A LondonGraph data story
The price of money
For twenty-six years the cost of borrowing fell and the cost of a London home rose. Then borrowing got expensive again, and the houses did not get cheaper.
Data story
The price of money
2000
01 / 06
01 / 2000
Start with the price of money. In January 2000 the Bank of England’s base rate — the grey line — was 5.66%. It is the rate everything else in this story is quoted against, and for most of the next decade it did what people expected rates to do: move a little, occasionally.
02 / What a household actually pays
Almost nobody borrows at the base rate. The blue line is what a household with a quarter of the price as deposit was quoted for a two-year fix — the ordinary way to buy a home in Britain.
It opens at its highest point in the whole record, 6.79% in February 2000, and then spends 21 years coming down — to 1.20% in September 2021, the cheapest borrowing here.
03 / And the price of a home
Now the red line, read against the right-hand axis: the average London home. £139,611 in 2000. £544,814 now — a rise of 290% while the cost of borrowing fell.
The two lines are not the same measurement and do not share a scale. What they share is a direction of travel, and for most of this period it is opposite.
04 / 2007–2009
The one stretch where they moved together, and downward. Prices topped out at £581,320 in August 2022 and fell 55% to £262,661 by April 2009.
The base rate went to the floor and stayed there. Note what the blue line does not do: the fix did not follow it all the way down. Lenders were pricing risk, not the base rate.
05 / The cheap decade
Then the long descent. The fix reaches 1.20% in September 2021 — the cheapest borrowing in the record.
Prices in this window do the opposite of what the affordability arithmetic suggests they should. A cheaper loan does not make a house cheaper; it lets a buyer bid more for the same house. That last sentence is an argument rather than a measurement, and it is the one economists have about this chart.
06 / And then it stopped
From the trough, the fix climbs to 4.92% by May 2026 — roughly 4.1 times what it was. Prices did not fall to match. They are 6% below their 2022 peak.
What moved instead was who could buy at all. In the most recent four quarters, landlords and lenders began 33,672 possession claims in London courts.
Follow the evidence
2000
- Two-year fix, 75% LTV
- Bank Rate
- Average London home
Method and limits
About these numbers
Rates are Bank of England series: the base rate, and the quoted two-year fixed rate at 75% loan-to-value, monthly. Prices are the average London figure from the UK House Price Index, published by HM Land Registry. Possession claims are Ministry of Justice quarterly counts for London, summed across mortgage, private, social and accelerated landlord claims.
Two lines moving together is arithmetic. One line causing the other is an argument, and this piece is careful about which sentences are which. Every figure above is read from the series drawn beside it, so the words cannot drift from the chart when the next month lands.
Keep following the evidence
Continue reading
01 · 3 evidence sets
The rent-pay trap
The same rent is a very different burden depending on where London pay lands.
Read next →02 · 3 evidence sets
The housing pipeline
A target, an approval, a start and a completed home are not interchangeable stages.
Read next →03 · 4 evidence sets
A home without security
Rent, possession action, temporary accommodation and rough sleeping mark different points in London’s housing emergency.
Read next →