FTA Vantage Point: Interest Rates  

How much more help do young people need?

Derek Bradley

Derek Bradley

The TV presenter Kirsty Allsopp caused a bit of a stir last week (February 6) by suggesting to the Sunday Times that “young people could afford to get on the property ladder if they gave up luxuries, such as their gym membership and foreign holidays and looked at cheaper areas.”

She has a point, as shocking and unpalatable as it may seem to some. 

This made me pause to reflect how today's first time buyers - indeed, any buyers today, really - have no idea of the pain experienced when buying a home or what it took to get that first foot on the property ladder a generation or two ago.

I know that there has always been a 'baby boomer era' different mindset about spending and saving. Today we seem to be living in an “I want it now” world. 

But in my younger days if you wanted something you saved for it, that included a deposit to buy a house. This was parentally drummed into me from the day I started my first Saturday job.

The average salary in 1973 was around £2,200, the year I got my foot on the property ladder. I was 22 and that property was a two-bed bungalow in Eastwood, Essex, everyone remembers that first house you brought. 

It cost £11,500, (in 2019 the then owner sold for £310,000). I had saved a deposit, was relatively well-paid working for the airline BOAC, BA’s forerunner, and could comfortably afford my £10,000 Halifax mortgage.

Fast forward to today and I am mortgage free, my fiscal moans focus on how low interest rates are for my savings.

We hear about the terrible impact of inflation on hard pressed families, energy price and interest rate hikes and the poverty that it supposedly produces. 

But let’s get real. Poverty of any type has been seriously recalibrated. Firstly, by millennials and even more so now by ‘Gen Z’. A major ‘poverty’ cause today is that what was seen as luxuries in my younger days is seen as life’s necessities today.

Those gym memberships, exotic foreign holidays, tattoos, new cars, designer somethings, tablets, phones, widescreen TVs; all fuelled by a combination of decent incomes and an abundance of low or nil cost credit is what I think Allsopp is thinking about. 

Taxing times

Even the hardest pressed today seem to be able to afford some or all the above.

The amount of mortgage you could get in the early 1970’s would be based on a multiple of 2.5 times your annual salary. Today that could be 6 times or more depending on your lenders perception of your lifestyle and what interest rate fix you opted for.

In the 1970s, the highest rate of income tax on earned income was 83 per cent. Margaret Thatcher's government reduced it to 60 per cent in 1980 and 40 per cent in 1989 

But on top of that, here is what else we had to contend with through the late seventies, early eighties and nineties. Just imagine this happening today.