Yahoo Movies Remembering the 1990s mortgage crisis – and how we survived it
In anticipation of a Bank of England interest-rate rise lenders including Halifax and Virgin Money have started withdrawing mortgage deals. Markets now expect rates to rise in the coming months, with traders predicting they will hit six per cent in the middle of next year. For many midlife homeowners, this won’t be the first time they’ve faced a financial housing shock.
Here, three Telegraph writers reveal how they survived the spectre of rising rates and plummeting prices in the early 1990s
‘I was trapped in negative equity’
Victoria Lambert
When I bought my first flat in the spring of 1990, it was with the sense of urgency that could only be engendered by going to university in the Eighties. I knew – thanks to literally everybody’s parents, and the estate agents with their company Golfs and giant phones, who wore red trousers and bought you chardonnay on expenses – that if I didn’t get on the property ladder as soon as I was earning, then I might never have a home, ever. I would fail at life.
More than that, you had to have the largest mortgage you could get – even if you didn’t want or need that much. Don’t worry, said everyone. Think big. Property never crashes. The value of your new home can only go up. It’s win win win win win. Have another chardonnay.
As soon as I was 24 and earning a salary that could sustain a mortgage – £26,000, if memory serves me right – combined with a deposit of £5,000, part legacy, part savings, I began touring the most horrible flats that London had to offer. The best mortgage deals were three times your salary, plus five per cent down minimum.
Ringing in my ears was that advice: Buy as much as you can.
My des res appeared like a mirage in the shape of a three-bed Victorian property, newly converted. Don’t get ideas of grandeur. After rejecting dingy, mould-filled flats – one was next to a flat sealed off after a murder, another was overlooking the back of Brixton prison and had only half a bath – my Shepherds Bush maisonette seemed like a palace. And crucially, at £81,000, an investment.
I flattered myself that interest rates were on the way down from their high of 15 per cent in 1989. Whilst at the same time, prices were at the rock bottom of the market.
Of course, reality set in at once. Yes, I could afford my mortgage payments at first – though not the running repairs caused by the appalling job the builders had made of the conversion. The day I moved in, the ceiling collapsed.
The real problem was that the market had clearly not settled and sank further. Within a year, the identical flat below mine sold for £76,000. I started obsessively reading property prices.
I rented out both bedrooms, trapped in negative equity, my flat worth less than my mortgage and no sign the market would recover.
It took until 2000 for the flat to recoup its original value, and I finally sold it for £168,000 in 2002. So I didn’t lose money – unlike so many – but 10 years to see that kind of return meant being awfully patient.
I looked it up recently. It sold in 2018 for £450,000. Well, it would have been an investment had I hung on to it for 32 years.
‘The only new thing in my flat was a fridge’
Lisa Markwell
I bought my first flat in April 1992, just as the results of the general election were known. My parents had, rather unexpectedly, written to me to make sure I voted Conservative, because “if I wanted to be a homeowner that’s the party to support”.
I was 27 and had both a steady job on a newspaper and a steady boyfriend. But I didn’t earn that much and I’d flat-shared in Notting Hill for years, so had grown used to the groovy, bohemian area and wanted to keep living there.
The problem was affordability, even then. I asked to be shown flats on quiet roads; the first place I met the estate agent was on the main thoroughfare, slap bang opposite the fire station. Knowing both the interest rates and the amount of interest in the area, I put in an offer then and there. It had two bedrooms and a tiny terrace – and a (non-working) fireplace.
Flat 6 cost me £70,000, three times my salary, and interest rates were sky-high, so it was as much as I could do to cart my few belongings from my previous, more swish address in the back of my boyfriend’s pick-up truck.
I took the doors off all the kitchen cabinets and painted what was left matte black. I couldn’t afford new furniture so bought what I could from Golborne Road market. With no budget for fancy lighting, I snapped up the cheapest glass candlesticks I could at boot sales and lit candles all along the mantelpiece; heating was expensive and the candles warmed the room.
One day not long after, round the scuffed, third-hand G Plan circular dining table, my boyfriend proposed. “Let’s get married,” he said. “What about tomorrow?”
We did just that, returning from the registry office within the hour as – big excitement – weeks earlier we’d bought a new fridge and John Lewis was delivering it at 3pm. It was the only new thing we bought for Flat 6.
We stayed on Ladbroke Grove for a further eight years, selling at three times the purchase price. But every single time I drive past that flat I wish I had somehow had the foresight to keep hold of it (which I might have been able to do with a bit of financial wrangling). I just checked, and something similar goes for about £1.7 million today.
It would have been an amazing asset for my own (now grown) children, who have no hope of getting mortgages. Interest rates might be spiralling upward like they did in 1992, but properties are wildly more expensive. It’s an entirely different time.
‘I watched the pound tumble on my black and white TV’
Peter Stanford
It was my first flat, bought in 1990 when deregulation in the City of London had sent property prices in the capital into what appeared to be an endless upward spiral. I was in my late twenties and with help from the Bank of Mum and Dad became the proud owner of a one-bedroom loft in Bow, east London.
My ex-estate agent mother told me I’d paid too much for it, and that I should have gone instead for somewhere with a spare room for a lodger. But what did she know? Back then there was mortgage tax relief and building societies were tripping over themselves to lend money to the unwary.
And everyone I knew was getting on the property ladder and leaving me behind. I figured I could tough out being strapped for cash for the first year. If only I had done my figuring with some figures in front of me.
The mortgage of £50,000 gobbled up so much of my £12,000 yearly salary that there was nothing left to buy a proper bed, somewhere to sit or even a decent television. It took me six months to save up enough to buy a fridge.
The past couple of days have vividly brought back a memory from each evening watching the news on an old black-and-white portable donated by my sister to find out how sterling was doing. It had quickly become apparent that every tumble in the value of the pound meant my mortgage would go up while property values would slump.
As my generation entered the age of negative equity, it was the most hard-pressed and sleepless I have ever been. And when Black Wednesday came along in September 1992, and for a brief period interest rates touched 15 per cent, the cliff edge of repossession was within touching distance.
I was one of the lucky ones. I landed a better-paid job and so didn’t slip from the hallowed property ladder into bankruptcy. And now I find myself in the happy situation of having benefited many times over in subsequent moves from the property booms that followed. Yet I also now have two children in their twenties who have decided after graduating that London isn’t for them.
Property prices are so crazy that the lifestyle and career sacrifices required to fund a mortgage in the capital are causing an exodus of newly-adult London kids – even from Bow, where I see another flat in my old block is on the market at £600,000. Let’s at least hope that includes a fridge.
