The History of Mortgages in the UK

The history of mortgages in the UK stretches back nearly 250 years, to a group of neighbours saving together in a Birmingham pub in 1775. From those first building societies to today’s online applications and fixed-rate deals, the way people borrow to buy a home has changed enormously, and so have interest rates, which have ranged from 17% to just 0.1%.

This guide takes you through the key moments in UK mortgage history: where the word comes from, how building societies began, the big changes of the 1980s, the 2008 financial crisis and what mortgages look like today.

Where does the word “mortgage” come from?

The word came into English in the late 14th century from Old French. It comes from “mort gaige”, which means “dead pledge”. A pledge is something given as security for a loan, in this case land or property.

Why “dead”? According to the Online Etymology Dictionary, the pledge “dies” either when the debt is repaid, because the lender’s claim on the property ends, or when the borrower fails to pay, because the property is lost to the lender. In both cases the agreement comes to an end, which is where the “dead” comes from.

1775: the first building society

The story of the modern UK mortgage really begins in 1775, when Richard Ketley, the landlord of the Golden Cross Inn in Birmingham, set up the first known building society.

These early societies were “terminating” societies. Once every member had been housed, the society was wound up. According to the Building Societies Association, they were mostly found in the Midlands and the North of England, and the very last terminating society, First Salisbury, wasn’t dissolved until March 1980.

The 1800s: building societies grow and become permanent

Building societies spread quickly. In 1812, a court case called Pratt v Hutchinson gave the first formal recognition of their rights, and the Building Societies Association says there were more than 250 societies by 1825. In 1836, the first law written specifically for them, the Regulation of Benefit Building Societies Act, officially recognised them.

The next big change came in 1845, when James Henry James published a leaflet on a new idea, and the first known “permanent” societies started. Two years later, in 1847, Arthur Scratchley’s Treatise on Benefit Building Societies set out the permanent principle in more detail. Instead of closing once their members were housed, permanent societies carried on, taking in savings from some members and lending them to others to buy homes. This is the model building societies still use today.

By 1860 there were more than 750 societies in London and 2,000 in the rest of the country, and the Building Societies Act 1874 put the industry on a firmer legal footing.

The 1900s: home ownership spreads

By 1910, there were 1,723 building societies with 626,000 members and assets of over £76 million, according to the Building Societies Association.

1980: the Right to Buy

The Housing Act 1980 gave council tenants in England and Wales the right to buy their home at a discount, and, at first, the right to a mortgage from their local council. The House of Lords Library notes that the Act covered the tenants of over 5 million council homes, and that sales peaked at 167,123 in 1982/83. For many families, it was their first step onto the property ladder.

The discounts were generous. Tenants needed at least three years’ tenancy, and the discount started at 33% of the home’s value, rising by 1% for each extra year, up to a maximum of £50,000. Anyone who sold within five years had to pay some or all of the discount back.

The 1980s and 1990s: a market transformed

The Building Societies Act 1986 gave building societies wider powers in housing and personal banking, and set up the Building Societies Commission to regulate them. It also allowed societies to convert into banks, a change known as demutualisation.

Several of the biggest societies did just that:

The early 1990s were a difficult time for many homeowners. The Building Societies Association records that repossessions reached 75,500 in 1991, the highest figure on record.

£Mortgage repayment calculatorSee how different interest rates change a monthly paymentTry it →

Building societies in the 2000s and beyond

Building societies didn’t disappear after the conversions of the 1990s. Many stayed mutual, which means they’re owned by their members, the people who save or borrow with them, rather than by shareholders.

• 1960 and 1962: new Building Societies Acts tightened the rules on how much cash societies had to keep available, and brought earlier laws together.
• 2007: the “Butterfill” Act allowed societies to raise more of their money from sources other than their members’ savings, up to a maximum of 75%.
• 2009: during the financial crisis, Nationwide took over Dunfermline Building Society’s savings, branches and mortgages under new emergency banking powers.
• 2024 and 2025: Nationwide bought Virgin Money, and Coventry Building Society bought The Co-operative Bank, showing societies growing by buying banks, the reverse of the 1990s.

How interest rates have changed over time

Bank Rate is the Bank of England’s main interest rate. It affects the rates lenders charge, especially on tracker and variable mortgages. The Bank of England says that between 1975 and 2007, Bank Rate was 3.5% at its lowest point and 17% at its highest.

During the 2008 financial crisis, Bank Rate was cut to 0.5%. In March 2020, during the pandemic, it was cut to 0.1%, which the Bank of England describes as the lowest in its history. It stayed below 1% from April 2020 to May 2022.

The Bank of England started raising rates at the end of 2021 to help control inflation, and Bank Rate reached 5.25% in August 2023. Cuts began in August 2024, and Bank Rate was reduced to 3.75% in December 2025, where it was held at the September 2026 decision. Our guide to fixed, variable and tracker mortgages explains how changes in Bank Rate can affect different types of mortgage.

After 2008: tougher lending rules

The financial crisis led to a big rethink of how mortgages are sold. Two sets of changes in 2014 still shape lending today.

1. April 2014: the Mortgage Market Review The Financial Conduct Authority’s rules strengthened affordability checks, and require lenders to consider how likely future interest rate rises could affect what you can afford.
2. June 2014: an interest rate stress test The Bank of England’s Financial Policy Committee recommended that lenders check borrowers could still afford their mortgage if Bank Rate rose by 3 percentage points within the first five years. This recommendation was withdrawn from 1 August 2022.
3. October 2014: a limit on high loan-to-income lending Lenders were limited to 15% of new mortgages at 4.5 times income or more. This limit remains in place.

Help for first-time buyers

The government’s Help to Buy equity loan scheme launched in England on 1 April 2013. By the time it ended in 2023, 387,195 homes had been bought with an equity loan, worth £24.7 billion in total. Of these, 328,346 were bought by first-time buyers, about 85%.

The Lifetime ISA followed in 2017, adding a government bonus to savings for a first home. In the Budget on 28 October 2026, the government confirmed a new scheme, Your First Home, for new-build homes in England, and a First Time Buyer ISA to replace the Lifetime ISA for new savers from April 2029. Our Budget 2026 bulletin has the details.

Mortgages today

Building societies are still an important part of the market. In 2025, the Building Societies Association said its members held 24% of all residential mortgages outstanding in the UK.

Today, many borrowers choose a fixed rate, typically for two to ten years, and many lenders offer mortgages with a deposit of as little as 5%. If you’re starting out, our guide to how much deposit you need to buy a home and our step-by-step guide to the home buying process are good places to begin.

The history of mortgages at a glance

What UK mortgage history can teach today’s borrowers

History doesn’t predict what will happen next, but it does show a few patterns worth knowing about.

That’s why it can help to know when your current deal ends and to look at your options in good time. Our guide to when and why to remortgage explains the timing, and you can set a free reminder so you don’t miss your deal’s end date.

Summary

The history of mortgages in the UK runs from a 14th-century “dead pledge” and a Birmingham pub in 1775, through the growth of building societies and the changes of the 1980s, to the tougher lending rules that followed the 2008 crisis. Interest rates have risen and fallen dramatically along the way, which is a useful reminder that the rate on any mortgage can change over its lifetime.

Sources

• Building Societies Association – The history of building societies
• Building Societies Association – Raising the bar: cheers to 250 years of building societies
• Bank of England – What is happening with interest rates in the UK?
• Bank of England – Bank Rate history and data
• Bank of England – FPC confirms withdrawal of mortgage market affordability test
• Financial Conduct Authority – Interest rate stress test
• House of Lords Library – Right to buy: past, present and future
• GOV.UK – Help to Buy: equity loan scheme data to 31 May 2023
• Online Etymology Dictionary – Mortgage

Last updated: 31 October 2026. This guide is general educational information only and is not regulated financial advice.