[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?

 

[dsr-burnley]

Yes - because mortgage repayments were a mix of interest and capital, my parents mortgage payments as a percentage of their income dropped quite rapidly, as wage rises outstripped mortgage rises. And of course, the actual amounts owed in the first place were far lower in relation to income as well. I read somewhere recently that a 6% mortgage interest rate now would have been the equivalent of 25% in the early 1980s - but they were only actually up to around 15%.

Oh - found what I read: https://www.leedsbuildingsociety.co...es/housing-is-now-at-its-least-affordable.pdf

In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3% of disposable income (see Editors’ notes). Today, with the average 2 year fixed rate mortgage on offer to new customers currently standing at 6.43%, those figures are around £292,000 and 45.1% respectively.

That article has been debunked, and it's pretty rubbish that it's still on the Leeds BS website. The author compared the average house price at 1980 prices and compared it with the average household income after adjusting for inflation to 2020 prices. Of course he got a nonsense answer.

The average wage in 1980 was £5,000+. The average household income was nowhere near half what it is now in absolute terms; more like one-sixth.

 

[Berty23]

I read a lot of comments here about 'greedy landlords'.
You don't think the mortgages have gone up on their properties then.
I have one in Melbourne and am currently having to subsidise the tenant by $500 a month, I just put the rent up by $20 a week.
That is the first rise in 2 years, which equates to 10 pounds a week in sterling.
The strata is another $4k a year on top of that.
Landlords and tenants are suffering equally.

Does that mean that you are now contributing towards paying off your mortgage rather than getting someone else to pay it for you? When landlords say they are losing money they actually mean “I am having to pay off my own debt rather than someone else pay it for me” so is that actually “losing” money or not making as much?

Landlords benefited from 15 years of crazy low interest rates so many kept buying more houses which meant prices kept rising and all the time they were getting more people to pay off their debt for them. If these people can’t afford to pay their own debt then they should sell up.

It feels like there will be significant pain for the economy but it is unsustainable having prices so high. People blame immigrants for high house prices but if landlords did not keep buying more property then prices would be lower.

It has bothered me for an ages that people can make such a fortune on the thing we need. A few years ago my neighbours bought the house they were renting and their monthly mortgage was 500 quid (or something like that) lower than the rent. The owner had also made about 150k in capital gains in a decade. My heart bleeds for landlords of multiple properties. Or property speculators.

Maybe everyone who ever lost money on shares should get it back?

 

[raymondo]

I am sorry if this sounds harsh and I wish anyone facing challenging times all the best but we can’t keep expecting the govt to bail people out everytime things gets tough.

Since Covid it seems to be the go to solution, people will have to make sacrifices until the interest rates stabilise. I was too young to really understand it all but talking to my parents about interest rates in the late 80’s early 90’s they were horrendous and people found a way to deal with it. The same must happen now.

Yes, and let's remember it's not the government that bails out anything... it's the taxpayer. I've been careful all my life, thanks.

 

[dsr-burnley]

Does that mean that you are now contributing towards paying off your mortgage rather than getting someone else to pay it for you? When landlords say they are losing money they actually mean “I am having to pay off my own debt rather than someone else pay it for me” so is that actually “losing” money or not making as much?

Landlords benefited from 15 years of crazy low interest rates so many kept buying more houses which meant prices kept rising and all the time they were getting more people to pay off their debt for them. If these people can’t afford to pay their own debt then they should sell up.

It feels like there will be significant pain for the economy but it is unsustainable having prices so high. People blame immigrants for high house prices but if landlords did not keep buying more property then prices would be lower.

It has bothered me for an ages that people can make such a fortune on the thing we need. A few years ago my neighbours bought the house they were renting and their monthly mortgage was 500 quid (or something like that) lower than the rent. The owner had also made about 150k in capital gains in a decade. My heart bleeds for landlords of multiple properties. Or property speculators.

Maybe everyone who ever lost money on shares should get it back?

Don't you think that the tenant will suffer worse than the landlord if they are evicted? The landlord would have to sell the property and bank the proceeds, but the tenant would be homeless.

 

[raymondo]

Genuine question - not trying to be goady

Many people are struggling with rent increases imposed by (often greedy) landlords - should private-rental tenants also receive government support if they struggle with higher rents?

Problem is, any support or financial aid for either mortgage-payers or renters is tantamount to taxpayers subsidising the profits of mortgage lenders and landlords.

There needs to be better rent increase controls.

 

[Herr Tubthumper]

Sorry if already mentioned, but I think the government was looking at longer term mortgages that you pass on when you pass on (or rather away), in the longer term with interest added you could end up paying for a castle but living in a studio flat.

I have a 40 year mortgage over here which I will most likely not pay off in my lifetime.

 

[pocketseagull]

Landlords and tenants are suffering equally.

No. You own a property that can be sold if necessary and presumably have another property where you live. You aren't suffering equally.

 

[mikeyjh]

I read a lot of comments here about 'greedy landlords'.
You don't think the mortgages have gone up on their properties then.
I have one in Melbourne and am currently having to subsidise the tenant by $500 a month, I just put the rent up by $20 a week.
That is the first rise in 2 years, which equates to 10 pounds a week in sterling.
The strata is another $4k a year on top of that.
Landlords and tenants are suffering equally.

And that's why landlords get a bad name! You're not subsidising anyone - You're, slowly, buying an asset, you're tenant is paying you rent to occupy the flat not to pay for the purchase of it. In any case, if your rental income is greater than than the interest you're paying + maintenance & other expenses then you're making a profit, be happy about it.

I (obviously) don't think being a landlord is a bad thing but those 'BTL' types that just see a renter as a mechanism to buy a house I have a problem with.....

 

[warmleyseagull]

Sunday Times has leader that is clear that government should not play ‘fairy godmother’.

Only 28% of households are mortgage holders, and many of those have fixed deals that last for some time (two sons have just taken 5 year deals under 5%) so the rest of us will be paying in some way or other (more taxation or more borrowing for future generations to pay off) for a relatively small minority. How is that fair?

 

[Mustafa II]

Sunday Times has leader that is clear that government should not play ‘fairy godmother’.

Only 28% of households are mortgage holders, and many of those have fixed deals that last for some time (two sons have just taken 5 year deals under 5%) so the rest of us will be paying in some way or other (more taxation or more borrowing for future generations to pay off) for a relatively small minority. How is that fair?

Well as long as you and your sons are okay, screw the millions of others who are in serious risk of losing their homes (mainly young people, under 40).

Wonder if your opinion would be different if your sons were up for a renewal which they couldn't afford the repayments....

 

[beorhthelm]

Well as long as you and your sons are okay, screw the millions of others who are in serious risk of losing their homes (mainly young people, under 40).

Wonder if your opinion would be different if your sons were up for a renewal which they couldn't afford the repayments....

you say that, missing the question of fairness. why do you expect government to support a small group that made a particular economic choice over others? at least consider how it looks for many others who took a longer view.

main reason anyone took such a short fix at the obvious market bottom was to get the lowest possible rate and payment. a prudent view would be to take as long a fix as practical, pay a bit more for secured outgoings next 5-10 years. now its suggested that those facing a remortgage in next 6mth get a tax payer backed extension to their fix, while no one else does? this is difficult to balance fairness and look at providing help.

 

[Herr Tubthumper]

I read a lot of comments here about 'greedy landlords'.
You don't think the mortgages have gone up on their properties then.
I have one in Melbourne and am currently having to subsidise the tenant by $500 a month, I just put the rent up by $20 a week.
That is the first rise in 2 years, which equates to 10 pounds a week in sterling.
The strata is another $4k a year on top of that.
Landlords and tenants are suffering equally.

You’ll have to try harder than this to convince NSC of suffering landlords. Whilst you might be subsidizing now, there must have been many better years to offset this? And then there’s capital appreciation.

 

[Chicken Run]

No way should the government (Ultimately the Taxpayers) offer any sort of assistance, imho you should be taking mortgages & remortgages in the knowledge of worse case scenario costs!

 

[Mustafa II]

you say that, missing the question of fairness. why do you expect government to support a small group that made a particular economic choice over others? at least consider how it looks for many others who took a longer view.

main reason anyone took such a short fix at the obvious market bottom was to get the lowest possible rate and payment. a prudent view would be to take as long a fix as practical, pay a bit more for secured outgoings next 5-10 years. now its suggested that those facing a remortgage in next 6mth get a tax payer backed extension to their fix, while no one else does? this is difficult to balance fairness and look at providing help.

Firstly, it's not a small group, it's millions of people. Secondly, even if it was a small group, which it isn't, why shouldn't the government provide help when there is an economic crisis and it is their homes and livelihoods at stake?

This is very much a generational problem. It is under 40s who will be most widely and severely affected. It is always revealing the demographic of NSC in respect of issues like these. "Boomers" have no idea what it's like to require multiples of their annual wage merely to save up a deposit for a flat... Then when they finally do, they're expected either to suck it up or lose it all of they can't afford it, once the interest rates rise.

I'm up for a renewal next year. I'm going to be okay, as I don't owe too much, but I will have to use a bulk of my savings to soften the blow.... However I have friends who have young families who are literally going to lose their home
.... That's not fair.

The government needs to offer some relief for all the millions of largely young people who could well lose everything.

 

[timbha]

Nationalise building societies.

How do you nationalise a mutual (owned by its members)?

 

[Harry Wilson's tackle]

I am sorry if this sounds harsh and I wish anyone facing challenging times all the best but we can’t keep expecting the govt to bail people out everytime things gets tough.

Since Covid it seems to be the go to solution, people will have to make sacrifices until the interest rates stabilise. I was too young to really understand it all but talking to my parents about interest rates in the late 80’s early 90’s they were horrendous and people found a way to deal with it. The same must happen now.

Here is another view.

Most of the time we piddle about in the liberal free market economy world, but when a crisis arrives (Covid) we go balls-deep communist, with blanket handouts coupled with restrictions that send the libertarian right into a conniption fit.

Perhaps....perhaps the liberal free market economy, survival of the fittest, and all that, is not the way forward?

I'm unsure.

However if we can go balls-deep turbo Corbyn (under a tory government) during the Covid 'crisis', why not now, in the impending personal financial meltdown crisis, shift to the left a bit?

 

[Bodian]

That article has been debunked, and it's pretty rubbish that it's still on the Leeds BS website. The author compared the average house price at 1980 prices and compared it with the average household income after adjusting for inflation to 2020 prices. Of course he got a nonsense answer.

The average wage in 1980 was £5,000+. The average household income was nowhere near half what it is now in absolute terms; more like one-sixth.

House prices vs income. How affordable are UK homes?

Are houses getting more or less affordable in the UK compared to salaries and how much would a house cost now if prices increased at the same rate as salaries?

www.avtrinity.com

"The history of house price affordability UK over the past 40 years.
House price affordability is simply the number of times the average salary needs to be multiplied to buy the average house. For example, in 1983 the average house price was £26,000 and the average salary was £8,528. Therefore, it would take 3 times the average salary to buy the average house.

In 1993 the average house price was £56,000 and the average salary was £17,784. Therefore, it would take also 3.1 times the average salary to buy the average house.

In 2003 things got more expensive as the average house price was £125,000 and the average salary was £21,124. Therefore, it would now take 5.9 times the average salary to buy the average house.

In 2013, affordability took another hit as the average house price was now £165,000 but the average salary was only £27,011. Therefore, it would take 6.1 times the average salary to buy the average house.

In 2023 (figures from 2022), house affordability took another turn for the worse as the average house price rose to £280,000 and the average salary had only risen to £33,000. Therefore, it would take 8.5 times the average salary to buy the average house."

 

[Jimmy Grimble]

Firstly, it's not a small group, it's millions of people. Secondly, even if it was a small group, which it isn't, why shouldn't the government provide help when there is an economic crisis and it is their homes and livelihoods at stake?

This is very much a generational problem. It is under 40s who will be most widely and severely affected. It is always revealing the demographic of NSC in respect of issues like these. "Boomers" have no idea what it's like to require multiples of their annual wage merely to save up a deposit for a flat... Then when they finally do, they're expected either to suck it up or lose it all of they can't afford it, once the interest rates rise.

I'm up for a renewal next year. I'm going to be okay, as I don't owe too much, but I will have to use a bulk of my savings to soften the blow.... However I have friends who have young families who are literally going to lose their home
.... That's not fair.

The government needs to offer some relief for all the millions of largely young people who could well lose everything.

I was about to say something similar re: the average age of NSCers. Quite a revealing thread for it.

 

[Motogull]

Rent has gone up by 25% for many since COVID. At least homeowners have an asset. Something needs to be done about both in the short term and the rental situation needs looking at in the longer term too (build more f***ing houses!).

On my travels, I see lots of new builds going up. Pretty much every town and village. The countries economy is too reliant on this sector (work from architects at the beginning all the way through to DIY stores at the end). I am not sure there is much capacity for more.

I also have issues with BTLs. We all know may new builds will be taken up this way, so the level of available property to buy does not rise in proportion to ne homes, thus pushing prices up.

I fear it could go tits up.

 

[The Fits]

On my travels, I see lots of new builds going up. Pretty much every town and village. The countries economy is too reliant on this sector (work from architects at the beginning all the way through to DIY stores at the end). I am not sure there is much capacity for more.

I also have issues with BTLs. We all know may new builds will be taken up this way, so the level of available property to buy does not rise in proportion to ne homes, thus pushing prices up.

I fear it could go tits up.

Interest rates rising, mortgage approvals dropping, cost of living showing no signs of improving, rental market rising, no signs of discouraging BTLs or foreign ownership, houses lying empty, general standard of old houses dropping. Whereas 2008/9 was very much out of the blue (despite warnings from some economists etc) feels like we are just sleep walking into this one.