Whatever happened to the ‘housing ladder’?

Window Cleaner on Ladder

It’s one of the big issues that separate Generation X and Millennials and their Baby Boomer parents. During the 1980s and 1990s, mass homeownership combined with high inflation and high interest created the concept of the ‘housing ladder’. Margaret Thatcher made the purchase of council houses possible and nearly 70 per cent of adults owned their own home by 1987.

The picture looks very different today with less than half of all home in private ownership. The prospects for many 20 and 30 year olds to buy their own place are completely different in 2020, with deposits of £30,000 and five times earnings required for a mortgage of £300,000.

In the 1980s it was a generally accepted notion that a couple would typically buy a starter home in their 20s, use the built-up equity to upsize to a home suitable for growing family and then again to a larger home, all within fifteen years or less.

Zah Azeem, Partner at Sctivener Tibbatts comments: “This housing market pattern became the norm. Many older people still think that the current housing market is in some way due a correction back to the 80s. However we can now see that the conditions forty years’ ago were unique and will only resurface if we return to an era of high inflation and high interest rates.”

By analysing the high inflation and high interest rate period between 1970-1990, when the housing ladder was at its peak, and 1998 to 2018 – during a period of low inflation and low interest rates, with a broken housing ladder – Property Reporter illustrates where and why this breakdown occurred.


• Between 1970 and 1990, the average rate of inflation (RPI) was 10.1%.
• Average earnings were £1,080 but were growing by 12% (on average) per year until 1990 (2% real earnings growth)
• Average mortgage interest rates were around 12%
• The average starter house price in 1970 was £4,975

The economic state in 1970 meant, in theory, a couple would have been earning £1,620, and with a 12% mortgage rate could have bought a £3,281 starter home for £405 per year of repayments. This is assuming that house prices rise in line with average earnings, family homes are always priced at 50% higher than starter homes and that large homes at 100% higher than starter homes.

Based on the average couple’s situation from 1970 to 1990, inflation and wage increased rapidly, eroding their mortgage debt. This meant that, despite rising house prices, they were able to upgrade to a family home in 1976 and a large home in 1982, thereby “climbing” the house ladder. By 1990, their mortgage repayments are only 9.1% of gross earnings, despite having upgraded their house twice.


• Between 1998 and 2018, the average rate of inflation (RPI) it was 2.8%
• Average earnings in 1998 were £15,100, and grew by an average of 3% per year (almost no real earnings growth)
• Average mortgage interest rates were around 4.5%
• The average starter house price in 1998 was £93,130

The low inflation and low interest-rate environment from 1998-2018 meant that it took more than twice as long to move up to the second rung on the housing ladder than from 1970-1990, leaving the top rung out of reach.

The existence of the housing ladder depended on inflation rapidly eroding the mortgage debt, which allowed buyers and sellers to build up equity that could be put towards a new home. The key difference between these two economic climates is the ratio of house prices to earnings. In the high interest rate environment, a starter home costs just about double the initial household earnings. In the low interest rate environment, the starter home costs over four times initial household earnings.

Of course, there are still buyers today snapping up the larger and more expensive homes, but these purchases are now driven more by inherited wealth opposed to accumulated equity and will remain out of reach for those who are not lucky enough to inherit a sizeable sum from the earlier generations of homeowners.

If you would like to discuss this or something related to a valuation please contact zah@scrivenertibbatts.co.uk or call us on 020 8947 7040.