[Finance] 'Possible' BofE Base Interest Rate Rise this Thursday .....

[Neville's Breakfast]

So, yesterday morning I get an email from my mortgage lender saying that the base interest rate had just been increased. Few hours later an apology email saying the email was a error and that the BofE doesn't meet until Thursday this week.

I'm a massive cynic generally and to me this looks like the decision is made in advance of the BofE meeting and communicated to mortgage lenders ahead of the meeting supposedly to make the decision. I know it doesn't make much difference as if the rate goes up it goes up and millions pay more. Am I being too cynical ? Was it a genuine mistake ? I guess we find out tomorrow ! If true it's nice of the BofE to add to the cost of living crisis.

The Bank of England only moves the headline rate. Mortgage lenders are not obliged to respond. It is a free market. However with inflation currently running at somewhere between 10 and 30 % it wouldn’t be that much of a surprise if interest rates were to rise from current absurdly low levels. Lots of people on here comment on the rich getting richer but much of that is from their ability to borrow (to invest) at ridiculously cheap levels.

 

[Neville's Breakfast]

This. A thousand times this. People who came up through a functioning system sneering at those who are having to fight for every basic opportunity we took for granted. Graceless and charmless at best.

It really isn’t. As has been mentioned; interest rates of 10 to 15 % ! My wife and I had no furniture for 6 months when we bought our first house. Final salary pension, that’s a joke. Only happens in the public sector. Like many others I also did not have a free uni education. Grants were means tested and my parents who scrimped and saved and sacrificed had to pay. Thousands of others didn’t even get a uni education as only a small proportion of kids went to uni. So yes, the moaning is entitlement.

 

[Weststander]

Interest rates have been incredibly low for nearly 15 years. People's lives have grown and developed around these rates rightly or wrongly. Throw big changes into the mix since the pandemic in people's circumstances like redundancies, loss of earnings, hikes in energy, fuel, cost of living generally, then you have a lot more going on than just writing it off to 'over extending' themselves. Perhaps one or two pressures on finances should be able to be accommodated by prudent planning, but this is pressure from all angles.

Given the huge rises in property values over 2 decades and how difficult it is for young people to get on the ladder, it must be great sat up in an ivory tower blaming everyone in difficulty for over extending themselves.

This.

House prices went up exponentially to negate (and partly because of) low interest rates, making housing costs all in just as expensive for the average mortgagee.

The BoE increasing rates when there isn’t need to dampen a non-existence consumer spending boom, is a hammer blow to those on variable rates, when already facing huge hikes in the cost of groceries, car fuel and domestic fuel.

I’ve heard the spiteful argument in previous recessions about “those homeowners or business people who over extended, are facing their comeuppance”. A nasty viewpoint glossing over the real lives affected, with no knowledge of personal circumstances involved.

 

[Weststander]

One thing I've noticed is the younger generation seem to want everything new all the time, whether its shiny shiny or fashion . . . . . . having recently renovated our house we struggled to offload some perfectly good used house stuff, furniture, appliances and the like . . . no takers for hand made wooden kitchen doors in perfect condition for example, nor a pefectly good used vileroy and boch sink. . . . I used reclaimed stuff in my old cottage 23 years ago . . . . .its back on the market and still there!

We noticed the same.

Just recently it was almost impossible for us to sell/gift contemporary furniture such sofas and sofa-beds, fire rated, in neutral colours.

It’s a 21st century thing, I first noticed this in about 2000 when I worked with a 19 year old girl on low pay (modest background, no parental handouts) who bought a brand new Micra, then a couple of years later a brand new VW Beetle. Holidaying in Cancun, Caribbean island holidays. Lots of young people eat out a great deal.

Partly this can be young adults not prepared to go through the ‘torture’ of saving for a £40k deposit. Instead spending everything and more.

In the 70’s and 80’s first, second, third cars were semi-bangers from Shoreham Car Auctions or Argus/Friday Ad classifieds. I remember cleaning my old brothers rusty cars that’d cost them £100 a piece.

Expectations, consumption and materialism have increased markedly, keeping up with Jones’s rife due to Instagram lifestyle boasting.

It’s a changed and funny old world.

 

[Bold Seagull]

I got on the ladder early '92 via a repro, earning less than £10k a year was hard . . . somehow, with a lodger and a part time job on occaision, or fixing stuff for people I rode it out until I got promoted and earnt more. Nothing handed on a plate.

I had an endowment originally, got out as soon as I could afford to. ('99) it wasn't until I was in my late 20's I wasn't on the line at the end of every month, no holidays, no car, then again with a young family in a bigger house a few years later it was hard. . . . only now my lads older and we're both working again are we comfortable . . .although our outgoings have hiked markedly recently. Fortunately not sweating but it has made a difference.

There will be a lot of people in the shit in a year or less. Big mortgages to service on top of personal debt and contractual obligations ( cars etc) add to that food and bills . . . . we're forking out over £200 a month more than 6 months ago already. . . . the country is in a mess.

One thing I've noticed is the younger generation seem to want everything new all the time, whether its shiny shiny or fashion . . . . . . having recently renovated our house we struggled to offload some perfectly good used house stuff, furniture, appliances and the like . . . no takers for hand made wooden kitchen doors in perfect condition for example, nor a pefectly good used vileroy and boch sink. . . . I used reclaimed stuff in my old cottage 23 years ago . . . . .its back on the market and still there!

Sometimes it’s the reverse. When my grandad passed, my mum or her sister didn’t want any of his stuff; some really nice g-plan side board, coffee table - they even moved and bought new stuff!

Only reason I’m on Facebook is the marketplace. Got a great 50s dresser for the living room for £40, a solid wood carved wardrobe for £75, a chest of drawers for free - all great made stuff imho. I love it.

 

[Weststander]

Sometimes it’s the reverse. When my grandad passed, my mum or her sister didn’t want any of his stuff; some really nice g-plan side board, coffee table - they even moved and bought new stuff!

Only reason I’m on Facebook is the marketplace. Got a great 50s dresser for the living room for £40, a solid wood carved wardrobe for £75, a chest of drawers for free - all great made stuff imho. I love it.

The trendy mid century look, Mrs.W is a long term fan and has bought some pieces. Martlets often a sauce.

 

[LamieRobertson]

Fed increased their rate by .5%

 

[portslade seagull]

The BOE will increase the rate tomorrow

 

[usernamed]

It really isn’t. As has been mentioned; interest rates of 10 to 15 % ! My wife and I had no furniture for 6 months when we bought our first house. Final salary pension, that’s a joke. Only happens in the public sector. Like many others I also did not have a free uni education. Grants were means tested and my parents who scrimped and saved and sacrificed had to pay. Thousands of others didn’t even get a uni education as only a small proportion of kids went to uni. So yes, the moaning is entitlement.

No. Sorry, our generation grew up in a world where a house was genuinely affordable at 3.5x salary, which is what the mortgage lender would give you, and we had largely functioning infrastructure around us, including education and health.

We can’t sit there having had the opportunity to buy a house at £30k with a deposit of 3k and complain about “entitled” kids who work just as hard as we did, but see starter homes going in the 250k to 300k price bracket.

These guys have paid for prescriptions all their lives, these guys have paid for dentistry all their lives, they’ve paid for university and childcare and they’re both expected to hold down full time jobs, be brilliant parents, often while caring for their own parents. They’ve paid market rate rents, often for poorly maintained property, and the rents have kept going up diminishing their chances of getting the deposit together to get onto the housing ladder to start with.

And where does their money go? To our generation who decided property looked cheap and bought five.

I’ve no quarrel with anyone doing well, but I’ve got no respect for those among us who’ve made sure that they’re all right and then pulled up the drawbridge and walked away with no thought of those coming after.

I remember the time of 15% interest rates (another Conservative success story) and I’m not trying to diminish the sacrifices that you and your wife had to make, but those were different times when social housing was available so low earners didn’t have to pay market rates, the state paid for far more than the modern state, and there was, in short, a better safety net if the worst were to happen. Everything is stretched so tight atm, with so little slack anywhere in the system, that even a small worsening in people’s situations can potentially be disastrous for them. The moaning is legitimate fear.

 

[Farehamseagull]

No. Sorry, our generation grew up in a world where a house was genuinely affordable at 3.5x salary, which is what the mortgage lender would give you, and we had largely functioning infrastructure around us, including education and health.

We can’t sit there having had the opportunity to buy a house at £30k with a deposit of 3k and complain about “entitled” kids who work just as hard as we did, but see starter homes going in the 250k to 300k price bracket.

These guys have paid for prescriptions all their lives, these guys have paid for dentistry all their lives, they’ve paid for university and childcare and they’re both expected to hold down full time jobs, be brilliant parents, often while caring for their own parents. They’ve paid market rate rents, often for poorly maintained property, and the rents have kept going up diminishing their chances of getting the deposit together to get onto the housing ladder to start with.

And where does their money go? To our generation who decided property looked cheap and bought five.

I’ve no quarrel with anyone doing well, but I’ve got no respect for those among us who’ve made sure that they’re all right and then pulled up the drawbridge and walked away with no thought of those coming after.

I remember the time of 15% interest rates (another Conservative success story) and I’m not trying to diminish the sacrifices that you and your wife had to make, but those were different times when social housing was available so low earners didn’t have to pay market rates, the state paid for far more than the modern state, and there was, in short, a better safety net if the worst were to happen. Everything is stretched so tight atm, with so little slack anywhere in the system, that even a small worsening in people’s situations can potentially be disastrous for them. The moaning is legitimate fear.

Great post, absolutely spot on [emoji122]

 

[StonehamPark]

I’ve no quarrel with anyone doing well, but I’ve got no respect for those among us who’ve made sure that they’re all right and then pulled up the drawbridge and walked away with no thought of those coming after.

 

[Neville's Breakfast]

No. Sorry, our generation grew up in a world where a house was genuinely affordable at 3.5x salary, which is what the mortgage lender would give you, and we had largely functioning infrastructure around us, including education and health.

We can’t sit there having had the opportunity to buy a house at £30k with a deposit of 3k and complain about “entitled” kids who work just as hard as we did, but see starter homes going in the 250k to 300k price bracket.

These guys have paid for prescriptions all their lives, these guys have paid for dentistry all their lives, they’ve paid for university and childcare and they’re both expected to hold down full time jobs, be brilliant parents, often while caring for their own parents. They’ve paid market rate rents, often for poorly maintained property, and the rents have kept going up diminishing their chances of getting the deposit together to get onto the housing ladder to start with.

And where does their money go? To our generation who decided property looked cheap and bought five.

I’ve no quarrel with anyone doing well, but I’ve got no respect for those among us who’ve made sure that they’re all right and then pulled up the drawbridge and walked away with no thought of those coming after.

I remember the time of 15% interest rates (another Conservative success story) and I’m not trying to diminish the sacrifices that you and your wife had to make, but those were different times when social housing was available so low earners didn’t have to pay market rates, the state paid for far more than the modern state, and there was, in short, a better safety net if the worst were to happen. Everything is stretched so tight atm, with so little slack anywhere in the system, that even a small worsening in people’s situations can potentially be disastrous for them. The moaning is legitimate fear.

Every generation has that legitimate fear and each one has different causes that create that fear. It doesn’t actually matter that houses cost 250 k compared to 80 k (the latter being the cost of our first house) if the mortgage interest rates are so much lower. There will be a problem in the future if interest rates rise to counter inflation and house prices crash. Our generation faced this negative equity disaster. The current one hasn’t. So far they buy a house, it goes up in price.
We have never pulled up a drawbridge. We have spent a lifetime sacrificing, as did our parents. I agree with you about buy to let. It should be banned, as should foreign money in our housing market. But no political party has ever backed these ideas. High rents are simply a function of high house prices. It is an economic relationship. Keeping interest rates artificially low and allowing foreign money and multiple house ownership is to blame and it is a little wide of the mark to look for ordinary older people to blame.

 

[Blue Valkyrie]

It really isn’t. As has been mentioned; interest rates of 10 to 15 % ! My wife and I had no furniture for 6 months when we bought our first house. Final salary pension, that’s a joke. Only happens in the public sector. Like many others I also did not have a free uni education. Grants were means tested and my parents who scrimped and saved and sacrificed had to pay. Thousands of others didn’t even get a uni education as only a small proportion of kids went to uni. So yes, the moaning is entitlement.

You are talking about maintenence grants for university - grants to pay for accommodation and expenses.

You would not have had to pay for university tuition fees.

Also as a student up until the early 1990s you would have been able to claim income support ( unemployment benefit ) - I did this - and housing benefit over the university summer holidays ( and I think if you go back far enough over the Christmas and Easter holidays as well ? ).

 

[Neville's Breakfast]

You are talking about maintenence grants for university - grants to pay for accommodation and expenses.

You would not have had to pay for university tuition fees.

Also as a student you would have been able to claim income support ( unemployment benefit ) and housing benefit over the university summer holidays ( and I think if you go back far enough over the Christmas and Easter holidays as well ? ).

Tuition fees are paid because there are so many more kids now who have the opportunity of a university education. You can’t have it both ways. There has never been a blank cheque for free tuition for everyone who wanted it. Either you restrict the numbers (and thereby restrict educational opportunity) and don’t charge fees like in the old days or you give that opportunity to everybody and charge fees. Moaning about the fees whilst ignoring the opportunity given is entitlement. Regarding benefits received in the holidays you are right. We all claimed it and spent it on a two week holiday on the beach in Spain or Greece. It was a joke. Had to sign on on a Thursday so flew out the next day and spent the lot. We were entitled kids wasting public money. It was stopped pretty soon after I left uni in the 80s.

 

[Westdene Seagull]

When Mrs Jakarta and I sat down over 20 years ago and had a good hard look at our in goings and outgoings since we were buying a house in RH20. We were offered a £500K Mortgage but we took one one of £250K and bought a smaller property.

I went back offshore & worked my butt off to pay it down. 1990's interest rates would make youngsters eyes water.

So no I don't have too much sympathy for the entitled generation that can't cope with 1-2% bank rates...

In the 90's, if you were lucky, you could get 4 - 5 times your household income as a mortgage. So I'll be generous and assume the £500k offer was five times your income. That means your household income would have been at least £100k - a substantial amount in the 90s - even now most households don't have that income. To put it into perspective - it's worth £185k today ( assuming your income was based on 1999 ). So your lack of sympathy seems born out of you having a considerable income in the first place - an income most people don't have nowadays.

 

[usernamed]

Every generation has that legitimate fear and each one has different causes that create that fear. It doesn’t actually matter that houses cost 250 k compared to 80 k (the latter being the cost of our first house) if the mortgage interest rates are so much lower. There will be a problem in the future if interest rates rise to counter inflation and house prices crash. Our generation faced this negative equity disaster. The current one hasn’t. So far they buy a house, it goes up in price.
We have never pulled up a drawbridge. We have spent a lifetime sacrificing, as did our parents. I agree with you about buy to let. It should be banned, as should foreign money in our housing market. But no political party has ever backed these ideas. High rents are simply a function of high house prices. It is an economic relationship. Keeping interest rates artificially low and allowing foreign money and multiple house ownership is to blame and it is a little wide of the mark to look for ordinary older people to blame.

I’m not looking to point fingers, it helps nothing, but I’d like to make a couple of further points:

1. The cost of the initial property does matter if family aren’t in a position to help. £25,000 is no small amount to save, especially while paying market rents. Ok if you’re able to live with family while saving, but not everyone has that luxury. Plus an outstanding mortgage of £225,000 becomes much harder to manage much quicker when interest rates do rise than a mortgage of £72,000 (to use your example)

Wages have been stagnant a long time, the percentage of people’s wages going on their basic outgoings has increased with food, energy and fuel all increasing, as well as council tax. There are lots of people out there today who have followed what they’ve been told to do by their parents (buy a house) who are going to find themselves in arrears very quickly if rates continue their steady climb. Remember their loans were deemed affordable by the financial institutions who gave them.

2. Our generation did not have house prices increased as significantly by increases in market rents, because there was widely available social housing stock. This broke the link between the private rental market and house prices. The removal of social housing stock is what has tied house prices to market rents and allowed both to endlessly balloon. The modern alternative to private rental for many is homelessness, housing associations and local authorities are swamped, with demand vastly outstripping supply.

I have no quarrel with the basic tenet of Thatcher’s policy of “right to buy your council house” but the cruelty inherent in the policy was that local authorities were forbidden from using the proceeds to replenish their social housing stock and create new developments. It was always a policy where the sting was in the tail, and wouldn’t be fully felt until a decade or two had passed from implementation.

 

[Machiavelli]

In the 90's, if you were lucky, you could get 4 - 5 times your household income as a mortgage. So I'll be generous and assume the £500k offer was five times your income. That means your household income would have been at least £100k - a substantial amount in the 90s - even now most households don't have that income. To put it into perspective - it's worth £185k today ( assuming your income was based on 1999 ). So your lack of sympathy seems born out of you having a considerable income in the first place - an income most people don't have nowadays.

Precisely, and I'd add that most people didn't have that income thenadays either.
There is also the alternative that [MENTION=6741]jakarta[/MENTION] could afford a £0.5m house back then (ie one 4 or 5 times above the average) through inheritance.

 

[dazzer6666]

In the 90's, if you were lucky, you could get 4 - 5 times your household income as a mortgage. So I'll be generous and assume the £500k offer was five times your income. That means your household income would have been at least £100k - a substantial amount in the 90s - even now most households don't have that income. To put it into perspective - it's worth £185k today ( assuming your income was based on 1999 ). So your lack of sympathy seems born out of you having a considerable income in the first place - an income most people don't have nowadays.

4x my income in 1997 just about (at a stretch) enabled us to buy our place in Burgess Hill, using a bit of savings and a bit of equity from the place we were selling (which we’d bought in 1991 and had a negative equity mortgage having lost out in the crash on our first house)………..using one of my kids (28, highly educated, good job) as an example, the same property type today would mean a mortgage of maybe 25x salary - even a small flat would require a mortgage of around 8-10x salary and a 25k deposit (which is difficult to save for when paying over £1k/month in rent).

 

[Wrong-Direction]

No. Sorry, our generation grew up in a world where a house was genuinely affordable at 3.5x salary, which is what the mortgage lender would give you, and we had largely functioning infrastructure around us, including education and health.

We can’t sit there having had the opportunity to buy a house at £30k with a deposit of 3k and complain about “entitled” kids who work just as hard as we did, but see starter homes going in the 250k to 300k price bracket.

These guys have paid for prescriptions all their lives, these guys have paid for dentistry all their lives, they’ve paid for university and childcare and they’re both expected to hold down full time jobs, be brilliant parents, often while caring for their own parents. They’ve paid market rate rents, often for poorly maintained property, and the rents have kept going up diminishing their chances of getting the deposit together to get onto the housing ladder to start with.

And where does their money go? To our generation who decided property looked cheap and bought five.

I’ve no quarrel with anyone doing well, but I’ve got no respect for those among us who’ve made sure that they’re all right and then pulled up the drawbridge and walked away with no thought of those coming after.

I remember the time of 15% interest rates (another Conservative success story) and I’m not trying to diminish the sacrifices that you and your wife had to make, but those were different times when social housing was available so low earners didn’t have to pay market rates, the state paid for far more than the modern state, and there was, in short, a better safety net if the worst were to happen. Everything is stretched so tight atm, with so little slack anywhere in the system, that even a small worsening in people’s situations can potentially be disastrous for them. The moaning is legitimate fear.

This

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[zefarelly]

Sometimes it’s the reverse. When my grandad passed, my mum or her sister didn’t want any of his stuff; some really nice g-plan side board, coffee table - they even moved and bought new stuff!

Only reason I’m on Facebook is the marketplace. Got a great 50s dresser for the living room for £40, a solid wood carved wardrobe for £75, a chest of drawers for free - all great made stuff imho. I love it.

I may have that Sideboard in my TV room