The first sign of trouble for the Cartel came within days of the 1980 Budget speech. It became clear that NatWest was setting up a home loans unit to start as soon as the Corset was dead. Lloyds Bank was also dipping its toe in the mortgage market with the intention of ‘picking up the top end of the market’, according to their domestic banking manager.22
Lawson laid into the building society chiefs in an address to their conference at the Bournemouth Winter Gardens, but they were not keen to struggle against the world’s most powerful financial institutions. ‘I don’t think a return to the jungle is in the national interest,’ said Building Societies Association chairman Leonard Williams.23 For two years, he led the building societies into battle with the banks – aware, to start with, that the banks were tending to pick up custom initially from the people the building societies turned down as bad risks. But in the long run, it was an unequal battle. The days of mortgage rationing were over.
The crunch came in October 1983. All the senior managers of the building societies were in Melbourne at a big international conference when the Abbey National took the opportunity to break the arrangement to limit interest rates. ‘The Cartel is an arrangement to stifle competition,’ chief executive Clive Thornton told the press. ‘We want none of it.’24
When building society interest rates started to rise up to market levels, wholesale funds were available to the banks on the wholesale markets – but not to the building societies. They had to wait for new legislation in 1986 (see the next chapter) that allowed them to bypass their own depositors and raise money in that way – eventually the cause of disaster for Northern Rock and HBOS a quarter of a century later.
The year 1986 was also the year that the former Times editor Simon Jenkins said he heard a director of Halifax Building Society, as it was then, say: ‘God help us if the bankers get their hands on our mortgages or if our brokers get their hands on their deposits.’25 Both events did take place in the fullness of time, as we shall see.
Lawson talked about the end of the Cartel, but feared the short-term consequences of killing it. ‘I accept my prominent part in this though I was by no means alone,’ he wrote in 1992.26 In his autobiography, which he was writing the previous year, he described the explosion of mortgage lending that followed as ‘unprecedented and unforeseen’, saying that the late 1980s – with the huge explosion in house prices which he presided over as Chancellor – were a ‘once and for all occurrence’.27 As we have found to our cost more recently, that wasn’t so.
But by then, the world had changed. Within months of the decision to end the Corset, the whole tenor of the debate had shifted. We know now that the idea that somehow all prices reflected something real was a fundamental mistake which still infects many – especially in banks, where they still bolster their balance sheets with property values, only to have those values slip through their fingers. We might know that now, but by then it flew in the face of the new spirit of the times to point it out.
Hidden in the archives of the Bank of England is a revealing note. It is a memo from the governor (still Richardson) in May 1980, weeks before the Corset was finally loosened, and describes meeting a City grandee who asked him why nothing had been put in place to replace it.28 The deputy governor has added his own note on the file describing the hapless grandee. ‘Were he a Tory MP he would I fear rightly qualify for a certain adjective in rather wide current use.’
The adjective he referred to was ‘wet’, Mrs Thatcher’s new designation for her opponents in the cabinet. ‘Rather sad, I think,’ said the governor.
Nothing has replaced the Corset, and Thatcherism – heralded by the new and vigorously enforced consensus implied by this note – would countenance no such defences. House prices would find their proper level, whatever they happened to be, and the acceleration upwards had barely begun. The consequences have been profound.
If Surbiton holds a special place in the affections of the British middle classes – and I’m far from certain about that – it is because it was the fictional home of Tom and Barbara Good, the quintessentially middle-class downshifting couple who hit the TV screens in 1975 in The Good Life, the blueprint for a new middle-class craving for independence.
The Good Life was actually filmed in middle-class, semi-detached Northwood rather than semi-detached Surbiton, but a quick walk from the art deco railway station in Surbiton still makes it a kind of middle-class Ground Zero. There are the leafy suburban streets, the little slices of middle-class life, divided by wooden fences as far as the eye can see, the lawnmowers and electric drills getting dusty in their huts through underuse, and their silver cars in the garage, or on a concreted-over front garden (I can’t see the Goods concreting over their front garden, but let’s not go there).
It is also clear that things have changed since The Good Life. The curtains don’t twitch. There is hardly anyone at home behind the reclaimed front doors with their stickers for the National Childbirth Trust in the windows. The people who get off the train from Clapham Junction with me still carry shopping bags from Peter Jones, as they always did. Yes, the slightly faded advertisements for the Surrey Comet still grace the newsagent stands. Yes, I am nearly run over by a delivery van from Ocado. But there are also men on the platform bawling into their mobile phones in Polish, and there is one man dignified and resplendent in the white robes of an imam. What would Margot Leadbetter have said?
Things are different for lunch too. I’m not at all sure that the menu in the Surbiton Brasserie (if it existed in 1975) would have offered ‘lemon chicken with pine nuts’. Still less my jacket potato with Mediterranean vegetables and mozzarella. But what really strike me are the conversations among the mainly women clientele around me.
‘What is his role exactly?’ asks the lady on my right. ‘Is he one of the finance guys?’
‘It doesn’t make sense,’ says the lady on my left. ‘It’s just something HR came up with. Just to get brand-holders in the same room.’
They may be eating, but these are emphatically not ‘ladies who lunch’, and once again I realize the pressure of the mortgage market. This isn’t like it was when Margot spent her days with the local amateur dramatic groups, or battling with Mrs Dooms-Paterson and Dollie Mountshaft in the Music Society. These are working women, either because they choose to be or because they must work because their mortgage depends on joint salaries. The average house price in Surbiton, judging by the nearby estate agent, is around £600,000 for a three-bedroom semi.
There is even an argument that the mass appearance of middle-class women on the jobs market is one of the factors pushing up house prices over the last three decades. They earned money, which meant that bigger loans were available, so the house prices rose to meet them. That is how it works. Inflation is too much money chasing too few goods, and what we have seen since the deregulation of the mortgage markets is ever more reasons to lend more, so that the house prices rise to take account of it, and so the cycle goes on – in retrospect a terrifying rack for the middle classes.
Terrifying especially if women didn’t want to work, because that freedom is now beyond them. Once lenders had began to calculate the upper limit in multiples of joint salaries, there was another escalation of house prices. It is part of the far bigger vicious circle that is caused by people desperately stretching to afford the home they want, and which is outpacing their income as they watch – a spiral that keeps on spinning: smaller houses, bigger loans, more salaries, higher prices, smaller houses and so on.
One twist to this cycle we have so far managed to escape in the UK is lengthening the repayment terms. We have not yet been given the pleasure of Japanese-style Grandparent Mortgages, which extend the mortgage period so that
