[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?

 

[maltaseagull]

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.

I had a mortgage in the early 80s at 15% !!

 

[KZNSeagull]

Most things are always frighteningly slow going back down as the banks, supermarkets, petro giants etc want to squeeze the last droplets b4 being shamed into action.

One slight cause for optimism is energy prices - mine are going down from 1st July. Electricity by about 10.5% and Gas by 28%. That's price per unit. Standing charge staying the same

 

[Triggaaar]

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.

Could they have some sort of benefit that is for your primary residence only, and not for buy-to-let mortgages etc?

 

[vegster]

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.

I made it through the 80's and early 90's thanks to doing as much overtime I could and cutting outgoings to the bone. We went without nice holidays, meals out and for a few years stopped going to the pub entirely...I would have 4 cans of whatever crap lager was on special offer on Friday. But, at that time, we had not had 12 years of austerity and stagnating wages before it hit.

So many people are on the edge now, the government has to do something..heard of people whose mortgage payments are jumping by £700 a month !

 

[Zeus]

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.

Things are tough because of the government!

Renters are going to be hit horrendously as mortgage rates costs are passed through. People I know are in panic as their rental agreements are coming up and landlords are hiking rates. This won’t just affect people that took out mortgages.

 

[HeaviestTed]

Then why have US interest rates risen to the highest levels in 16 years - is that the Tories fault too?

They had inflation as well, maybe they should have cut tax on gas as well

 

[chickens]

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?

This is where there should be a difference between residential homeowners and those who treat property as just another asset class.

I’m in favour of a capped maximum rate for the family mortgage, past which some government support is available to make up the difference, interest rate should then be targeted by the Bank of England in the same way as they set an inflation target.

However, I’m afraid if you speculate in residential property as an investment, then it’s only fair that you have to set your rents at a level the market will stand. If this means selling one property to save another, or bearing losses on your investment, that’s what investment is.

My solution would be for there to be support at a particular point for homeowners, but no support for any form of buy to let (corporate or individual). Part of investing is knowing what to invest in, when to sell, and this opens the market for those who couldn’t currently access housing of their own. For too long we’ve allowed a finite housing stock to be a business with no risk and only reward (already often taxpayer funded). A real correction to house prices is long overdue and has only been held off by ever more fantastical schemes from government to prop prices up.

It’s time to decide if we want residential property to be for people to make homes in, or simply another store of value for those who already have countless classes of investment available to them.

 

[nwgull]

I had a mortgage in the early 80s at 15% !!

Less of a problem when the mortgage was on a house that cost a tenth of what the same house would cost today.

 

[Is it PotG?]

This could be the game changer in the 2024 manifestos.....who comes up with the best subsidy.

 

[slimes]

can't you extend your mortgage for a longer time to accommodate the interest rake hike if you can't afford it?

 

[Paulie Gualtieri]

As to comments regarding repossessions, I worked in the sub prime sector during the 07/08 recession. The lender absolutely will also do all they can to prevent repos particularly in areas of high concentration as neither party will get back the equity which will significant erode in a forced sale.

Expect more flexibility in forbearance measures from lenders, be it term extensions, part and part or rate reductions on their existing book

 

[sparkie]

It's a mess and going to get worse. I really feel for anyone involved.

I've been hit badly by all the recent financial hikes - first vehicle fuel prices then household gas and electric bills. But I sigh with relief that I don't have a mortgage or pay rent and this particular misery will swerve me.

Can't offer any solutions for the Government - except to massively boost the economy and sterling exchange rates by rejoining the EU Single Market. Silver bullet. Too stubborn to fire it.

 

[DJ NOBO]

So a landlord who has owned a property for twenty years and diligently paid the mortgage off is now forced to sell it for buttons to the current landlord? Have I got that right?

Shut up and give me the keys

 

[Berty23]

Interest rates when I purchased my first property in 1988 was 16%. There are a few things to take into account though, weekly wages and cost of property. I seem to remember my mortgage was about a third of my income.

I discussed this with my dad who is in his 70s. He said “far worse for us” until I pointed out that his mortgage was 2.5 times his Salary. Whereas an increase to 6% now can be off 6x a joint salary (or whatever) so it is much worse.

I am lucky and almost paid off my mortgage. But I did pull out of a purchase just after lockdown when I looked at what it would mean to have a 30 year mortgage and rates went to 6%. We stayed in smaller house.

I think Landlords who speculated on property prices increasing and getting others to pay their mortgage can take the hit rather than tax payer. Why should we save people who have potentially made tens or hundreds of thousands and ploughed it into more property? All keeping houses unaffordable for those who pay their mortgages

 

[mile oak]

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.

 

[Wardy's twin]

Why does the government use interest rates to control inflation why doesn't it increase tax instead? This would come with added bonus that more money would be available to give to the NHS. I say this as a pensioner with no mortgage.

 

[drew]

Sorry but basic economics question. As I understand it, BoE raise interest rates to reduce supply of money which means people can't spend as much. However, again as I understand it, this cycle of inflation is not the result of a surfeit of money sloshing around, but other factors. Surely address those? For example, with energy, I believe green energy, due to competition laws, has to be sold at the same price as electricity generated by gas. Surely this is artificially inflating the profits of the green energy generators? My supplier, Shell, boast 100% green energy but, price wise, that is of no benefit. As for shop prices, it will be interesting to see the profits the big supermarkets declare!!!

 

[OzMike]

We have just had our 11th interest rate hike here and it looks there are still at least 2 more to come.
People suffering here with mortgage stress as well.
I owned property in Brighton when intetest rates were 16% and was literally working to pay it, everything else was secondary, but I survived.
Will be using the same tack now.

 

[OzMike]

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.

 

[dsr-burnley]

The reason interest rates have been so low is largely because of government intervention. They have been printing money like there's no tomorrow which meant the banks didn't have to offer realistic interest rates to savers, they could get infinite funding from the government, so they could lend it out at historically low rates. There's only been about 20 years or so in the last 300 when base rates have been lower than 2%.

And of course, low mortgage rates coupled with insufficient house building means prices of housing shoots up. And no government will take severe action to bring them down because it will upset home owners.