UK Interest Rates by Decade The Truth About Mortgage Rates and House Prices

追加: 2026-06-02

[00:00:01]In this episode of the podcast, I want to talk a little bit about interest rates and house prices over the past five decades or so.

[00:00:10]And the reason for this is because I've seen a quite a lot on Instagram and TikTok about house prices and interest rates. More specifically, the claim that Gen Z's have been promised low interest rates.

[00:00:25]And in a post to me just coming here with what I think, I actually want to bring some data alongside as well.

[00:00:32]Because I think if we look back at the historic data, it paints a picture which I think is important for anyone who is considering, pondering as to whether or not buying a home is worthwhile or not.

[00:00:46]And I know that every time I talk about this, people get off people get really kind of like passionate um and annoyed.

[00:00:53]I see it in the comment section all the time. And look, my goal here is not to steer you down one route or the other. I believe that it's a worthwhile investment and it's definitely worthwhile long-term in terms of financial planning. If you disagree, then by all means make a decision that works best for you. But I want to have this conversation that is data-backed.

[00:01:14]And for those of you who are going to be watching this on Spotify or maybe on YouTube, what I'm also going to do is I'm going to overlay all of the data points on the screen so that you can see what we're talking about and you can actually go look at these uh data points on your own as well. But let's start with interest rates. Now, I want to look at it from the perspective of going all the way back to the 1970s because I think whenever we have a conversation about interest rates and home ownership, often times the boomers, baby boomers come up in the question or the conversation. And often times the conversation goes something like this.

[00:01:53]The boomers had the easy ride.

[00:01:57]House prices were much lower and therefore you had the benefit of property price growth.

[00:02:05]And whilst that is true, we can only say that because we have the benefit of hindsight. The boomers, yes, they had very very low uh house prices in relation to where house prices are now, but things are relative. What they had against them though were double-digit interest rates. And I want to go through these and just show you these. So, all of this data is from the Bank of England. Now, when we talk about uh the mean interest rate, which is what we're going to be looking at here, this is looking at mortgage rates, okay? So, in the 1970s, that decade, the mean interest rates of mortgage rate was 11.4%.

[00:02:45]In the 1970s, fast forward to the 1980s, the mean interest rate, mortgage rate, was 11.9.

[00:02:54]It wasn't until you got to the 1990s where you started to see a bit of a tick off where interest rates started to drop, mortgage rates started to drop.

[00:03:02]When I say interest rates, I mean mortgage rates. In the 1990s, 7.9%.

[00:03:07]So, what is that? That's a 4% drop in interest rates for that decade.

[00:03:13]Fast forward to the 2000s, 5.2% interest rates.

[00:03:19]In 2010, so the 2010s, that decade, 2.6%.

[00:03:25]And in the 2020s right now, we're on the uptick again to 3.1.

[00:03:30]Now, the big question is, why is there such disparity in the interest rates from the 1970s when you fast forward to the 2010s? And some of you may remember something called the financial crisis, the crash of 2007-2008.

[00:03:46]And typic And what happened then was in America, they lent mortgages to people where didn't verify their incomes, called subprime mortgages, and that had a global contagion.

[00:03:58]And it meant that globally economies crashed. Literally, institutions folded, people lost a lot of money in investments, lost a lot of money in pensions, people lost their homes. It was horrible.

[00:04:11]And the reason why we're seeing interest rates in the 2010s at 2.6% is purely because of the quantitative easing that the government went on. What they basically did was they pumped money into the system to prop up asset prices. When we say asset prices, house prices and all other asset prices. Alongside that, what they also did was reduce interest rates to encourage people to borrow and buy things.

[00:04:41]So, when we look at in the mean interest rate being 2.6% against the backdrop of the history of interest rates from the 1970s, it's an anomaly. It's not normal.

[00:04:55]It just so happens that because a lot of people took out a lot of debt, a lot of, you know, car finance, buying homes, funding businesses, with low interest rates, and because they've been sustained to be low over the past, I want to say, what?

[00:05:15]20 20 years, I I I want to say now, we have come to think that it is normal.

[00:05:22]Now, where we are right now is we're on an uptick.

[00:05:25]Prices or interest rates, the mean interest rate is at 3.1% as of 2025, slightly higher now in 2026.

[00:05:34]Now, what's happened to house prices alongside all of that? And this is where it gets really, really interesting.

[00:05:41]So, I mentioned earlier before that the boomers enjoyed low interest rate low low house prices, right? So, the average I'm laughing because I'm looking at the number right now.

[00:05:56]And uh wow, it's pretty staggering. In 1970, house price £4,378.

[00:06:07]I mean, in the context of the where prices are today, that's ridiculously low.

[00:06:13]Ridiculously low. But again, they had high interest rates. They fast forward to 1980s, 22,677.

[00:06:22]Still pretty decent compared to where we are now, but still a huge jump in that 10-year period. You fast forward to the 1990s, 60,000.

[00:06:32]2000, 84,000.

[00:06:35]2010, 165,000.

[00:06:38]2020s, 239,000.

[00:06:42]And you fast forward to 2025, it's slightly higher now in 2026, 2000 270,000 pounds.

[00:06:50]Average house price. Now, when you look at all of the numbers, you'll see that the increments in terms of how much house prices have gone up it's gotten less and less and less through the decades. Now, one thing that I have been hearing people say is over the past 5 years, well, house prices have actually fallen in real terms, and that is true.

[00:07:08]However, what they are saying is when you factor in inflation, house prices have fallen 14 to 15, maybe even 18% since the peak of 2022.

[00:07:21]Now, whilst that might be true, what's happening there is we're taking the short-term view. We're not taking that longer-term view.

[00:07:32]Because over the course of a decade or so, house prices have still gone up.

[00:07:38]And I think when you are in the decision-making process of is a house worthwhile buying? Yes, absolutely look at the data points and yes, you can conclude that if house prices have fallen since 2022 up until now by 14 to 15% when you factor in inflation that it's not worthwhile doing. But the decision to buy a home goes much, much beyond that.

[00:08:01]You've got to look at the long-term picture. And this then leads us to, well, what is likely going to be the situation for house prices in the future?

[00:08:13]I don't have a crystal ball. None of us have a crystal ball.

[00:08:17]But it's a legitimate question, right?

[00:08:21]What's going to happen to house prices?

[00:08:22]Now, if you go back a little bit and this is what we have to talk about wages, right? We have seen that wages have not grown alongside the increase in house prices.

[00:08:34]And this is the main challenge. The challenge is affordability and getting your hands on the deposit.

[00:08:40]Now, if you look back over the data and this is crazy, you know, in the 1970s, a house price was like four four times what you earned. Now, it's like 8.8 times the average salary. It's it's crazy from a price to income ratio. It's absolutely nuts.

[00:09:00]And whilst that is true, we have to then ask why is that the case, right? Because it didn't happen through no cause. There was no it didn't happen in a in a silo.

[00:09:13]It happened for a reason and it happened to because successive governments have failed to build homes.

[00:09:22]And herein lies the main problem. And herein lies one of the key indicators of where we think house prices might go in the future.

[00:09:30]At the moment as I'm recording this right now, I think the data says that we're 6 and 1/2 million homes short in terms of house pri- you know, house numbers for the population. 6 and 1/2 million short.

[00:09:42]So, that would tell you over the next 10 years, next 20 years, unless the government is able to build all of these houses. And by the way, even if they did build 6 and 1/2 million, every single year as the population grows, they need to build more. So, they have to satisfy the shortfall and then build numbers on top of that to get to parity with the house demand, the housing demand. The question is, do you see that happening?

[00:10:05]Unfortunately, I do not see that happening.

[00:10:09]So, if that is the situation that we're facing, this is a This is an economic question. This is supply versus demand.

[00:10:17]If there is a huge demand and short supply, what happens to the commodity in high demand? Prices tend to go up.

[00:10:27]And so, the forecast, I think, for me for the future is house prices will continue to go up. Now, what the government is trying to do with the renters' rights bill and some of the tax changes is they're trying their best to get properties out of the hands of landlords into the hands of first-time buyers. Whether this will work over the long term, I don't know. I certainly know a lot of landlords who are selling property right now.

[00:10:50]And that might do something to bring down property prices in the short term.

[00:10:56]But over the long term, is it going to make a meaningful dent? I don't think so, unless we see more homes being built.

[00:11:04]And so, I think, look, I wanted to present the numbers to you cuz I I'm acutely aware. I do have some Gen Zers who watch the podcast and the channel.

[00:11:13]These are just things for you to consider. Again, I don't It's not my bag to tell you what you need to do. You do what you feel is best for you.

[00:11:22]But I think getting the full picture is very, very important.

[00:11:27]If you're mid-30s, and we know that the average age of a first-time buyer now is mid-30s, and you're going to be facing a specific challenge of Okay, you probably worked hard to get your deposit. You've made the numbers work in terms of affordability, but you're probably staring down the barrel of a 30-35 year mortgage.

[00:11:46]That's scary because that takes you into retirement. And then you have to consider all the other things that you need to do in terms of retirement planning as well. And this is what I want to leave you with in terms of just a very high-level conversation or at least thought to consider.

[00:11:59]If you, in your life design, decide I don't want to buy a home from a pure financial planning point of view, you need to be extremely clear on what else you're going to be putting your money to to ensure that you do not get to 40, 50, 60 with zero in terms of assets because, unfortunately, we are going to be in a situation where we're going to have millions of people in pension poverty, in retirement poverty, because they've not planned.

[00:12:37]And that means you have to be very, very diligent, strict, focused on investing money.

[00:12:47]Putting your money to work, making sure that you don't get caught up in, you know, just life and the idea of just following the 9-5 or, you know, just being in the rat race that distracts you from your finances.

[00:13:02]You've got to be on the ball.

[00:13:05]Some people will say, "How do I know that I can afford a mortgage?"

[00:13:08]How do you know that you can afford rent? If you can afford rent, you can afford a mortgage, I think.

[00:13:15]These are just some thoughts. The other thing that often people will say is, "And this is a big thing on social media right now." Well, it's the ongoing cost of maintaining a home. Like, for me, this is it's crazy because people spend a lot of money on cars.

[00:13:28]You've got to MOT that thing, you've got to put fuel in it, you've got to replace the tires every so often, you have to maintain it.

[00:13:36]You have to fix it when it breaks down.

[00:13:38]That is an ongoing cost in an asset that is depreciating, yet the home that would be your security, and it goes beyond just the financial. This is the psychological security of not having to deal with rent and rent inflation and landlords. You think that that shouldn't come up with any maintenance costs?

[00:13:59]Give me a break. I mean, look.

[00:14:01]We've got to be honest with ourselves, right? But anyway, look, let me know what you think about this in the comment section. I'd love to hear your perspective, um but I hope you found this useful, thought-provoking in some way, shape, or form. I'll catch you next week. Cheers.