[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?

 

[Randy McNob]

Not at all. Tax payers money should be spent on health, education, defence, law and order, infrastructure, sustainability etc and benefits for those in genuine difficulty. But helping people buy their own homes, with other taxpayers money? Nope.

It's making banks richer dressed up as helping people buy homes, by a billionaire banker PM who was an architect of the last financial crash. A Prime Minister and government heavily invested in the wealth of financial institutions and landlord backers at the expense of the ordinary public. Big Corps make billions, banks make billions, landlords get richer, everyone else gets poorer. Tory Utopia. But hey, thank god we didn't get Corbyn eh.....

 

[The Antikythera Mechanism]

The banks should be made to pay saving accounts at, say, 1.5% below lending rates. They may not, then, be so quick to raise lending rates.

 

[Paulie Gualtieri]

I would restrict the number of AirBNB's in places like West Cornwall via some kind of licencing scheme, they destroy local communities.

The worse offenders of all are the rich who want their "country bolt hole" and use it for just a few weeks a year.

As for the mortgage market, I'd be surprised if we don't see a 6% base rate, inflation feels well sticky.

Popular West Country locations are often protected by S106 agreements where purchasers must be local (define) or not already be a homeowner. There are naturally various ways around this though

 

[Paulie Gualtieri]

There's no short term answer. The supply of housing stock needs to increase and house prices need to come down.

I would ...

Abandon the BoE's target of 2%. They can't hit it by continually putting up rates. Other levers need to be pulled
Fund councils to bring dilapidated stock back into use
Accelerate the change in building usage from failing town centres. Fewer boarded up shops and more liveable properties
Tax landlords up the ass
Tax Airbnb owners in the mouth, then up the ass, then in the mouth again

Air ATM?

 

[drew]

The banks should be made to pay saving accounts at, say, 1.5% below lending rates. They may not, then, be so quick to raise lending rates.

Not all savings accounts have the same rates though anyway.

 

[Glawstergull]

I hear you, but why should I have to put up with mortgage payment increases which are due to the government’s incompetence and recklessness?

I hear you but governments don’t pay for anything only tax payers do. Whilst paying my current taxes with are significantly more than most, I am also dealing with the same effects on the same increases and all the options seem to cost the public purse more. So I pay more, but it’s not my fault either.

 

[The Antikythera Mechanism]

Not all savings accounts have the same rates though anyway.

No, I appreciate that as my comment was generic, but if you have a variable lending rate of 6% would there be any “no strings attached” saving rates of 4.5% from the same banks

 

[Herr Tubthumper]

I hear you but governments don’t pay for anything only tax payers do. Whilst paying my current taxes with are significantly more than most, I am also dealing with the same effects on the same increases and all the options seem to cost the public purse more. So I pay more, but it’s not my fault either.

I'm not sure I understand your point?

 

[WATFORD zero]

It looks to me as if two issues are being conflated in this discussion

1. The artificially high (most would agree) Property prices in the UK.

2. The immediate and continuing increase in Mortgage rates.

High Cost of Property.

I believe there are only two ways this can be addressed. Either a VERY long term stagnation in the housing market, until some sort of more 'affordable' balance is restored. This would have to happen over at least a decade or two, and would also need a long term Government plan to build or make available more properties in order to fuel and maintain that long term stagnation by design.

Or a short-term 'realignment' of the housing market to try to match affordability meaning property prices dropping significantly over a short period. Anyone who owns property will see it's 'value' reduce, and for those with no or little mortgages I believe that there is no 'real' effect. I'm in this group and it makes absolutely no difference what my house is worth, as I chose it as a home to live many, many years ago and I was also very lucky in the affordability of property 30-40 years ago.

However, if there is a short term 'realignment' The poor bastards who will really suffer will be those who have just bought in the last few years or who have, for many reasons, mortgages that still account for a significant proportion of their property.

During the last 'realignment' we lost a lot of 'value' in the house we were in, but just about managed to keep out of negative equity, which actually meant no 'real' impact. I think this will still be the case for anybody who can keep out of negative equity this time round.

Increasing Mortgage Rates.

If the Government immediately joined the Single Market and Customs Union, food inflation would drop immediately and that, together with the current drops in energy prices would turn inflation round in months allowing the BOE to reduce interest rates and mortgage rates would follow.


Sadly, this Government will do neither and continue on it's path of the last 3.5 years and property prices will be addressed by the second method of short term realignment, fuelled by mortgage rates that will continue to rise and the poor bastards who have just bought, or who have mortgages for a significant proportion of their property and can't keep out of negative equity will again suffer just like last time - very very badly.

I am genuinely sorry, but I'm afraid my advice is still the same as 3.5 years ago, when this all started. Batten down the hatches

 

[Herr Tubthumper]

planning! we wont let anyone build anything, so stuck with mostly small developers doing infill and those wanting to push the premium end. can you imagine the objections if you said you want to build a nice block of social housing? housing associations do build some, though nowhere near what they did or could if we eased up planning.

Would people really object to social housing blocks? The can’t be any worse than the grim rabbit hutches which get sold as fancy lifestyle options/solutions eg the blocks around Brentford’s ground or that abomination at Tottenham Hale.

 

[Herr Tubthumper]

Just read the average UK 2 year fix is now 6%. A 13 (thirteen) year fix in Germany is 4, in France it’s allegedly even lower. What’s the reason for these huge differences?

I have asked this before, a year or so ago, but didn’t get an answer. Genuinely interested to know why there’s such a difference.

 

[luge]

Just read the average UK 2 year fix is now 6%. A 13 (thirteen) year fix in Germany is 4, in France it’s allegedly even lower. What’s the reason for these huge differences?

I have asked this before, a year or so ago, but didn’t get an answer. Genuinely interested to know why there’s such a difference.

our inflation is much higher...

 

[Normal Rob]

I've just fixed for 3 years. The monthly increase i'm having to pay is the equivalent of buying a new boiler every 3rd month.

 

[Machiavelli]

Just read the average UK 2 year fix is now 6%. A 13 (thirteen) year fix in Germany is 4, in France it’s allegedly even lower. What’s the reason for these huge differences?

I have asked this before, a year or so ago, but didn’t get an answer. Genuinely interested to know why there’s such a difference.

Our BoE interest rates are higher than those set by the ECB would be the key reason ...
... and our interest rates are higher because our inflation is higher ...
... and our inflation is higher because of [ ] -- fill in the six letter gap

 

[beorhthelm]

Just read the average UK 2 year fix is now 6%. A 13 (thirteen) year fix in Germany is 4, in France it’s allegedly even lower. What’s the reason for these huge differences?

I have asked this before, a year or so ago, but didn’t get an answer. Genuinely interested to know why there’s such a difference.

it is odd. 1% higher base rate would be a start, doesnt account for all the difference. different business models, profit margins, cost of mortgage business (higher repossession in UK?), pricing of risk all make some impact. its been a thing a long time, i remember euro mortgages in the early noughties, priced in euros to get better rate... and hope exchange rates didnt wipe out the benefit.

also looks like you can get a 10 year fix for around 4.5-5, short term expectation of higher rates giving way to lower rates.

 

[Randy McNob]

Just read the average UK 2 year fix is now 6%. A 13 (thirteen) year fix in Germany is 4, in France it’s allegedly even lower. What’s the reason for these huge differences?

I have asked this before, a year or so ago, but didn’t get an answer. Genuinely interested to know why there’s such a difference.

The real stinger in this country is you have to pay a large fee everytime you renew, hence they only offer short term deals, pure profiteering. In countries like Germany they are more heavily regulated to work for the consumer, remember all that silly EU regulation we need to get rid of? Our government talk of a bonfire of regulation like that's somehow a vote winner !?!

 

[Seagull58]

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.

Compulsorily purchasing property at considerably less than market value is theft.

 

[beorhthelm]

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

triggered curiosity, how does that work then? do you pass on the property and mortgage, does that not lead to problems if the beneficiaries cant make payments?

 

[Seagull58]

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

In my specific case the mortgage was paid off before I rented the property out.

 

[Bozza]

Just read the average UK 2 year fix is now 6%. A 13 (thirteen) year fix in Germany is 4, in France it’s allegedly even lower. What’s the reason for these huge differences?

I have asked this before, a year or so ago, but didn’t get an answer. Genuinely interested to know why there’s such a difference.

You're not comparing like for like there. Longer fixes are cheaper right now, because of the expectation that inflation will fall sooner or later and interest rates will follow, eg...

Halifax 2-year fixed rate: 5.36%
Halifax 5-year fixed rate: 4.89%
Halifax 10-year fixed rate: 4.74%