I was still a teenager when I bought my first house in the mid-1970s.
It wasn’t an extravagant home. It was an end terrace with a small front garden but it did have an absolutely huge back garden.
Back then, mortgages were really hard to come by. Lenders rationed them and the only reason we were able to get one was because my girlfriend (who became my wife not long after) had been saving with a building society since she was a young child.
It’s a long time ago when all this happened but if I recall correctly, the interest base rate at the time our mortgage started was around five per cent. By the end of the decade it had shot up to an eye-watering 17 per cent on the back of the oil crisis.
If the base rate was high, the actual mortgage rate was even higher.
I have mentioned before that my social media of choice is Twitter (sorry Elon, I mean X) and while the platform has some sensible people making sensible comments, there are a lot of people who I envision as red-faced, angry old men who spout nothing but bluster, bile and nonsense. Let’s call them gammons shall we for want of a better word.
So as the recent Bank of England base rate rises have pushed mortgage interest rates above 6.50 per cent, I am increasingly seeing the gammons referencing those ultra-high rates of the past saying things like: “We had interest rates in the high teens and just got on with it. I don’t see what the problem is today.”
There are several variations on this theme that usually go along the lines of: Stop buying avocado on sourdough toast/flat whites/Netflix/taking foreign holidays, tighten your belt like we had to and just get on with it.
But there’s a problem with this.
You can’t compare the housing market and mortgage rates from the 1970s and 1980s with today.
This is because in the 1980s – defined by Margaret Thatcher’s premiership – people were borrowing two times their income to get a mortgage. Today, it is not unusual for people to have to borrow the equivalent of six or seven times their income.
And then you have to factor in the actual cost of a house in comparison to wages. House price growth has significantly outpaced wage growth since the last financial crash, which has had the effect of pushing up the amount people have needed to borrow to get on the housing ladder.
And that was absolutely fine while mortgage rates were at a historic low. And it may have seemed that was how they were going to stay for ever.
We now know to our cost that was just a pipedream.
Of course, the ever-increasing base rate is because the Bank of England is trying to bring down soaring inflation. So while it’s no comfort to those people suddenly having to find an extra £500 or more to pay their mortgage, it would be interesting to see who or what is actually to blame.
Number one culprit is, of course, Brexit. As Jeremy Warner wrote in the Daily Telegraph (yes, the Telegraph, the house magazine of the Tory party): “To deny any Brexit effect at all is ridiculous.
"The cost and hassle of doing business with Europe, both import and export, has manifestly increased significantly, particularly when it comes to food, which now faces some formidable non-tariff barriers to trade.
“Meanwhile, there appears to have been little or no countervailing dividend from access to supposedly cheaper, global sources of food supply.”
You can couple this self-inflicted harm with a couple of factors over which we had no control – a post-pandemic surge in demand as the world opened up for business again and the war in Ukraine causing a spike in the price of energy and grain.
The Evening Standard reported in June: The UK seems to stand further and further adrift from its economic peers. In the G20 table of inflation, the UK sits in the relegation zone, ahead of only Turkey and Argentina.
So yes, anyone faced with high mortgage costs has my sympathy, but not if you voted for Brexit or Boris Johnson’s ‘over ready deal’.
You did this to yourself.
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