[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?

 

[WATFORD zero]

A very good summary of why we are here and why it's only going to get worse

Why the Bank of England can’t fix inflation being driven by Brexit, war and a Covid hangover​

Britain’s problem isn’t so much that it now has runaway inflation but that it’s the wrong kind of inflation altogether. It’s therefore being fought in the wrong way.
Of course, if the governor of the Bank of England, Andrew Bailey, pleaded that, he’d be ridiculed.

But it is nonetheless true, and it means that the weapons that are being used to fight inflation are the wrong ones, and, like clunky trebuchets being used to take on a fighter jet, belong to a previous age. No wonder the Bank of England’s economic levers aren’t working. We should at least recognise that fact, and understand why interest rate rises are going to be much more painful in the months ahead. People will be made homeless needlessly, their lives destroyed.

https://www.independent.co.uk/voices/bank-of-england-inflation-interest-rates-b2362235.html

Unfortunately, the only way out of this complete and utter clusterf*** is through Government action and we all know that isn't going to happen

 

[sparkie]

Rejoin the customs union and the single market, things will improve overnight especially with food inflation due to the removal of costly red-tape and a stronger pound on the tons of food you import from the EU.

It really is this simple.

Absolutely. But instead they fiddle while the country burns.

They'll see it in the end - after everyone else does. No leadership.

 

[nicko31]

At least (some) people are now starting to publicly talk about Brexit as a significant cause to the financial mess the U.K. is in. It’s a start I guess.

But these are not people in government or the opposition. Maybe we'll get a grip when Poland cruise past us

 

[luge]

But these are not people in government or the opposition. Maybe we'll get a grip when Poland cruise past us

They already have.

 

[portlock seagull]

Absolutely. But instead they fiddle while the country burns.

They'll see it in the end - after everyone else does. No leadership.

The counter argument will be they’re doing what we ‘the people’ wanted, and that’s leadership.

But I agree, the whole institute IMO is rotten, has been rotten, for decades. Self serving, no amount of reform can put right. The pursuit of money is now the only thing, everything is secondary to. Society mirrors the PL ironically now. If you’ve got it, great. If you’ve not, then tough. No one can or is willing to really help you. Those with money have all the power and are in charge of the politicians. The state. The Law. War. Economy. You name it. Corruption is endemic here and globally. The scale and enormity is beyond comprehension and that’s why nothing can really resolve it. Same as drugs. Mass migration. Climate change. And the next pandemic when it comes. These are problems beyond fixing now. Even though billions of us will suffer consequences. I’ve felt for some time now we’re basically waiting for a calamity so big it will rock the worlds foundation and dwarf Covid. It could be Putin and a nuclear war. It could be China’s war with the West. A Global famine. Or it could be a more deadly plague. Whatever it is, there’s a sense it’s coming sooner rather than later. Much sooner.

Anyway, who’s going to the under 23 friendly against Hemel Hemstead in a few weeks?

 

[sparkie]

With the (relatively minor) debts I still have to pay back I spend time on the moneysavingexpert forum.

Here's links to the mortgage forum :

Mortgages, Homes & Bills

Buying, Renting, Selling, Energy, Household Bills, Home Improvement

forums.moneysavingexpert.com

and, more generally, the debt forum :

Debt-free wannabe

Mutual support and help for those on their journey to becoming debt-free.

forums.moneysavingexpert.com

 

[beorhthelm]

But these are not people in government or the opposition. Maybe we'll get a grip when Poland cruise past us

not sure why Poland comes up, their inflation 13%, base rate 6.75%

 

[Uncle Spielberg]

It seems lenders may offer interest only for a period of time, extend the mortgage term if repayment or offer a payment holiday. Further details to follow

 

[The Clamp]

From what I hear on the radio the sum total of what they have done is give people in arrears a year to sort it out and tell us all to stop asking for pay increases.

Pathetic.

However, but of a wake up call to people with a mortgage who claim to “own their own house”

No you don’t. Not until that mortgage is paid in full and you don’t have any other debt secured on the property.

 

[dejavuatbtn]

No one in government will put their hand up and say they got it wrong and none of them have a clue about how to sort it. it would be interesting to see what promises they come up with at the next election.
Vote for none of the above.

 

[crookie]

I read on the BBC this morning I think that only 25% of homes are owned by people with outstanding mortgages. 37% of homes are owned outright. The rest rented. Out of those 25% it is only those on variable rate mortgages, or those with fixed rate deals coming to an end who are going to be squeezed by interest rate rises. If this is the case, it seems madness that thinking interest rate rises will have a huge effect on consumer spending. And a very uneven and unfair way of doing it. Surely a fairer way, if there really has to be money taken out of the economy to reduce inflation, then why not raise taxes ? At least the money then could be put to good use in public services rather than adding to banks profits. Or have I just answered my own question !!??

 

[luge]

The other problem with raising interest is that there is a large amount of savings held in the over 60 population... and because inflation is higher than savings rates... they're gonna spend. That was my father's analysis....

 

[schmunk]

The other problem with raising interest is that there is a large amount of savings held in the over 60 population... and because inflation is higher than savings rates... they're gonna spend. That was my father's analysis....

Surely raising savings interest rates encourages people not to spend?

 

[Creaky]

Surely raising savings interest rates encourages people not to spend?

Absolutely not!

Inflation running at around 10% - savings interest rates at less than 5%.

All that means is that savings are effectively being devalued by at least 5% a year and if you are retired then you have no means to make up that deficit.

 

[Machiavelli]

I read on the BBC this morning I think that only 25% of homes are owned by people with outstanding mortgages. 37% of homes are owned outright. The rest rented. Out of those 25% it is only those on variable rate mortgages, or those with fixed rate deals coming to an end who are going to be squeezed by interest rate rises. If this is the case, it seems madness that thinking interest rate rises will have a huge effect on consumer spending. And a very uneven and unfair way of doing it. Surely a fairer way, if there really has to be money taken out of the economy to reduce inflation, then why not raise taxes ? At least the money then could be put to good use in public services rather than adding to banks profits. Or have I just answered my own question !!??

You've just provided the most persuasive explanation there is as to why raising interest rates might not be that effective in bringing down inflation in the current situation.
I think it will eventually (if it doesn't, it's for the reason you mention). They say it takes 9-12 months for the effects of rate rises to take hold. Each month over 0.1m renew their mortgage deals, and it won't just be those that have already taken up a new deal that will be cutting back spending, it'll be the majority of those that have a new deal on the horizon. This will lead to a decline in inflation and will also impact on economic growth (note that the economy is reliant on things like house price growth and consumer spending). As you say, it is an extremely uneven way of confronting the situation, but it is what has been done historically to dampen down inflation.
Raising taxes is an alternative that I'd prefer, but only if it targets assets and conspicuous consumption, particularly carbon consumption (eg taxing more than one return flight p.a.). Note that the Tories at least claim that they don't like raising taxes (particularly on the kind of thing that I've suggested), that tax rates are at their proportional highest in 50+ years, and the chances of them pursuing a more equitable response is unlikely at best.

 

[Herr Tubthumper]

Sri Lanka: Five-day bank holiday for domestic debt restructuring

There are fears the government's plan could lead to volatility in financial markets.

www.bbc.com

"Sri Lanka: Five-day bank holiday for domestic debt restructuring"
"Sri Lanka began a five-day bank holiday from Thursday to allow the crisis-hit nation to restructure $42bn (£33.2bn) in domestic debt."

Brits love few things more than a bank holiday, so a 5 day bender will certainly get the public's support.......and it fixes the UK's finances. Win win? Is this an option for the UK?

 

[sparkie]

Sri Lanka: Five-day bank holiday for domestic debt restructuring

There are fears the government's plan could lead to volatility in financial markets.

www.bbc.com

"Sri Lanka: Five-day bank holiday for domestic debt restructuring"
"Sri Lanka began a five-day bank holiday from Thursday to allow the crisis-hit nation to restructure $42bn (£33.2bn) in domestic debt."

Brits love few things more than a bank holiday, so a 5 day bender will certainly get the public's support.......and it fixes the UK's finances. Win win? Is this an option for the UK?

They'll need to send everyone some free beer vouchers though.