Britain facing same hardship mortgage borrowers faced in 1991

David Fell of Hamptons said: ‘As a rule of thumb, a one percentage point rate hike today puts around twice as much pressure on mortgage household finances as the same rate hike ten years ago. year.

“The selling of house price growth and mortgage debt taken on by households means that fairly limited base rate hikes by historical standards have the ability to add significant pressure on household finances.”

Today’s rise in Bank Rates will also have a bigger impact as buyers have become accustomed to ultra-low rates. Over the past 13 years, the bank rate has been less than 1 pc. The shift to a higher interest rate environment is likely to have a much bigger impact on market sentiment, especially against the backdrop of the cost of living crisis, when buyers see the food bills , energy and fuel soar.

The Bank Rate would have to rise to 7% to have the same impact on household finances as the Bank Rate of 17% recorded in November 1979, Hamptons found.

With a discount rate of 7%, the average first-time buyer would need to spend 66% of their monthly salary to cover a mortgage on an average home. At the peak of the bank rate in 1979, the share was only 63 percent.

Lewis Shaw of Shaw Financial Services, a mortgage broker, said: “We have a generation of homeowners who have never seen a typical base rate or the mortgage rates that flow from it. This means that their frame of reference will now have to adjust and we all know that can be difficult.

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