deposit, and if you had convinced the manager of your good character (married with children on the way was a good sign) then and only then might he deign to make you a mortgage advance. Which very well could have a double digit interest rate attached.
The 20 somethings of today have no knowledge of the past, they weren't there, they merely have an idealised version they are being fed for political means. The reality was somewhat different.
"The trouble is a generation of young people from the early 90s through to 2007 managed to leave university, get jobs and buy houses with small or even no deposits and make a packet as prices rose consistently from the nadir of early 90s recession, all the while remortgaging and spending the equity, thus being able to live far beyond their true means."
Good point that. Would have lasted for about 13-15 years or so? So someone buying their first house in say, 1995, as the age of ~25, would be comfortably mid- to late thirties, just as interest rates plummeted to zero, and remained there for ten years and counting.
Here's a question; if the cost of money (interest rates) is effectively nil, what happens to time preferences/horizons?
Yes, anyone from about my age (47) down to about mid thirties would have experienced in their adult lives the golden trio of ever rising house prices, ever easier lending criteria and ever falling interest rates. They would all have been able to get on the property ladder in their 20s with ease, and make out like bandits. And once the crash came, due to the State intervention via zero interest rates and QE, have largely managed to keep hold of what they'd bought. The mass wall of repossessions that characterised the early 90s crash just didn't happen post 2007. Anyone coming after that generation (ie all their children) will have seen what their parents did, and what some of their slightly older contemporaries managed to do, and thought 'Thats what I'll have when I'm older!'
So everyone under about age 33 now is feeling very shortchanged because the generation immediately above them had such a bonanza. But not realising such a trifecta of good luck had never been seen before - there have been house price booms before, but not with easy lending criteria AND constantly falling interest rates. That had never happened, it was unprecedented, and may never happen again in our lifetimes. Yet that has become the expected norm.
We 'boomers' sometimes forget the effect of high inflation - the value of the capital 'debt' in those early mortgages we took out in the 70s & 80s was so quickly eliminated by the high inflation alone, at the same time as our salaries were being inflated to keep up, which also meant the monthly payments quickly become easier too.
That process left us with lots of 'free' capital in our houses . . . . which we can now use to pay our care-home fees.
So were we really so fortunate? Why did we bother?
"We 'boomers' sometimes forget the effect of high inflation - the value of the capital 'debt' in those early mortgages we took out in the 70s & 80s was so quickly eliminated by the high inflation alone, at the same time as our salaries were being inflated to keep up, which also meant the monthly payments quickly become easier too."
Yes and no - inflation does make debts easier to afford, but you have to be able to ride the inflation train without falling off to get the benefit. High inflation does mean higher wages, in the long run, in the short run you may lose your job and be unable to pay the mortgage (interest rates being far far higher than today, often in double digits) and have your house repossessed. Repossessions were far higher in the 80s and early 90s than they are today. If you had a nice State funded salary, and got inflation proof pay rises, they yes the high inflation years would be great. If you had a private sector salary you could easily lose your job due to high inflation and your house with it, as jobs were hard to come by - the 80s were the mass unemployment decade too.
Hence my point - while the oldies had some advantages (higher inflation reducing their debts), they had other disadvantages to match (high unemployment, higher repossessions, high interest rates, harder availability of mortgages, no interest only mortgages). Its only the 93-2007 generation who got rising house prices, easy mortgage availability and falling long term interest rates. No other generation got that triple bonus.
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