Mum and dad say home buying in the 1980s was harder. They're wrong. Sort of.

A KPMG economist in Sydney has done something unusual this week. He has looked at the data, rather than listening to his dad.

Terry Rawnsley set out to test the claim that previous generations had it harder when mortgage rates were running at 17%. His finding: Australia's total mortgage burden - measured as interest payments as a share of household income - is now higher than it was at that 1989 peak, despite current rates being roughly half what they were then.

"In the past, paying off a home loan has been a source of security," Rawnsley told the Guardian. "It's increasingly a source of anxiety."

Good. Now let's apply the same logic to the UK, where this argument happens around kitchen tables approximately four million times a year.

What the numbers say

The Bank of England base rate hit 14.875% in October 1989. Nationwide's long-run data shows what that did to first-time buyers: mortgage payments as a proportion of take-home pay peaked at 48.4% that year. Brutal. Record-setting. Genuinely awful.

By Q4 2023, after the fastest rate-rising cycle in a generation, first-time buyer mortgage payments had climbed back to 39.4% of take-home pay. The highest since 2008. But still, technically, below 1989.

So your older clients have a point. Barely. And temporarily.

Here is what they are leaving out. The 48.4% figure in 1989 was a brief, screaming spike caused by emergency monetary policy fighting 1970s-vintage inflation. Within two years, rates fell and the pain lifted. Today's 39.4% is structural. It is baked into house prices that are not coming down meaningfully, into mortgage terms that keep getting longer, and into a deposit requirement that would make a 1989 buyer faint. The people paying eye-watering proportions of their income in 1989 mostly saw relief within 18 months. Today's buyers are signing up for 31-year mortgages.

Thirty-one years.

The three things the 1989 myth leaves out

House prices have left wages standing. In the late 1980s, UK homes cost roughly three to four times average earnings. The ONS now puts the ratio at 7.6 times nationally. In London it is 11.4 times. So yes, the rate was higher then. The house was also cheaper by a factor of two. The debt was smaller. The maths is not complicated.

The deposit was not a ten-year savings project. A typical first-time buyer deposit in 2023 was about 19% of purchase price - roughly 116% of average annual salary, according to Halifax. At a typical savings rate, Halifax calculates the average earner needs around 11 years to accumulate it. Eleven years of renting, of delayed family formation, of watching prices inch higher while the target moves. In 1989, buyers got on the ladder younger, at lower multiples, with deposits that did not require most of a decade to save. The myth that rates made it harder skips this part entirely.

A 31-year mortgage costs more total interest than a 25-year one even at half the rate. The standard mortgage term has stretched six years since the 1980s, quietly absorbing costs that lower rates should have reduced. Your clients in 1989 paid more each month, for less time, on cheaper houses. Your clients today pay less each month, for much longer, on houses that cost twice as much relative to their earnings. Neither is obviously better. But the generational comparison almost always looks only at the monthly payment, which is the least useful number in the whole calculation.

What you can actually do with this

When a client or their parent pulls out the "we managed fine at 15%" line - and they will, because they always do - you now have a more precise answer than sighing and nodding.

The rate was higher. The house was cheaper. The deposit was manageable. The pain was temporary. The mortgage was shorter. Today's buyer faces lower rates, yes. They also face prices at double the historical earnings multiple, a deposit that takes a decade to save, and a loan term that extends well into their 50s. The generation that paid 15% also retired at 60 with a paid-off house worth substantially more than they paid for it.

James Tatch at UK Finance said it plainly at the end of 2025: "Affordability is now very tight and this is likely to limit borrowing options for potential buyers in 2026." Rawnsley reached the same conclusion from different data, from 17,000 kilometres away.

The myth is not entirely wrong. The peak was worse, briefly, in 1989. It is just missing most of the story. And the rest of the story - the deposit timeline, the loan duration, the house price multiple - is exactly what clients come to a broker to understand.

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