[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?

 

[Seagull58]

Introduce a right-to-buy scheme for private tenants with a government-backed mortgage scheme. Allow private tenants to buy the property they live in for, at most, whatever the landlord owes on it.

What a ridiculous suggestion. I own a house worth 320K with no mortgage. Why on earth should my tenant be allowed to take ownership of my house for nothing? I worked hard to earn the money to buy the house and pay off the mortgage.

 

[BiffyBoy100]

Is there a reason there are no longer fixed-rate mortgage terms available? i.e a 30-year fixed at say 5% vs the crazy low/free money short 3-5 deals that has fuelled the market for so long. That would at least give some consistency so we're not seeing huge increases that people can't afford.

Maybe we also need to look at the German model where renting throughout life is more with better policies and incentives in play.

 

[Seagull58]

The tenant(s), not the landlord have been paying off the mortgage tbf.

My house has no mortgage and I am renting another property to live in (abroad). Why on earth should my tenant get ownership of my property?

 

[Arthritic Toe]

I thought the whole point of mortgage approval nowadays is to stress test to check whether someone can comfortably afford a rise of 5% in their mortgage rates .

We have been extremely fortunate over the last 10 years or so but very low mortgage rates were never going to go on forever.

No - after the last crisis, they introduced these measures to put an end to the boom-bust cycle. As happens every time though, these checks slowly erode as people forget and the irresponsible lending cycle starts all over again. If they'd have kept a lid on the lending, the price of the average 'first time buyer' property would have adjusted to that level. It has to - they can only sell a new build to someone who can afford it.

As it is, we're now up sh*t creek without a paddle. House prices have risen to insane levels purely because people could borrow huge amounts at near-zero interest rates. There is no silver bullet for this now that interest rates are returning to their long-term norm. Any subsidies etc will just kick the can down the road (although don't rule this out - it may be the last desperate card played by the Tories ahead of the election).

There will be a correction in prices over the next few years and there will be winners and losers as a result - there needs to be some scheme to avoid mass-repossessions, but not subsidies - possibly it can involve extending terms. It really isn't the fault of those who now face unaffordable mortgages - they are just innocent victims of this insane boom-bust cycle that no government seems able (or willing) to control.

 

[Seagull58]

Main borrowing for us is up for renewal in a few weeks and the additional borrowing September. Renewed early April and paying an exit fee to get the additional borrowing aligned which is less than a separate fee.
Bloody glad I did it early as an extra £220pm then but would be £380 with recent rate changes.
Our first place and we didn't go to our limit to cover such risks as per whats happening now. Goes from 2.45% to 4.12%.
Landlords... I bloody hate them, back fence he is liable for smashed to bits and the tight arse never listened to his tenants and won't acknowledge us either. Dogs in garden attacking our kitten and still not a word from him. Selfish and greed living off others inability to raise mortgage deposits.
House now up for sale as probably needs cash for an apartment somewhere hot.

What a bitter post. I have rented my house out for 13 years. I have had the fence replaced twice and I had the house completely redecorated inside and out in-between tenants 2 years ago. I had one tenant who lost her job, didn't tell me and missed 3 monthly payments whilst refusing to leave, and I had another tenant who did a runner 2 months into her tenancy because of a "change in circumstances" and wouldn't even answer her phone for a week to arrange to return the keys.

 

[dsr-burnley]

Or ban second/third homes and holiday homes. In my avenue of 14 houses - when I moved here 20 years ago 13 were lived in full-time. Now only seven are. That's six houses that could have been bought by people to live in taken out of the market. So, those that are available in the area to still live in have gone up in price.

I can see there is a problem with homes being used for holidays, but banning or restricting holidays isn't the answer. Build more houses for the locals, and prices will drop.

Why do they never talk about banning hotels and using those properties as housing?

 

[beorhthelm]

There will be a correction in prices over the next few years and there will be winners and losers as a result - there needs to be some scheme to avoid mass-repossessions, but not subsidies - possibly it can involve extending terms. It really isn't the fault of those who now face unaffordable mortgages - they are just innocent victims of this insane boom-bust cycle that no government seems able (or willing) to control.

that's probably how this will be resolved, banks know repossessions are bad for business (get stuck with falling assets on their balance sheets) and have been more flexible for some time.

 

[Seagull58]

Maybe the government could purchase at a very reduced rate off the landlord and tenant stays. Then the government actually gets an asset which can be sold for profit. So the landlord loses out but the tenant stays out and the government gets something for its money rather than just pumping up a balloon. Or maybe tenants can get first refusal? Lots of different options. I just can’t see why people who think they are genius by getting other people to pay for their assets should be saved the moment it gets difficult. If people did not spread themselves so thinly to maximise returns then they could absorb this. Whatever happened to living within your means?

Stealing property from home owners is not the basis of a fair and just society.

 

[Arthritic Toe]

Skipton have this product, hopefully others will follow suit

Press Release Article - Skipton Building Society

www.skipton.co.uk

And here we go again. Remember the infamous Northern Rock 125% mortgage? The banks do this secure in the knowledge that they will be bailed out by the tax payer.

 

[Arthritic Toe]

And here we go again. Remember the infamous Northern Rock 125% mortgage? The banks do this secure in the knowledge that they will be bailed out by the tax payer. Hopefully NO OTHERS follow suit.

 

[BiffyBoy100]

And here we go again. Remember the infamous Northern Rock 125% mortgage? The banks do this secure in the knowledge that they will be bailed out by the tax payer.

I got a tasty 125% Northern Rock mortgage at the age of 21. I only asked for 100%, but they recommended I go on holiday, buy a new car, and generally enjoy life as it would be wrapped into the 30 years. I think they even included all the fees so there was zero cost to being a homeowner. Those were the days.

 

[Arthritic Toe]

And here we go again. Remember the infamous Northern Rock 125% mortgage? The banks do this secure in the knowledge that they will be bailed out by the tax payer.

Just for laughs (like they’ll take any notice of me) I’ve submitted this complaint to the FCA:

You have evidently forgotten about Northern Rock. You were sleeping then and you’re sleeping now. Please do not allow the banks to lend irresponsibly. Skipton BS have just announced a 100% mortgage. Why are you allowing this? The tax payer will ultimately have to bail out the banks again when they fail. Is your role not to regulate these products?

 

[Berty23]

Stealing property from home owners is not the basis of a fair and just society.

It is not stealing. It is doing what existing companies already do but might not have the capital to do on a large scale. There are lots of companies you can contact for a very quick sale. They are essentially the house equivalent of “we buy any car”. If lots of houses need to be sold then the government can help people do this quickly. If people are not desperate to sell them the market will decide.

Many would argue that the houses actually belong to the banks and if people can’t afford to pay their mortgages then the bank will “steal it off them”. Maybe property speculators who spread themselves too thinly when money was cheap and were happy to take the profit and have someone else pay off their debt might change their ways if they have to pay their own debt. If they can’t afford it then lose the house. If lots of people lose houses in this way then maybe we could end up with a sensible housing market where first time buyers are able to afford their own home rather than pay someone else’s mortgage. Plus it might prevent future speculators doing the same.

If people who lose money on houses get bailed out then what else? People who lose on shares? People whose businesses fail? Let’s just go the full Monty and anyone who is stung by crypto.

 

[lasvegan]

Stealing property from home owners is not the basis of a fair and just society.

There are a lot of Marxist nutcases on here who think that it is.

 

[Herr Tubthumper]

Maybe we also need to look at the German model where renting throughout life is more with better policies and incentives in play.

I agree, it works well. But it will not work in the UK

1) You will need to build up a very significant and large stock of social housing.

2) There needs to be a lot of joined up thinking eg the need to fund healthcare so that care in old age is addressed and covered financially. Brits often have to sell a house to go into care, in Germany this is all covered by welfare.

3) Significant paradigm shift in UK thinking towards home ownership. Even me with all my progressive and socially minded thinking (wink) backed by points 1 and 2 even I bought within a couple of years of living here as we didn’t want to fund other people/organizations.

 

[Randy McNob]

What a ridiculous suggestion. I own a house worth 320K with no mortgage. Why on earth should my tenant be allowed to take ownership of my house for nothing? I worked hard to earn the money to buy the house and pay off the mortgage.?

If you had a tenant surely it was them who worked hard to earn the money to pay off the mortgage?

 

[Herr Tubthumper]

I can see there is a problem with homes being used for holidays, but banning or restricting holidays isn't the answer. Build more houses for the locals, and prices will drop.

More housing needs to be built but building regulations need to be brought in as well; there needs to be a stop to the mass built poorly constructed rabbit hutches and ugly tower blocks which currently get built.

If I was PM for a day I'd ban design and build...there needs to be seperation between architecture practices and building companies.

 

[kentgully]

In the eighties, my mortgage rose to 18%... what's the problem, you lot have it easy.

 

[Machiavelli]

Or ban second/third homes and holiday homes. In my avenue of 14 houses - when I moved here 20 years ago 13 were lived in full-time. Now only seven are. That's six houses that could have been bought by people to live in taken out of the market. So, those that are available in the area to still live in have gone up in price.

Yup. Legislative change will also assist with things, and has the additional benefit of something that can be done overnight. It's going to take decades to claw back the shortfall in new housebuilding, on the other hand.

 

[drew]

In the eighties, my mortgage rose to 18%... what's the problem, you lot have it easeasy

And did you benefit from MIRAS