THIS week marks the 20th anniversary of mortgage rates hitting a record high and the first anniversary of some rates falling to an all-time low. The typical standard variable rate reached 15.4% on March 1, 1990, when interest rates stood at 15%. The increase would have left someone with a £70,000 mortgage paying £924 a month in repayments, £898 of which went on interest. Unsurprisingly, the steep rise in mortgage rates, which had stood at 9.8% two years earlier, led to a growth in repossessions. The situation was made worse by the fact that fixed-rate deals were only introduced for the first time towards the end of the 1980s, meaning most people were still on their lenders’ SVR in 1990. The number of people who lost their homes soared nearly three-fold during the year to 43,900. It continued climbing during 1991 to reach a record 75,500, a level not surpassed, despite the number of people with mortgages increasing by 1.5m over the past 20 years. By contrast, the Bank of England’s Monetary Policy Committee reduced interest rates to a record low of 0.5% in March last year, leaving some borrowers paying no interest at all on their home loan. The 0.5% reduction on March 5 ended six months of aggressive cuts, which saw the base rate dive from 5% at the beginning of October to just 0.5%. The reductions caused repayments for a tracker customer with a typical £150,000 mortgage to tumble by nearly £400 a month or £4,700 a year, with millions of borrowers on standard variable rate mortgages also seeing their repayments drop dramatically as lenders passed on some or all of the reduction. An estimated 50,000 borrowers who were on tracker deals that were fixed at 0.5% or more below the base rate also did not have to pay any interest at all on their home loan. Richard Sayer, director at North East estate agents Rook Matthews Sayer and residential property spokesman for the RICS in the North East, can recall when interest rates soared: “I can remember vividly when the mortgage rates hit the all-time high as I was starting my own business. It was an extremely hard time for buyers and homeowners. There had been a big boom, much like there was before this crash. “People had bought at the peak then found that their mortgage went through the roof. It was a shock to everybody. “Everybody in the wine bar had said you should buy your own house but when people did they literally couldn’t afford to pay bills or eat. It was just devastating.” But Richard predicts that things are set to become easier for existing buyers. “We are encouraged that Santander is now prepared to lend at 90% of the value to new buyers. “If they are prepared to lend 90% then it’s clear that they are comfortable that property prices aren’t going to go down and that we are now at the bottom. There is a bit more confidence.” John Bruce, principal director at Newcastle’s Bruce & Co Legal and Financial, believes the all-time low in the mortgage rate will stay put for the near future, but doesn’t share Mr Sayer’s optimism. He said: “In the next 12 months we are unlikely to see anything except minimal interest rate rises. Over a three-year period we might end up something somewhere at the 5% mark. “In terms of people looking for a rate, they should just be sitting on the base rate – I don’t think fixed rates are attractive at the moment. “There are certainly more applications going in but it’s still very tight.” | 
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