Mortgages: A brief history

31st March 2021

To reach their dream of homeownership, most aspiring buyers depend on being offered a mortgage. In Q2 2020, the outstanding value of all residential mortgage loans had reached a staggering £1,513.3bn1. But where did it all start?


Estimates of homeownership are sketchy prior to the 20th century, but data from 1831 has led to estimates that between 13% and 22% of households may have been owner-occupiers2. Those who did purchase their own property often did so by paying into building societies, which allowed members to pool their funds to facilitate the purchase of land, housebuilding – and the provision of mortgages to other members. For many decades to follow, building societies dominated the mortgage industry.

Homes fit for heroes

Following the First World War, people became increasingly dissatisfied with Victorian-style living conditions. The government pledged to provide returning war veterans with decent homes, prompting a huge housebuilding drive that continued well into the interwar years. By the 1930s, cheap homes and easy mortgage finance was available to a rising middle class. However, a 1931 survey suggested that homeownership remained out of reach of the majority of the working classes3. Even so, total mortgage assets held by building societies jumped from £69m in 1919 to £678m in 19404.

Homeownership rises…

A period of economic affluence followed the post-war rebuilding effort, with low house prices and interest rates enabling more people to get their foot on the ladder. Home ownership increased from 29% in 1951 to 45% in 19645. Fast-forward to the 1980s and the introduction of legislation to further boost homeownership. The Right to Buy scheme, introduced under the Housing Act 1980, allowed council house residents to purchase their home at a heavily discounted cost. In 1983, the MIRAS (Mortgage Interest Relief at Source) scheme was introduced, offering tax relief on mortgage interest payments. By 1991, 67% of Britons aged between 25 and 34, and 78% of 35 to 44-year-olds, owned their own home6.

…and falls

The 2008 financial crash spelled the end of this period of homeownership growth. Tighter regulations since 2014 have rendered borrowers subject to more stringent lending criteria, impacting first-time buyers the hardest. According to figures, declining home ownership in the decade since the financial crisis means that those aged between 35 and 44 are now three times more likely to rent than they were two decades ago7.

1FCA, 2020

2The Smith Institute, 2011

3University of Oxford, 2000

4The Smith Institute, 2011

5Stonewater, 2019

6ONS, 2016

7ONS, 2020 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.