Mortgage rates doubling. Home owners in despair. Thousands of homes being repossessed.
Sounds familiar? This was Britain in 1990. I was running Nationwide Building Society’s press office and had the job of announcing that February that mortgage rates were going up to 15.4 percent. Just two years earlier the home loan rate was just over 8 percent.
The 1980s were a golden time for home ownership in Britain. Prime minister Margaret Thatcher championed a home-owning democracy, and the proportion of people owning their own home rose from 56 percent in 1980 to 67 percent in 1990. (Source: Statista.) But the housing boom crashed after Thatcher and her chancellor Nigel Lawson allowed the economy to overheat, and interest rates almost doubled in just over 18 months, culminating in that eye-watering 15.4 percent mortgage rate.
As spokesman for Britain’s third largest mortgage lender, I was busy explaining the impact on borrowers (and savers). Fixed rate mortgages were in their infancy in the UK, with the first launched in 1989, and I can’t remember Nationwide offering one back then. Many borrowers were on annual review mortgage schemes, which fixed the monthly payment but not the interest rate for 12 months. If interest rates soared, the borrower had to pay back the extra money owed later.Continue reading