Interest rates get brought up every time this topic is discussed and the math remains the same. Even accounting for the difference in interest rates, people are much worse off today than they were in the 80s.
1989:
- Interest rate: 14.5%.
- Average house price: £58k.
- Monthly repayment: £650 (90% LTV, 25 year term).
- Average pre-tax income: £10k.
2024:
- Interest rate: 5.25%.
- Average house price: £282k.
- Monthly repayment: £1500 (90% LTV, 25 year term).
- Average pre-tax income: £35k.
So in 1989, an average mortgage was about 80% of an average gross income. In 2024, an average mortgage is about 50% of an average gross income.
I specifically chose 1989 because it was a year of high interest rates, but you can repeat the calculation for other years if you wish. I don't think the results will support your assertion.
The 2nd group can't "refinance" all the extra principal they owe.
In 1989 interest rates were at record highs and mortgage interest relief was still a thing. Despite interest rates hovering between 8-12% for the rest of the 1980s, mortgage repayments were consistently a much lower proportion of income.
In 2024 there's no interest relief and we're exiting a period of record low rates. The rise to 5.25% already puts us in a worse position than when rates were at 10%, 14.5% would disastrous.
It is worth looking at the mid-2000s numbers (post-MIRAS, but pre-crash) and comparing them to today's numbers. They're really not so different.
No argument on the relative leverage: 10% would be impossible and 15% would probably precipitate a revolution.