Comparisons with the savings and loan crises of the 80s and 90s have frequently been made during the recent spike in interest rates But is it fair or even accurate to compare the two? SteveRobson04 takes a look ⬇️
Halifax launched its first product in 1989 at a rate of 12.75 per cent and the standard variable rate peaked in 1990 at 15.4 per cent, though the average throughout the year was 14.3 per cent.
On the face of it, that seems a lot higher than current predictions that rates will go above 6 per cent in 2023. However, economists say the interest rate isn’t really the most important factor, it’s the affordability of those rates that is key. In 1990, the average household income in the UK was about £12,300 and the average cost of a house was just under £58,000.In 2022, average household income was around £34,000 and the average cost of a home was £294,000.Housing analyst Neil Hudson says that if actual mortgage rates are adjusted for against their affordability, 13 per cent in 1990 was the equivalent of around 6 per cent today.
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