How big a mortgage do you need also leads to another question, how big a house do you need.
There is an old saying from around the 1950s or 60s, “Buy the most expensive house that is right for you that you can afford”.

This has often proved to be good advice right up until recent times. The reasons being:

  • House prices have risen fairly steadily throughout this time.
  • General prices (inflation) have risen at a fast rate throughout this period. Often it is the rates were actually the low rate of price rises. Prices rose some years as much as 15% or more in the 1970s and early 1980s. So if you were a borrower, part of your loan was paid for by the savers whose savings were reducing in value even though they were getting a decent rate of interest of 10 to 15% per annum. This caused a dramatic effect. Continue reading “How Big A Mortgage Do You Need” »