The problem is that the interest rate alone gives you no sense of how affordable mortgages are. This is not just a small point; it's everything. And here's where things get interesting, which is to say scary. Read EdConwaySky 's full analysis 👇
As any homeowner knows, your ability to repay your mortgage depends on all sorts of factors alongside the interest rate itself.It depends on how much money you've borrowed. It depends on how much you're earning and how much of that money is being eaten up by other non-discretionary things like energy bills.It depends on the length of your mortgage term and it also depends on how much assistance you're getting from elsewhere.
The 1980s - seen as a period of astoundingly high interest rates - did indeed see the bank's rate in double digits throughout - an average of 12.7% between 1980 and 1989. Actually it is worse, because none of the above figures takes account of MIRAS, which made mortgages much cheaper. None of them adjust for the fact that people are going to have considerably less money available in the coming years to pay their mortgages, because of the rising cost of energy.
If rates rise next year to 4.75% - as investors expect - then that would be the highest adjusted interest rate since 2008 - just before the financial crisis.
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