You state having a mortgage over 3 times your salary has never pushed you over the affordability, yet here we're in a situation that as you agree, will push you over the edge. Is that not a slight contradiction?
It's not. I can
afford my house even when rates hit 12-14%. It's not a question of not having money. The point is - when you start loosing money on being home owner, no one is going to want to be home owner.
Home owners aren't switching mortgages every two to three years because they like arrangement fees, improving their credit scores and chatting with their financial advisors. We keep switching mortgages because no bank in UK ever offered good rates for long periods of time, and they definitely won't now, not when interest rate is ridiculously low - it's just not how it works.
And it's never affordability alone that creates housing market.
All of you presume that when the current home owners stumble and fall, and market collapses, it will allow you jump on a cheap path to ownership at the bottom of the ladder. That's not going to happen. House market, and mortgages, depend on houses being good investment long term and on those properties being collateral. Banks money depends on you paying them extra £100,000 in interest over 25 years, and you are not going to buy into this just to be bound to the same old flat for 25 years, be deep into red for 15 of those and come out on the other end as a finally recovered negative equity survivor when you're 50 years old.
The moment houses in Britain are:
- more expensive to mortgage than to rent
- impossible to sell on
- stop gaining any considerable value long term (or loose you money long term)
you end up with Japanese scenario - owneship doesn't make sense, being financially bound to place for over 30 years doesn't make sense, investing in improvements, doing places up and renovations stop making sense. And additionally in short run defaulting and allowing repossession can only save millions of people a lot of money. With immediate effect.
This creates chain reaction - people allow reposession, banks are left with half a town worth of 250,000 loans on houses now worth 130,000, and even if they tried to sell them again, at 120,000 (plus interest) loss they can be only bought by people earning 43,000 a year, which is unrealistic in country where over night building crews, painters, plumbers, carpenters and related supply trades become unemployed, the whole infrastructure based around credits, loans and financial advice lay off employees and landlords with multiple properties just begin to bleed money left, right and centre shot in wallet by mid term fixed rate mortgages on their buy to lets just coming to an end thus starting yet another chain reaction.
This is not going to be victimless revolt. This isn't going to be socialist putch where poor lower classes become land owners and the riches go live in council houses. You will not buy those mythical 70k flats all over the place - no one will lend you even 50% LVT when banking sector is left with unimaginable losses and worthless piles of defaulted brick and mortar every 50 yards all over the country.
If you have a reliance on either of the following:
- Low Interest Rates
- Introductory Mortgage Rates
- Re-mortgaging
- House Price increases
...then you could not afford your mortgage on the original terms, which is what you agreed to.
Every mortgage depends on those things. Everywhere in the world. There is no scenario where bank helps you buy into property to loose money. You want low interest rates and best offers. They want you to remortgage. And the whole lot depends on house price increases, otherwise there is no collateral for bank or incentive for you to buy in first place.
