diamond geezer

 Tuesday, October 11, 2016

25 years ago today I bought a flat. Twenty-somethings bought flats in those days, it wasn't an impossibility.

More importantly, 25 years ago today I started out on a 25 year mortgage. 11th October 2016 seemed impossibly far distant at the time. I cannot believe this last day has finally arrived.

If October 1991 seems a very long time ago, that's because it is - think Bryan Adams at number 1 for the 15th week, John Major's first conference speech as Prime Minister and the final episode of Dallas on BBC1. For the previous four years I'd been lodging in a single room, sharing a house with people I might rather not have shared with, and feeling generally encroached upon. Then, with a new job in a new part of the country, I finally sold my soul to eternal debt, took the plunge into home ownership and, for the first time, tasted independence. My new flat took forever to purchase (Bryan was number 1 throughout the whole saga) but at last I had more than one room of my own, my own front door, my own phone bill and my own space.

I feel almost guilty mentioning this now. The very idea that a single 26 year-old might be capable of owning their own home seems entirely unrealistic today. The modern default is very much a flatshare in a rented property, either with a partner or a number of random folk grouped together for support. And yet I own my own place, and have done for 25 years, which means nobody need clog up my bathroom or kitchen unless I invite them in. I am blessed, and unduly fortunate, and I recognise this.

Taking on a mortgage is a scary thing, and was especially so in 1991. Interest rates were over 10%, and looked like staying high for ages, which meant a substantial payback burden. As it turns out interest rates have never been that high since, indeed they've stayed below 6% since 1999, and below 1% since 2009, thanks to external pressures unimaginable at the time. Our current pitiful mortgage rates make taking on substantial debt a breeze, or would if only people could afford the massive deposits required, and if banks were keen and willing to lend.

The price of my flat seemed a very large amount of money back in 1991. I'd pushed the boat out and found a property costing just over three times my salary, which was below the national average at the time. There are no properties in southeast England valued at three times the equivalent salary today, so out-of-reach has the home-owning dream become. But in 1991 it got me a nice two-bedroom flat within walking distance of Bedford station close to all local amenities, plus a parking space I didn't need because I hadn't got a car. I hoped that the monthly haemorrhaging of my bank account would be worth it in the end, and as things turned out it got me onto the housing ladder before getting onto the housing ladder became all-but impossible. Just in time.

I was fully intending to go ahead with a repayment mortgage, but some young upstart in a suit persuaded me that an endowment mortgage was the answer to my financial needs instead. He was very wrong, although I didn't realise this at the time, and neither did the hundreds of thousands who embraced similar deals. It meant I wasn't paying my mortgage off, merely paying towards a life assurance deal which would pay out at the end, supposedly covering all costs. And with interest rates in the stratosphere all looked promising for a surplus payout, initially at least.

Eleven years later, despite tumbling interest rates, the insurance company were still sending me letters saying my mortgage would be fully paid off. But after twelve they starting sending red alerts admitting there was a high risk my policy wouldn't pay out enough, and then they invited me to write in and complain. I wrote in and complained. I pointed out that I'd been sold a life assurance policy when I was single with no dependants, and the Sales Complaints Manager agreed, offering a financial settlement equivalent to 10% of the value of the mortgage (in line with the Financial Ombudsman's calculations). It sounded good. But it still wasn't enough.

Today my 25 year endowment policy pays out. The plan was that the full cost of my mortgage would drop into my bank account this week, whereas the reality is I'm only getting three-quarters. Even with the extra 10% for being missold I'm quite a few thousand short, such are the inadequacies of our financial institutions' future projections. If my salary hadn't increased since 1991 I might be in trouble, except of course it did, so I'm not, which is nice.

I no longer live in that Bedford flat, I rent it out, which is one of the reasons I've been able to pay off the extra. Crucially I didn't sell it off when I moved to London, having calculated that the price differential between shire and capital was too great. Silly me, the differential is far greater now, indeed in 2016 I'd reckon I'd need to sell off two Bedford flats to afford a flat half the size in town.

Instead I rent myself in London, which is a whole different level of insanity. Every month I hand over more to my landlord than he'll be paying to his mortgage lender, and every year the amount I pay goes up, not down. I've forked out a fortune over the last 15 years, enough to buy the flat I'm living in outright, but have absolutely nothing to show for it... other than the opportunity to be a Londoner, that is.

So although I'm a winner in the home-owning lottery, I'm a residential loser because I choose to live in London rather than elsewhere. Skyrocketing rents mean I too am being shafted by the system which makes London one of the most expensive cities on earth, but cushioned by having a property of my own elsewhere, so lucky me. If you're under 40 I am one of those comfortable Sixties-born bastards you economically despise, for which I apologise. In my defence I didn't choose to be born back then, and I'm going to die before you, and I recognise I've taken advantage of opportunities unavailable to the next generation down.

I could quit the capital and go and live in Bedford, especially now the flat there is truly mine. I'd save a fortune every week, even if I threw an annual rail season ticket up to London into the mix. But I'd lose time travelling every day, and be at the whim of Thameslink, and I reckon I've moved on since living up there in 1991. You'd not be reading this blog if it was Bedford-centric, that's for sure, and I'd really rather not head back unless I had to. If you ever spot a month of posts about the Harpur Centre, airship hangars and locations from Some Mothers Do 'Ave 'Em, you'll know I've lost the battle.

Instead here I am precisely 25 years on from becoming a homeowner and preparing to receive a financial windfall, a present to myself from a quarter of a century ago. The sheer utter privilege of my situation does not escape me. And while the hike in house prices in Bedfordshire since 1991 is nowhere near as much as I'd expect, it is far more than I deserve, and it makes my mortgage look like the bargain of the century. And a bargain that completes today, hurrah! Beers are on me.


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