A recent television programme, The Blackouts of ’74: When Britain Went Dark, examined why the lights went out in 1974 and Britain was reduced to a 3-day working week.
The programme’s blurb suggested that “The grim 1970s continue to exert a powerful pull on our imaginations possibly because the era speaks to our age of soaring prices and strikes.”
It’s easy for today’s programme-makers to draw such a comparison with what happened nearly half a century ago. It was an era when double-digit inflation became the norm; before the end of the 1970s, Bank of England base interest rates hit 17%, while the number of working days lost as a result of industrial unrest exceeded 3.5 million. Unemployment soared; the price of oil rose fourfold just as miners voted for a national strike with coal stocks at worryingly low levels.
Sound familiar? There was more.
Plans were made for petrol rationing; the national speed limit was cut by 20mph to save fuel. Television ended every night at 10.30 pm as ministers urged citizens to share baths and to brush their teeth in the dark. In January 1974, the government announced the three-day working week. It is remembered as the darkest day in the story of mid-1970s Britain.
Let’s get some perspective. Yes, supermarket shelves displayed a limited range of products and candles, in particular, were in short supply (one of the programme’s ‘talking heads’ said that people drove over to France to buy candles, although there were probably fewer than 20 who did so), but to suggest that 2023 is anything like 1974 is stretching things.
Take inflation. By the end of 1974, annual inflation had reached 16%; twelve months later, the figure had soared to 24%. It would be another seven years before the annual rate fell below 10%. By comparison, in the three decades between 1993-2022, inflation stayed well below 5%.
It could be argued that today’s labour disputes make the news because they’re so rare. Consider the facts: in the year to March 1974, more than 2.2 million working days were lost through industrial unrest (a figure that grew to 3.5 million five years later), whereas official figures for the 12 months to March 2023 are 84% lower than this.
Employment levels have also increased steadily, absorbing a burgeoning labour force. In the decade between January 1975 and September 1984, unemployment rose from 4% to almost 12%; today’s jobless rate is 3.9%.
Then there are interest rates which, in January 1975, stood at 11.25%; they too would rise inexorably, hitting 17% by November 1979 and, with one exception, which lasted a month, remain in double-digits until 1983. It’s worth noting that for the best part of 22 years since 2001, rates have been less than 5%.
Given such an unpromising backdrop, we may have expected property prices to suffer. It’s certainly fair to say that over the past half century property has not always been a one-way bet. Many homeowners will recall making eye-watering mortgage payments, often at the expense of something else, though not quite as important as keeping a roof over your head. They have been rewarded many times over.
According to the Nationwide House Price Index, in the third quarter of 1974, the average house cost just £10,148. Bear that figure in mind because despite regular economic storms, financial crises, outrageous displays of political weakness, strikes, fluctuating levels of joblessness, occasionally volatile interest rates and external factors over which the nation had no control, by the end of 2022, average house prices had risen to £265,195. That’s right: a 26-fold increase over a period when we saw, or experienced first-hand, every conceivable factor capable of harming the property sector, yet still it has prospered.
Some of today’s homeowners might be concerned about the growing band of vociferous naysayers using any platform they can (newspapers, TV, radio, online, social media etc ) to confidently predict an impending ‘house price collapse’, but don’t we hear them every seven years or so?
Yes, measures such as interest rates, inflation and the volume of labour disputes are currently higher than we have grown used to, but from a historic perspective, they’re manageable and cannot be compared with the worrying situation which faced the country in the mid-70s.
In his excellent book, A History of Modern Britain, Andrew Marr notes that “The three-day week was not, it later turned out, quite the economic disaster it seemed. The industry had maintained almost all production – which shows how inefficient five-day working must have been – and relatively few jobs had been lost.
“[In the subsequent] election campaign a public fed-up with chaos and desperately looking for good news clutched at [Harold Wilson’s] Social Contract. Wilson was able to appear as the calm bringer of reason and order.”
Outgoing Prime Minister Ted Heath will be forever remembered for the three-day week (he also took Britain into Europe), but there were longer-lasting consequences of his Premiership. The school leaving age was raised to sixteen; the Pill was made freely available on the NHS; the local government was radically reorganised with more than 800 English councils disappearing and mammoth, new authorities created in their place. Elsewhere, responsibility for NHS hospitals was taken away from hundreds of local boards and handed to new regional and health authorities and, in 1971, decimalisation witnessed the demise of the florin, half crown and pounds, shillings and pence.
Granted, the 1970s are not necessarily remembered with affection by some, but with the benefit of hindsight, it’s remarkable how the economy survived a vicious, almost unprecedented storm. Homeowners who took the plunge during this time have been well rewarded, as have those of us who arrived at the property party a little later. Each of these older homeowners have heard the hollow predictions of house price crashes before and instinctively know what will happen.
Interesting for that older generation, but what has this all to do with equity release you may ask?
From times of such adversity, it is worth noting that there have been two constants over the last two decades - the stability of interest rates and the continued escalation of house prices. Both these metrics are prerequisites in an equity release calculator in educating homeowners over the age of 55 on how much equity they can release from their main residence.
According to Zoopla on 1st June 2023, the average sold price for a property in the UK in the last 12 months was £355,488, and likewise, the current lowest equity release interest rate is 5.80% MER with More2Life on their Tailored Lifetime 1 plan.
So, looking back historically over the decades, the current population over the age of 55 who made the jump onto the property ladder, have fared extremely well, now sitting on a tangible asset whose equity therein can ensure the difficult times of the past are long behind them.
