We bought our first house in 2013. It was a small 1930s property in the suburbs of London, financed with 90% debt and 10% equity — the standard home-buying structure in the UK at the time. I was never particularly comfortable with credit, perhaps because of my background or simply due to a naturally cautious approach to spending, especially when the money is not your own.
What ultimately persuaded me to take the leap and commit to a 15-year mortgage was careful financial planning. Before taking on such a long-term obligation, I wanted to ensure that we would be able to afford the repayments not only under current conditions, but also in more difficult environments.
Our planning was based on historical UK interest rates from 1975 to 2013. Looking at the long-term trend, it becomes clear that interest rates in the 1970s were above 20%, before gradually declining over the following decades to almost 0% after the 2008–2009 financial crisis. At first, it seemed difficult to imagine how households in the 1970s could afford mortgages at such high rates. However, it is important to understand that inflation was also significantly higher at the time, meaning wages and incomes were increasing much faster than they tend to in today’s lower-interest-rate environment.
To find a balanced approach, we stress-tested our mortgage affordability using interest rate assumptions of 12%, 8%, 6%, and 4%. Looking back, I realise this was a rather extreme exercise, but it proved highly valuable in understanding the relationship between income, debt obligations, and household spending.
Since 2013, our family has remained actively involved in real estate through renting, buying, renovating, and selling property. Over time, debt became less of an enemy and more of a useful financial tool — provided it is used responsibly. Leverage can significantly enhance returns in real estate, but the key is not to overextend yourself to the point where a sudden change in interest rates, income, or market conditions could destabilise the entire investment.
Debt therefore carries both benefits and risks. Used prudently, it can accelerate wealth creation, improve purchasing power, and provide access to opportunities that would otherwise remain out of reach. At the same time, excessive leverage can quickly become dangerous if financial assumptions prove unrealistic or circumstances unexpectedly change. Understanding this balance is one of the most important aspects of long-term real estate investing.