Mortgage Rate Rises

[danlightbulb]

I think you should be able to have this 12 month holiday (after all, it only hits your lifetime debt)

...


But mainly I think inflation should be handled by something else additional rate rises. Something that impacts the wealthy not helps them. Because that's what rate rises do.

And after 12 months? These rate rises might be around for 10 years. Is wage growth going to inflate the problem away?

I agree on your last point. I understand why base rate matters but it is not fit for purpose regarding the issue we currently have, the causes of it, and the people who will be impacted by it.

 

[SPG]

Free cash to stop people spending.... jeez

I am luckier than most but my general outgoings have skyrocketed...... A £110 quid a month energy bill pre Ukraine is now £250 and the so called 5% salary increase we got is way better than a lot of people got.

The state damm right better help people, its the state`s fault we are in this predicitment and by STATE i mean the **** show that is the Tory goverment.

It should only be given on your main reisdence though, if you have a buy to let mortage then tough ****.

 

[413x]

Probably could have done. Likely if they had a partner too.

Many millennials, myself included, have been chasing house prices for a decade or more, and if lucky managed to scrape together a deposit and get a mortgage for the crappiest houses in town (ours needed a full renovation when moving in, but there wasn't much choice on the market within budget) - most of my friends/family in this generation it's been a combination of living at home, someone died, or parents 'gifted' a chunk, the ones still doing it while renting haven't been able to get the mortgage yet because the bottom rung is getting pulled further and further away at a rate they can't keep up with.

We did finally managed it in 2018 - then moved again in 2021 to a 2.5ish bed (you can probably guess why, and the older place was a 'starter' with no scope for improvement and in an undesirable location) and took out further borrowing. The bank would have lent us 500k on our then earnings (gone up since) but we felt that was too far and went for 360k and aimed for 75% LTV as our target (why not, we both have years of earning left and life insurance, should the worst happen). So we finally get on the ladder, and get going, paying back over a 35 year term, then within 5 years the interest rates are going up and the repayments could almost double. I mean, come on! Wtf are we supposed to do to avoid getting shafted at every hurdle? *

Before you say "look at cheaper places to live", we moved out of the North because job prospects and wages were **** and found that our earnings and careers have started (in my case there was nothing but retail work in my home town) and boomed since making that choice. So we are better off, but this just feels like being dragged under after just making it to the surface.

We're slightly lucky in fixing early last year for 5 years, so there's a chance this could change for us, but still painful for others in this thread and friends we know of. Personally looking at payments going from £1050ish to £1800ish IF we can get below £300k before 2027 - if they go up to 10% that would be £2600pm - and if we don't overpay and bury our heads in the sand it's a couple hundred more again.

These are scary numbers, and those interest rates can always go higher and higher.

*if we'd have waited, we'd be still renting and facing rent rises and probably moving every 2 years like everyone else has to do, and in the process incurring more cost keeping you away from that bottom rung. The whole system is a rat trap

Lower numbers for us all round.
But yes. The fear of, say, 6pc mortgage is genuinely life changing. It would strip away so much ambition and hope. That's the pain of it. You know you are stuffed for next 5 years.

5 years is a long time considering it might not be any better after that.

And its a large chunk of luck to avoid it.


And the point about moving somewhere cheaper. It's an option for some, but as you say, sometimes the jobs aren't there. Great for retired people.

It is hard to make the right call. You see over time, maxing your mortgage is usually the best thing in the long run. It's worked for us even in 2020.and all the way back to 2008 it was the right call. So it's unfair to call people out for getting, I dunno, the very cheapest flat they can.. To be prudent.



Its tough out there. Especially for FTBs now. Sky high rates, potential house price crashes. Job security. But at same time sky high rents. It's an impossible choice.


Its going to be a gloomy few years at least. Then climate change is going to make all this seem like a minor inconvenience

 

[Richie]

I do think that if someone has just tried to do the right thing, against a tidal wave of obstacles, then it isn't right for that person to suffer no.

This will across as flippant but - That's life. You can try your hardest and still end up screwed by life through no real fault of your own.

You can either pout I'm the corner decrying life is not fair or pull your big boy pants on and get on with it as best you can.

Is it fair? Likely not but that's how it is sometimes.

This is especially true when help does seem to be handed out willy nilly for any other problem, just not the problem my cohort seems to be suffering from.

What examples are you referring to?

Do you think house buyers now want to spend 5x their salary on a house? Do you think they don't know deep down that this is stretching or risky, or inherently overvalued? It is not a choice for many people.

You're preaching to the choir here....

Now I agree with your point that some people have made that choice and do have substantial headroom. So the clear answer is to stop those people spending somehow, not forcing a group that has little into further poverty.

Sure. Want to give some specifics as to exactly what you would do as PM? (Vat changes for example - applies to what and what rate(s) would you use?

 

[413x]

And after 12 months? These rate rises might be around for 10 years. Is wage growth going to inflate the problem away?

I agree on your last point. I understand why base rate matters but it is not fit for purpose regarding the issue we currently have, the causes of it, and the people who will be impacted by it.

As others have said, I think if you can't survive after 12 months you've truly over extended, or(more likely) lost your job and haven't been able to get one for a long time.

You can't ask a 21yo renter to bail out this scenario. It's just not fair.


Young people are already shafted paying for pensions they probably won't get, an NHS that might be gone when they need it later in life. It's not fair to ask them to help out mortgaged individuals as well when they may never have one

 

[dlockers]

You can either pout I'm the corner decrying life is not fair or pull your big boy pants on and get on with it as best you can.

The third option is to voice your situation and see if there is consensus...... you aren't judge, jury and executioner of what support is acceptable. Corporations get billions in tax breaks all the time; they voice the concern, and see if it gets momentum.

 

[delta0]

Indeed which is why I am a long term supporter of transitioning to recovering some taxation via wealth taxes.

If you lower income tax you push the burden back into later life for many, allowing them to get set and then to pay more when less at risk financially.

One of the biggest draws to salary taxation was that it was hard to avoid for most. Only the really rich would have the opportunity to avoid taxes.
Now contractors etc means its a broken model.

I’ve been very hesitant on wealth taxes depending on how they are implemented. They would have to be sufficiently high enough and not consider illiquid assets like primary house otherwise I would have to end my time in the UK. No doubt they could be avoided quite easily by the truly wealthy.

 

[adam cool dude]

Free cash to stop people spending.... jeez

I am luckier than most but my general outgoings have skyrocketed...... A £110 quid a month energy bill pre Ukraine is now £250 and the so called 5% salary increase we got is way better than a lot of people got.

The state damm right better help people, its the state`s fault we are in this predicitment and by STATE i mean the **** show that is the Tory goverment.

It should only be given on your main reisdence though, if you have a buy to let mortage then tough ****.

It is the states fault we are in the mess but helping people is only going to make it worse. There comes a point in time where there needs to be hardship to reset everything. It is all only going one way. Problem is no government would ever make that call because it is political suicide to the masses but it would get my vote.

The government makes a mess but it is the persons responsibility to be prepared for that mess in my opinion.

 

[413x]

Indeed which is why I am a long term supporter of transitioning to recovering some taxation via wealth taxes.

If you lower income tax you push the burden back into later life for many, allowing them to get set and then to pay more when less at risk financially.

One of the biggest draws to salary taxation was that it was hard to avoid for most. Only the really rich would have the opportunity to avoid taxes.
Now contractors etc means its a broken model.

Yes. More when your young is more important than when you are old.

My. Parents will probably pass each of us (6 kids, 3 from my mums side, 3 from step dad) 125-150k each.

I would have rathered 10-20k at 25 years old.
Could have been on housing ladder 10 years earlier.



Switching tax to load more onto wealth and high earnings does a proxy of this. It gives you more when you need it, and takes more when its well into luxury territory. It helps out with the IHT issue too a bit by taking from you as you age rather than when you pass.
IHT is contentious. I think it should be more aggressive. But most don't agree

 

[dlockers]

There comes a point in time where there needs to be hardship to reset everything.

Says who? Honestly I must have read the book incorrectly about "life" lol.

 

[SPG]

Yes you should be prepared for a mess I totally agree however this is beyond a mess it's catrasphree

The first place to look is the mortgage system itself. Longer life style terms on friendly terms instead of the city cash grab we have now. But the Tory's won't do that will they....

 

[Uther]

Says who? Honestly I must have read the book incorrectly about "life" lol.

Most people have had it very easy over the last decade or so, we're just going back to things being more normal.
For 'normal' read 'pretty ****' for anyone who isn't wealthy.

 

[danlightbulb]

What examples are you referring to?

Just off the top of my head:
* banks get into trouble, they get bailouts that cost the country billions.
* certain industries get into trouble, they get supported.
* wealthy individuals get more tax breaks than normal people.
* long term asset stripping by private utility companies (including water, the sector in which I work).
* stamp duty holidays not helping normal people because the property price goes up - that money ends up at the top of the chain i.e in the hands of the already wealthy.
* increasing reliance on the welfare state even for people in work, because our economy is so screwed up that low end work doesn't pay.
* house buying 'support' like help to buy - i use the term 'support' loosely because it inflates prices, and that money ends up at the top of the chain, i.e in the hands of the already wealthy.

Sure. Want to give some specifics as to exactly what you would do as PM? (Vat changes for example - applies to what and what rate(s) would you use?

I agree with MKW's views on wealth taxes. Also yes VAT could be adjusted so that more luxury goods are targeted. Target landlords putting up rents through rent controls. More regulation to drive price protection for consumers. Dividend taxes. Share buy back taxes. Work to increase the supply of goods and services. Postpone costly environmental policies that are loaded on top of various bills, but reallocate those taxes to higher end consumption.

Ultimately we do have to remove money from the economy - I understand this fully - but it should be removed from the top end, not the bottom end, this is the fundamental difference.

As others have said, I think if you can't survive after 12 months you've truly over extended, or(more likely) lost your job and haven't been able to get one for a long time.

You can't ask a 21yo renter to bail out this scenario. It's just not fair.


Young people are already shafted paying for pensions they probably won't get, an NHS that might be gone when they need it later in life. It's not fair to ask them to help out mortgaged individuals as well when they may never have one

What would you be able to change if you had a 12 month mortgage repayment holiday? Would you be able to get a job paying £15k more in that time (maybe, depends what you did to start with), would the interest rates have fallen back to 3%?

I agree on your point about renters, they need protection too. Referring back to my reply above yours, the money (pain) should not be coming from the bottom end, it should be taken from the top end where the actual money is in the first place.

Agree also with your point on pensions, or NHS. This effects many of us, mortgage holders or not. This is world class asset stripping that has caused this. There is money - where is it all?

The government makes a mess but it is the persons responsibility to be prepared for that mess in my opinion.

To a degree yes, but it is only possible for people to protect themselves by so much. This is beyond reasonable expectations now and is getting worse.

 

[Freakbro]

or 685k of debt at 6%. It'd be a game changer

Yea, but no-one would be that daft to have a £685k mortage at 6%...



Would they?

 

[Jono8]

I think it is unfair to have a go at people in terms of planning etc. I am sure many were aware interest rates could go up, but likely didnt expect them to go up 5% in less than a year and a half. There has not been such a sustained quick rise, since the 1980's/35-40 years ago.

As an extreme example, what if they went up to 15%?

"Sorry that £600 a month you pay to have a roof over your head is now £3000 a month".

How do you plan for that? The only way to do that is just to except you will never own a home because it will always be too risky.

You can only plan so much for every eventuality, and if you do, you will likely never do anything or take any risk.

 

[danlightbulb]

Yea, but no-one would be that daft to have a £685k mortage at 6%...



Would they?

Its all relative isn't it.

Someone who earns ten times what I earn could have a ten times bigger mortgage. The impact of rates on their mortgage would be the same in percentage terms as anyone else, but the impact in monetary terms is less than the impact on someone on a more normal salary because as a proportion of their bills, their essential things like food fuel and energy will be lower than someone on a normal salary.

 

[danlightbulb]

You can only plan so much for every eventuality, and if you do, you will likely never do anything or take any risk.

Also to add to this - its actually encouraged to take risk, to speculate, to consume. Our whole system relies on it!

 

[Jono8]

Also to add to this - its actually encouraged to take risk, to speculate, to consume. Our whole system relies on it!

"Spend, spend, spend! Buy, buy, buy! ....No wait, not that much."

 

[Jono8]

I often worry how out of touch these dinosaurs in charge of everything are and I wonder whether they are just hoping all the old tricks will work again.

The average mortgage is now over £200,000. That's £12,000 in interest a year at 6%

I cannot find figures but the average mortgage in 1988 must have only been ~£30,000 judging by house prices, but was likely even less. Even 15% on that is £4500 in interest a year.

Surely these people do understand that you cannot have interest rates like they have been before, or living will just be unaffordable.

You can't just keep putting interest rates up and up, expecting the average person on a median salary to find extra tens of thousands a year.

 

[PIPPI]

If I want to move to a bigger more expensive house and sell my car to help fund this,

Do I use the money from the sale of my car to reduce my current mortgage or save the cash to use on the new house?

The massive slow down in the market feels like my house may be for sale for quite a while before it sells so inflation will eat away at any savings in the bank right?

I have a variable mortgage (0.7 above base rate) with no early repay fees