FTA Vantage Point: Interest Rates  

What buying a house during the 14% base rate peak taught me

Simoney Kyriakou

Simoney Kyriakou

My mother took out a mortgage in 1990 when the Bank of England base rate hit 14 per cent.

The mortgage rate was just over 16 per cent. Everyone thought she was mad. 

The property market was starting to crash; she was a single mother on a four-figure, part-time annual wage, and the child maintenance was sporadic at best, non-existent at worst. 

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I didn't think much of it at the time; I was caught up in the excitement in finally being able to have my own room at 12 years old, rather than sharing my mum's any more. All my friends had their own rooms. 

But I remember vividly what it took for her to get on the property ladder, and I remember that she was forced into it, basically. 

In a 'previous life', she had worked for The Prudential, and as an ex-staffer she was allowed to remain renting a small flat above a shop almost in perpetuity. Except the 1990s property crash was just around the corner, and the Pru wanted to clean up its book of residential properties. 

It gave us notice in the late 1980s - '89, I think - that it intended to sell the properties to a developer. This gave my mother no choice but to see what was on the market, and what was near enough to my school. 

"We need to get on the housing ladder", she said to me, as she reached under the old DIY white wardrobe for her meagre savings. 

Just a few hundred pounds, which she had put together from whatever alimony she was getting sent over or from the sale of her jewellery and little treasures.

I had no idea what a housing ladder was. I honestly thought it was those fire escapes from West Side Story, and I said something to that effect.

"You buy a house when you can, and over time, most house prices will go up", she explained.

"But they're going down - the news said so."

"And that is why we need to buy now. I will never be able to afford it otherwise."

"But the news said mortgage borrowing is too expensive." (She encouraged me to watch the BBC news at 6pm every night).

She handed me the envelope - I'd never seen £20 notes before. It must have been about £400 or so.

"But the same rates that make mortgages expensive mean interest rates also are high on savings. So we put this in the Abbey into a savings account, and then it will grow by itself thanks to interest rate rises."

I wasn't great at maths, but I got the concept of money growing. She took out a few notes. "This is our tithe - this will go to the poor and to the Children's Society. The rest goes to the Abbey."