[Finance] What should the government do about the coming base rate mortgage hike time bomb?

[Mustafa II]

800,000 people up for renewal next year.

I personally know people who simply won't be able to afford the increase. They're ones of many I'm sure.

Tax breaks? Government subsidies? Or should they just allow the crisis to play out?

 

[KZNSeagull]

An interesting suggestion I have heard is to temporarily raise VAT to try to stop people spending, rather than keep raising interest rates, as that will effect more people.

 

[BBassic]

I'm torn between looking at re-mortgaging now when it's pretty painful or waiting until November (my current deal is up in April '24) when it might be less painful, accepting the potential for it to actually be really painful.

 

[Sarisbury Seagull]

Numbers 1 and 2 were discussed by Jeremy Hunt, Martin Lewis and the mortgage lenders and agreed by the mortgage lenders back in December 2022. https://www.gov.uk/government/news/mortgage-lenders-commitments-to-borrowers
Martin Lewis has consistently told people to speak to their mortgage lenders about forbearance measures all this year, if they are struggling to meet payments.

Not sure what is so different that Rachel Reeves is saying here with 1 and 2? 4 and 5 are fair enough.

But numbers 1 and 2 haven’t actually been properly implemented as options. Lenders still make it very difficult for people to do those two things.

 

[KZNSeagull]

But numbers 1 and 2 haven’t actually been properly implemented as options. Lenders still make it very difficult for people to do those two things.

Ah ok, Martin Lewis makes it sound like they are being more accommodating than they were. Perhaps they aren't.

 

[Mustafa II]

I'm torn between looking at re-mortgaging now when it's pretty painful or waiting until November (my current deal is up in April '24) when it might be less painful, accepting the potential for it to actually be really painful.

I'm in the same position (March '24).

I don't think anybody is in the position to advise right now. Who knows what it will look like by then.

The advice I've got is when there is 6-7 months to go, apply for a remortgage - you don't have to commit to it, but once agreed, you can keep it if things do get worse further down the line.

After that, it's down to personal circumstances and risk aversion. I'll probably look to get a tracker (I predict that they will look to bring rates back down ASAP once inflation is under control), as I feel I could cope with any increases as well. This is high risk though.

My plan B and C are to either get a 2 year fix (not keen on doing this) or an interest only (if there are good deals with this) and look to overpay - I have been told you can leave these with no early exit fee, but I'm yet to confirm that?

 

[sparkie]

I'm torn between looking at re-mortgaging now when it's pretty painful or waiting until November (my current deal is up in April '24) when it might be less painful, accepting the potential for it to actually be really painful.

Things won't be any better in November as there is nothing in the pipeline to make things better.

 

[BBassic]

I'm in the same position (March '24).

I don't think anybody is in the position to advise right now. Who knows what it will look like by then.

The advice I've got is when there is 6-7 months to go, apply for a remortgage - you don't have to commit to it, but once agreed, you can keep it if things do get worse further down the line.

After that, it's down to personal circumstances and risk aversion. I'll probably look to get a tracker (I predict that they will look to bring rates back down ASAP once inflation is under control), as I feel I could cope with any increases as well. This is high risk though.

My plan B and C are to either get a 2 year fix (not keen on doing this) or an interest only (if there are good deals with this) and look to overpay - I have been told you can leave these with no early exit fee, but I'm yet to confirm that?

Yeah I'm leaning towards 2 year fix and using some of my savings to knock a chunk off of the overall amount before then.

We've been overpaying for the last few years so might increase that amount by closing the wallet for frivolous things.

 

[luge]

I'm in the same position (March '24).

I don't think anybody is in the position to advise right now. Who knows what it will look like by then.

The advice I've got is when there is 6-7 months to go, apply for a remortgage - you don't have to commit to it, but once agreed, you can keep it if things do get worse further down the line.

After that, it's down to personal circumstances and risk aversion. I'll probably look to get a tracker (I predict that they will look to bring rates back down ASAP once inflation is under control), as I feel I could cope with any increases as well. This is high risk though.

My plan B and C are to either get a 2 year fix (not keen on doing this) or an interest only (if there are good deals with this) and look to overpay - I have been told you can leave these with no early exit fee, but I'm yet to confirm that?

Luckily we are august 26 before we have to re do ours. If it was now it would be squeaky bum time. We were offered a 7 year mortgage as well... wish i'd taken that option!!!

Given that predicting this mess is clearly not a great idea, surely better taking a fixed option in Oct and then switch to a tracker nearer the time?

 

[Nobby Cybergoat]

This is a very good point from a very clever man.

Why are the working age, bringing up family age groups bearing the entire burden and the retired bearing none?

 

[Sarisbury Seagull]

Ah ok, Martin Lewis makes it sound like they are being more accommodating than they were. Perhaps they aren't.

No, mortgage lenders in this country are generally a disgrace to be honest. The whole system and industry needs shaking up.

When it comes to interest only - because so many people took out interest only loans in the 80’s/90’s and didn’t have repayment strategies or had mis-sold endowments, the FCA clamped right down on interest only mortgages and it’s very difficult to get one on a residential property for most people. The lenders have done nothing to make it easier since the rate hikes - YET. I do think this is going to be the most logical solution for most people in the short term to avoid missed payments or repossessions so hopefully something will be done to ensure it is an option.

To extend the mortgage term - this would take a lot of borrowers past the lenders maximum age as so many people max the term to keep payments down and affordable so unless the lenders majorly change their criteria, I don’t know how that will work.

Point 5 regarding not affecting credit score is interesting, I can’t see any lender agreeing to that though. One missed mortgage payment, let one more, has such a detrimental impact on a credit rating and the chance of getting another mortgage in the future. Credit scoring is another thing that needs shaking up IMO. Too many lenders ridiculously harshly penalise people for one or two explainable missed payments from the past or a low credit score as thay haven’t had credit!

 

[KZNSeagull]

No, mortgage lenders in this country are generally a disgrace to be honest. The whole system and industry needs shaking up.

When it comes to interest only - because so many people took out interest only loans in the 80’s/90’s and didn’t have repayment strategies or had mis-sold endowments, the FCA clamped right down on interest only mortgages and it’s very difficult to get one on a residential property for most people. The lenders have done nothing to make it easier since the rate hikes - YET. I do think this is going to be the most logical solution for most people in the short term to avoid missed payments or repossessions so hopefully something will be done to ensure it is an option.

To extend the mortgage term - this would take a lot of borrowers past the lenders maximum age as so many people max the term to keep payments down and affordable so unless the lenders majorly change their criteria, I don’t know how that will work.

Point 5 regarding not affecting credit score is interesting, I can’t see any lender agreeing to that though. One missed mortgage payment, let one more, has such a detrimental impact on a credit rating and the chance of getting another mortgage in the future. Credit scoring is another thing that needs shaking up IMO. Too many lenders ridiculously harshly penalise people for one or two explainable missed payments from the past or a low credit score as thay haven’t had credit!

Agree re point 5. As I was out of the country for 12 years my credit score disappeared, so when I came back and needed a small car loan, the buggers charged me 17% interest when the base rate was .01% or whatever it was. Once that was paid off and the car fell to pieces, I needed a larger car loan on which they charged 2.5% interest! Mad

 

[seagullwedgee]

This is a very good point from a very clever man.

Why are the working age, bringing up family age groups bearing the entire burden and the retired bearing none?

Is that the same now-retired generation who were suffering mortgage interest rates of 15%+ through the 80s and early 90s?

 

[Nobby Cybergoat]

Is that the same now-retired generation who were suffering mortgage interest rates of 15%+ through the 80s and early 90s?

Mate, if there's one misapprehension in the entire universe of poorly thought out opinions that's been debunked it's that one.

It's not the rate, it's the effect of the rate .... oh I can't be bothered, anyone want to jump in and help me?

 

[luge]

Mate, if there's one misapprehension in the entire universe of poorly thought out opinions that's been debunked it's that one.

It's not the rate, it's the effect of the rate .... oh I can't be bothered, anyone want to jump in and help me?

No. It's pointless trying too. However there is a lesson to be learnt from it that things will probably be ok if people prioritise what they do - but the effect of it now is going to be worse, even if i can see fewer repossessions due to banks being way more lenient.

 

[pb21]

...things will probably be ok if people prioritise what they do...

Which they obviously will do, and many/most will be able to get by. But by having to spend several grand a year more on a mortgage then into the general economy, for the next few years, wont be great for anyone.

 

[seagullwedgee]

These were the BoE Base Rates at the end of each calendar year, to 1 decimal place. To suggest that home buyers back in the 80s and 90s had it easy really does not stand up.

 

[Icy Gull]

Mate, if there's one misapprehension in the entire universe of poorly thought out opinions that's been debunked it's that one.

It's not the rate, it's the effect of the rate .... oh I can't be bothered, anyone want to jump in and help me?

Not actually true, I came very close to being unable to pay my mortgage at the time. It was the generation of mortgage yourself to the neck initially to get the best house/flat you can and it will ease off in a year or two. Within a month of me doing exactly that on a repayment only mortgage the interest rates went up sharply and quickly to 15% but luckily they came down again pretty quickly. That is not going to happen now though is it?

 

[Nobby Cybergoat]

Can someone explain this to me as well?

get that the economic orthodoxy here is that we need to cool the economy to get inflation down. So what we’re doing is increasingly interest rates so that mortgage holders and renters will have less money, so buy less, so the price of stuff comes down.

But why is mortgage interest rates the only lever that can be used here? What about taxation? At least then the money goes to the public purse rather than banks.

If we are going to go through a national exercise in impoverishment and deprivation (which could be the epitaph for tory brexit Britain) at least lets spread the deprivation around not just lay it on those who are trying to buy or live in a house? What about those who already own a house, do they not have to contribute anything to this?

 

[pb21]

Is that the same now-retired generation who were suffering mortgage interest rates of 15%+ through the 80s and early 90s?

These were the BoE Base Rates at the end of each calendar year, to 1 decimal place. To suggest that home buyers back in the 80s and 90s had it easy really does not stand up.

You just said 15%+ thorough the 80s and early 90s and then just minutes later produce evidence that shows you were making it all up.

You clearly don't get it.

 

[Creaky]

This is a very good point from a very clever man.

Why are the working age, bringing up family age groups bearing the entire burden and the retired bearing none?

If your only retirement income is the state pension then you are correct.

Inflation hits all other retirees harshly. Yes saving rates have increased but only by about a third of the inflation rate. Any retiree with cash savings have seen that effectively devalued

Some annuities do have an inflation clause but many don’t.

Those two factors alone make a significant dent in the real income of retirees without any chance of improving their income in the future.

At least those of working age, realistically or not, do have the hope of future improvement - for retirees any damage done to their savings or incomes is permanent.