When ladders turn to snakes

David Bullard writes on the effect of rising interest rates on property ownership in the UK


Back in 1978 when I was still living in England I decided it was about time to get my foot on the lowest rung of the property ladder. Up until that point I had lived in rented accommodation in such swanky areas as Chelsea and Westminster. My shared flat in Chelsea was in Smith St just off the trendy King’s Road. It was above an Indian restaurant and next door to a pub called ‘The Phoenix’ which was famous for attracting the likes of the Australian tennis player Evonne Cawley and the actor Nicol Williamson.

My flat-mates were three girls, two of whom would correctly be described as ‘Sloane Rangers’ while the third was mentally stable. The only problem with sharing a flat with three girls was the fact that the bath always had items of recently washed underwear hanging on a line above it. Another downside was bumping into male friends who were sneaking out of one of the girl’s bedrooms at seven in the morning. It’s a bit difficult striking up a conversation under such circumstances. So when the rental period was up I perused the ads in the Evening Standard and contacted somebody offering a flat share in Morpeth Terrace, Westminster, right next to Westminster Cathedral. ___STEADY_PAYWALL___

It was a spectacular step up from the Chelsea flat with a wood paneled entry hall, a porter on permanent watch and the added attraction that the top floor flat apparently belonged to the actor Peter Sellers. The flat was owned by a young female barrister with a very rich daddy. The rich daddy owned large swathes of Kent and my landlady would return from a shooting weekend on the family estate with a brace of pheasant which she would hang for a few days in the bathroom. After four or five days the smell was unbearable and the pheasants would then be gutted and plucked in the kitchen which sent the unpleasant aroma of death and decomposition throughout the entire flat.

Our third tenant was a very attractive Greek girl studying medicine at Guy’s hospital. Her father owned a chain of restaurants in London’s West End and he also owned a Rolls Royce Silver Shadow which he allowed his daughter to drive when he was out of the country. I managed to persuade my attractive flat mate to give me a lift to work in the Rolls one morning. We stopped outside my office in Cornhill in pouring rain just as the company’s managing director was arriving soaked through from his walk from Bank underground station. For some reason I didn’t get a pay rise that year.

Despite the undoubted pleasures of living in central London the properties were well beyond my budget so I bought a two bedroom town-house in Chelmsford, Essex for the princely sum of £9 750 which I sold for £19 500 three years later during the early stages of what was to become a property boom. In 1979 the Bank of England set the base rate (the rate at which the clearing banks could borrow from the B of E) at a record high of 17% so my cost of borrowing back then would have been even higher than that.

This week the Bank of England said that interest rates will probably have to be raised by more than originally expected after Liz Truss’s disastrous first month in office. That means that the cost of borrowing will rise significantly for those with mortgages. For an entire generation knowing nothing else than low interest rates this will come as a nasty shock. Not so long ago a five year fixed rate for a mortgage could be had for 1.5%.

That rate has now risen to 5.4% and is expected to go higher. While these numbers are way below what I was paying for a mortgage back in 1979, the effects on the property market are likely to be far greater. If the cost of money is artificially low as it has been for the past twelve years and there’s no expectation of interest rates rising then house buyers will happily borrow the maximum they can afford and that, in turn, will push house prices higher. Low interest rates meant that it wasn’t worth saving so many people bought properties to let and funded them with cheap mortgages. In addition to rental income there was a certainty that the value of the property would rise dramatically.

Those who have been lucky enough to renew their five year fixed mortgages recently can probably afford to sit tight and see what happens over the next few years. Those applying for new mortgages or renewing an existing mortgage are going to have to pay far more to borrow money. This is bound to have an effect on property prices so the added attraction of a guaranteed capital gain on those buy-to-rent properties may be about to disappear.

An entire generation of borrowers will shortly be getting a harsh lesson in financial reality now that the magic money tree has withered and died. But we’re still a long way off 17%.


Many media commentators have expressed shock and horror at the news of the amended minister’s handbook, particularly the new ruling which allows our beloved leaders access to as much free electricity and water as they wish. The car allowance has also been upped to R800 000 which does seem a bit mean spirited seeing that the sort of cars our beloved leaders really like cost upwards of R1,5 million. Heavens, an entry level BMW 318i now costs R762 000 and that’s the sort of car a travelling salesman might choose. How can someone who has joined the struggle and devoted themselves to introducing ‘a better life for all’ be expected to drive such a proletarian vehicle? Oh the ignominy. Most people find it very strange that somebody earning over R2 million a year can’t afford to pay for basic services such as electricity and water but that’s good old communism for you.

A few days ago the expressionless, moon faced Xi Jinping weaseled his way into a third five year term as Leader of the Chinese Communist Party (CCP) with no obvious challenges to his authority. While life has been pretty miserable this year for the majority of China’s 1.3billion population it probably hasn’t been quite so miserable for the 2800 odd well connected party members. For example, it’s difficult to imagine one of Xi’s robotic fellow politburo chums being cooped up for two months in a tiny Shanghai apartment and only being allowed out every so often for a regular COVID test and to buy food.

Xi’s imbecilic ‘Zero-Covid’ policy which dictates that a whole city of 20 million people has to go into lockdown if there are three positive COVID test results in the area may be damaging the economy and causing discontent among normal citizens but that is hardly a concern for cosseted senior party officials.

In fact, the Zero-Covid policy almost certainly has nothing to do with protecting the people from a virus that has a very low mortality rate and everything to do with an experiment in mass crowd control. If you can lock up the inhabitants of an entire mega-city and beat the living daylights out of anyone who objects to this loss of freedom then you can get away with virtually anything as a government; as the hapless residents of once free Hong Kong have discovered over the past few years. Of course it’s not just the free electricity and water you get when you are a leader of the people in South Africa.

You also get to live rent free or at a highly subsidised rental and you don’t experience load shedding like the proles do. That’s because you either live in a national keypoint or because you have been supplied with a stand-by generator, again at the taxpayer’s expense. What on earth do they spend their astronomical salaries on? Certainly not on legal challenges to hang on to their jobs because it seems the taxpayer foots that bill too. The sense of entitlement within the higher echelons of the ANC is mind boggling but certainly not surprising given their corrupt track record over the past twenty eight years.

Hopefully that will all change in 2024.