The Thatcher government raised bank base interest rates in 1979 to 17 per cent. A new mortgage that year saw an interest rate of 15 per cent. Just imagine how that would have impacted on your lifestyle lattes, latest iPhone, other ‘tech’ acquisitions and yoga classes.
And then came 16th September 1982, Black Wednesday. A crash of the pound forced John Major’s Conservative government to exit the European Exchange Rate Mechanism.
That day saw the then chancellor Norman Lamont take the base interest rate from 10 per cent to 12 per cent at 10.30am, later that day rates rose further to to 15 per cent. The next day, panic over, the government reduced back to the original rate of 10 per cent.
The cost of servicing a £250,000 repayment mortgage over 25 years that day would have increased to some £3,595pm at 17 per cent, (assuming that base rate of 15 per cent).
Mortgage rates of just 2 per cent today would see that cost be a trifling £1060pm.
Crunching the numbers
The shock it caused cannot be fully appreciated even in retrospect, but despite the pips being squeaked, the nation just got on with it. There was no mention of poverty. Anger maybe.
Foodbanks did not suddenly pop up to take the strain, the Chancellor was not handing out cash buffers to all and sundry and there were no complaints of hardship such as you hear today, despite the huge servicing costs of a mortgage then or about not getting on the housing ladder.
In 1982 the UK average salary was around £7,500. In 2021, the average salary for workers in London was £39,700, in the North East £27,500, not exactly a levelling up.
Anyone who came of age in the late 1960’s will be familiar with the introduction of credit cards. Barclaycard was the first in the UK I recall.
Most people who were born in the 1950’s and grew up in that era will have had a credit card. What a lot of people don’t know is that before credit cards became part and parcel of our daily lives, most people had very little access to credit at all.
In 1973, to buy a car you could not have a PCP, it was the good old ‘never- never’ straightforward HP with decent deposit. If you wanted a household appliance such as a colour TV, video, washing machine most would rent. Credit card limits were very low, interest free loans were not even heard of.
31 March 1980 saw the national debt reach some £95.6 billion, in today's terms that would be £430bn.
The total credit card debt alone in the UK was £56.5 billion in August 2021, down a lot on the 2020 figure of £72.2bn, a Covid plus. The average credit card debt per household was £2,033 as of August 2021. That figure represents an average of £1,068 per adult.
