2022 mini-budget discussion

Greebo · 28 Sep 2022 at 13:52

dLockers said:
Oh snap

Send help

Wow. imagine how much worse i would have been with Corbyn though? Lucky escape eh?

Felon · 28 Sep 2022 at 13:52

delta0 said:
I already posted the response to this showing that the 20% peak we saw in 1980 is equivalent to around 14% today. This also completely ignores the fact that mortgage lending criteria are also much stricter today. Mortgage companies have also typically used a 5.5% base rate as a stress test (in fact when I renewed mine earlier this year they were talking about much higher numbers in their stress test so maybe they knew something was coming!)

I think the problem is, that in the 1980s, people were far less indebted and their incomes were much higher as a proportion of their monthly payments, ergo; their affordability was much more sensible.

The problem now, due to the amounts of debt people have - a slight increase in any rate, adds £hundreds or £thousands more, per month on people who have expensive mortgages - which is a lot of people, because houses are very expensive.

wesimmo · 28 Sep 2022 at 13:53

EddScott said:
I'd question the private Vs public sector increases - and by a genuinely independent review. Not skewed either way.

Obviously not against wage increases but they need to be sensible. Would an 8%, for instance, increase this year be acceptable but a reduction of 4% next year if inflation drops back down to say 3/4%?

RM is a basket case example - if you have a private sector company with a strong union how can it not end in disaster?

Not quite sure how that is relevant to public sector wage increases - or the lack of.

That's not how inflation works...

You'd still need an increase of 4% the year in which inflation is 4% to .maintain your wage in real terms.

Azza · 28 Sep 2022 at 13:53

delta0 said:
I already posted the response to this showing that the 20% peak we saw in 1980 is equivalent to around 14% today. This also completely ignores the fact that mortgage lending criteria are also much stricter today. Mortgage companies have also typically used a 5.5% base rate as a stress test (in fact when I renewed mine earlier this year they were talking about much higher numbers in their stress test so maybe they knew something was coming!)

The Bank of England withdrawn its recommendation for affordability tests 1st August, so lenders don't actually have to carry out interest rate stress tests if they don't want to.

Financial Policy Committee confirms withdrawal of mortgage market affordability test

Following its latest review of the mortgage market, the Financial Policy Committee has confirmed that it will withdraw its affordability test Recommendation

www.bankofengland.co.uk

chrismscotland · 28 Sep 2022 at 13:53

Our mortgage deal runs out in Feb '24 I think, we've still got an interest only mortgage which is some relief but galling to be only paying interest!
We are putting as much as we can into clear off the capital as we go though.

GordyR · 28 Sep 2022 at 13:54

delta0 said:
I already posted the response to this showing that the 20% peak we saw in 1980 is equivalent to around 14% today.

Yesterday afternoon I had a quick go at the calculations myself and came out at very similar numbers to those provided by the analyst who Ed Conway is quoting in that thread.

Would you mind re-posting your rationale please, because I cannot for the life of me see why yours would be any different, unless everyone including myself is missing something glaring.

Admittedly, I'm very much out of practice as I've run a software development company for the last ten years, but I do have a background in economics.

Can I ask what your qualifications are in this area?

Ayahuasca · 28 Sep 2022 at 13:54

Azza said:
The Bank of England withdrawn its recommendation for affordability tests 1st August, so lenders don't actually have to carry out interest rate stress tests if they don't want to.

Financial Policy Committee confirms withdrawal of mortgage market affordability test

Following its latest review of the mortgage market, the Financial Policy Committee has confirmed that it will withdraw its affordability test Recommendation

www.bankofengland.co.uk

Almost like they knew what was coming and that millions would have failed the stress tests.

delta0 · 28 Sep 2022 at 13:57

Screeeech said:
I think the problem is, that in the 1980s, people were far less indebted and their incomes were much higher as a proportion of their monthly payments, ergo; their affordability was much more sensible.

The problem now, due to the amounts of debt people have - a slight increase in any rate, adds £hundreds or £thousands more, per month on people who have expensive mortgages - which is a lot of people, because houses are very expensive.

Not really. Average full time pay was £6000 and average house mortgage payment was £400/month. Today it’s £39k and average house mortgage payment £1,280/month (based on 5%). Also as I pointed out the mortgage lending criteria wouldn’t allow someone on £39k to borrow that much in the first place. We have quite a bit of head room before we hit that sort of position. Not to say we won’t ever get there but just that we forget how bad it actually was back then. We haven’t seen anything yet.

delta0 · 28 Sep 2022 at 13:58

Azza said:
The Bank of England withdrawn its recommendation for affordability tests 1st August, so lenders don't actually have to carry out interest rate stress tests if they don't want to.

Financial Policy Committee confirms withdrawal of mortgage market affordability test

Following its latest review of the mortgage market, the Financial Policy Committee has confirmed that it will withdraw its affordability test Recommendation

www.bankofengland.co.uk

I know they did but banks were using higher numbers and still do. Anyone that has sat through mortgage interviews recently know this.

EddScott · 28 Sep 2022 at 13:59

Dirk Diggler said:
Are you saying it's only public sector wages that increase inflation? What's your understanding of how a wage increase fuels inflation?

Seriously? of course not. Demanding a sudden increase in wage in line with current increases in inflation is unrealistic.

Doesn't an increase in available spending lead to inflation?

Murphy · 28 Sep 2022 at 14:04

thenewoc said:
And push those employees abroad, loosing all taxation from them. Better to have a little of something, rather than a lot of nothing!

Well that's a flawed assumption if ever i saw one. Firstly you're assuming the only reason someone lives in the UK is because of how much the government taxes them, secondly you're assuming those now vacated job wouldn't be filled by someone else, possibly lower down the pay scale (you're all about British jobs for British workers are you not?), thirdly if someone wants to leave the country simply because they don't get to keep as much as they used to then fine, i don't particularly want people who are just mooching off the rest of us living here, people who are not invested in our society. Fourthly if increased taxes equals rich people leaving then we should apply the same logic to everyone else should we not? Because if so I'd say someone going from a disposable income of £50k (for example) to £40k has a lot less to worry about than someone going from £1k to nothing or worse has a lot more reason to leave.

You've basically unthinkingly swallowed the "oh the rich will leave if we tax them too much" hook-line-and-sinker as even under a cursory glance it falls apart, it's like trickle down economics. It sounds reasonable but the moment you actually think about it it doesn't make sense.

bjorkiii · 28 Sep 2022 at 14:06

Whatever medication a few posters are on i would seriously ask for a review, its obviously not helping.

EddScott · 28 Sep 2022 at 14:08

wesimmo said:
That's not how inflation works...

You'd still need an increase of 4% the year in which inflation is 4% to .maintain your wage in real terms.

Oh, yes, sorry. I'm being stupid.

Greebo said:
Private sector have got good wage increases in the last year. Our staff got 8.5% in janaury and another 8.5% last month.

Public sector is currently growing much more slowly than in the private sector (1.8% versus 4.8% in the three months to April 2022, excluding bonuses; 1.5% versus 8.0% if bonuses are included).

I have sympathy for public sector workers who have had 10 years of wage stagnation and now are asking for the same as private sector are getting this year.

Fair enough. I'm more than happy to have any pre-conceived ideas I have debunked.

imtoooldforthis · 28 Sep 2022 at 14:09

What a thread the past ten or so pages have been. Thenewoc and Chris Wilson putting on a show, all we need now is Deuse to turn up with some pearls of wisdom.

Trifid · 28 Sep 2022 at 14:09

EddScott said:
Obviously not against wage increases but they need to be sensible. Would an 8%, for instance, increase this year be acceptable but a reduction of 4% next year if inflation drops back down to say 3/4%?

That's not how inflation works. It is cumulative. If wages increased with inflation and inflation was 8% this year and 4% next year, you would be due a wage increase of +8% this year and +4% next year. To get a pay cut for your example, you'd next deflation which is very bad and may well lead to pay cuts, but even in times of inflation, some companies were cutting pay, for example British Airways at the start of Covid.

200sols · 28 Sep 2022 at 14:11

dLockers said:
Oh snap

Send help

He's fixed for 10 years guys :cry:

Minusorange · 28 Sep 2022 at 14:19

imtoooldforthis said:
What a thread the past ten or so pages have been. Thenewoc and Chris Wilson putting on a show, all we need now is Deuse to turn up with some pearls of wisdom.

Pyscho Sonny to gatekeep us as well

kevman · 28 Sep 2022 at 14:19

delta0 said:
I know they did but banks were using higher numbers and still do. Anyone that has sat through mortgage interviews recently know this.

I recently spoke to nationwide and when we bought the house last year we were stress tested against 8%

In theory its affordable but wont be doing much else other than paying interest

Chuk_Chuk · 28 Sep 2022 at 14:21

Azza said:
The Bank of England withdrawn its recommendation for affordability tests 1st August, so lenders don't actually have to carry out interest rate stress tests if they don't want to.

Financial Policy Committee confirms withdrawal of mortgage market affordability test

Following its latest review of the mortgage market, the Financial Policy Committee has confirmed that it will withdraw its affordability test Recommendation

www.bankofengland.co.uk

So most mortgages have been stress tested then, since this change was only a month ago?

visibleman · 28 Sep 2022 at 14:21

CapitalOne said:
Except when you went on about the benefits of the IR35 change in the mini budget but then didn't answer my question

Praising recent IR35 changes? That's a (IT) contractor