[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?

 

[Gwylan]

My sister and I have just put my mum's house on the market. We went with the estate agent that priced it higher at £60k but he's warned us that it's the wrong time to sell and it could take up to a year.

Fortunately, we're not in desperate need of money but it must be tough for people who genuinely need to sell

 

[TomandJerry]

The City is split over how high the Bank of England may raise interest rates, by the “cursed ratio” of 52:48.

The money markets are currently indicating that a chunky half-point increase in interest rates, from 4.5% to 5%, is a 52% probability.

 

[Herr Tubthumper]

Returning the original thread subject, expect more of the same tomorrow

How high will UK interest rates go?​

The inflation figures the UK reported on Wednesday were not just objectively bad, with prices rising just as fast as a month before. They also come at a supremely sensitive time, with the Bank of England meeting to decide interest rates and mortgage costs an issue of nationwide concern.

https://www.ft.com/content/07bd1198-555e-4f45-801f-113963960ef8

Why UK has western Europe’s highest inflation rates (clue: it’s mostly about Brexit)​

https://inews.co.uk/news/world/uk-western-europe-why-highest-inflation-rates-brexit-2426613

And sadly, in answer to the OP, absolutely no prospect of the Government doing anything about 'the coming base rate mortgage hike time bomb'

I have said before, it's obvious the silver bullet is rejoining the customs union and the single market. This would turbo-charge the economy overnight. I do find it odd that no political party is offering this obvious solution.

 

[mikeyjh]

Of course it does. You build new houses and all those local trades get a boost, those companies pay taxes, they create jobs, those people doing the jobs also pay taxes. It's oiling the wheels of the economy

There are two reasons why I doubt this government (and others?) won't do that right now.
1) It would fuel inflation! Apparently we need to take the wind out of the economy's sails, hence the interest rate rises.
2) People's perception of their wealth has become inextricably linked with the 'value' of their home, build enough homes for everyone and prices will plummet. Especially for the nasties, this is a disaster!

Personally I think we need to build more flats. There are plenty of brownfield sites knocking around across the country that could be utilised for this.

 

[sparkie]

Markets seem to pricing on a 6% base rate now, fixing in the 7's look a real possiblity. Labour's idea of forcing banks to allow mortgage holidays to interest only seems reasonably sensible if certain criteria are met, we don't want mass defaults

Mandatory automatic approval for switching to interest-only does seem a sensible policy to ease the current crisis.

 

[WATFORD zero]

Just how far would house prices have to fall before a single mother on minimum wage could afford to buy one? Not all tenants are young professionals struggling to raise a deposit.

If we want to reduce the private landlord market, we must have a proper safety net in advance for the tenants who have lost their homes.

When has a single mother on minimum wage ever been in a position to buy a property ? When I was one of the children of a single mother working full time, we lived on a council estate, (remember 'latch key kids?) and struggled to get by. That is why there is a need for social housing and the selling off of vast tranches with no replacement was the beginning of the current house price crisis. And any major building plan is going to need workers to implement it, something we are now desperately short of and is currently adding to the inflation/mortgage rate issues.

And onto the actual subject of this thread, the current mortgage rate crisis which is completely separate and was always going to happen from the moment the current Government cabal was elected to implement what they had sold to the nation a few years earlier

As has been pointed out a number of times on this thread, the second point could be addressed immediately, the first would need a very serious long term plan. This cabal is incapable of either.

 

[folkestonesgull]

There are two reasons why I doubt this government (and others?) won't do that right now.
1) It would fuel inflation! Apparently we need to take the wind out of the economy's sails, hence the interest rate rises.
2) People's perception of their wealth has become inextricably linked with the 'value' of their home, build enough homes for everyone and prices will plummet. Especially for the nasties, this is a disaster!

Personally I think we need to build more flats. There are plenty of brownfield sites knocking around across the country that could be utilised for this.

The problem is the build cost on contaminated brown field land is very high..the easy sites have been built on, particularly with recent changes to building regs, biodiversity net gain, management of surface water etc...on top of that outside of cities there is a need to provide expensive parking spaces that reduces density and further pushes up costs.
Without public subsidy to decontaminate land a lot of brownfield sites will remain vacant or in temporary uses that push up the land value - they are just not viable
Ultimately we need to build more homes where there is demand or rebalance our economy to increase demand where it currently isn't...

 

[Uncle Spielberg]

0.50% increase today ?

 

[The Antikythera Mechanism]

2) People's perception of their wealth has become inextricably linked with the 'value' of their home, build enough homes for everyone and prices will plummet. Especially for the nasties, this is a disaster!

If house prices plummet, house builders will stop building, as their costs will stay the same and they won't accept a reduction in profit. Demand will then exceed supply, forcing prices back up.

 

[Blackadder]

Interest rates up to 5%. Ouch

 

[Icy Gull]

Get Labour in NOW, they have all the answers clearly. I have been swayed listening to their comments this lunchtime.

 

[KZNSeagull]

Get Labour in NOW, they have all the answers clearly. I have been swayed listening to their comments this lunchtime.

Which were?

 

[Icy Gull]

Which were?

Have a listen to Rachel Reeves and her five point plan. Practical support right now. How it works I haven’t got a clue but she seems to

 

[KZNSeagull]

Have a listen to Rachel Reeves and her five point plan. Practical support right now. How it works I haven’t got a clue but she seems to

These 5 points?
1. Borrowers will be able to switch to interest-only

2. Borrowers will be able to increase mortgage length

3. Borrowers can undo No.s 1&2

4. Six months before lender can start a repossession

5. FCA to advise credit ratings should be unaffected.

 

[Icy Gull]

These 5 points?
1. Borrowers will be able to switch to interest-only

2. Borrowers will be able to increase mortgage length

3. Borrowers can undo No.s 1&2

4. Six months before lender can start a repossession

5. FCA to advise credit ratings should be unaffected.

Theoretically, all good ideas. How workable are they though?

 

[luge]

Theoretically, all good ideas. How workable are they though?

They should be workable and within limits of what is sensible - they've also been banded about by a few experts, so I'd be surprised if the government don't take them on. What they won't do, and neither will labour do as it seems, is offer payments to households in need.

 

[KZNSeagull]

Theoretically, all good ideas. How workable are they though?

Numbers 1 and 2 were discussed by Jeremy Hunt, Martin Lewis and the mortgage lenders and agreed by the mortgage lenders back in December 2022. https://www.gov.uk/government/news/mortgage-lenders-commitments-to-borrowers
Martin Lewis has consistently told people to speak to their mortgage lenders about forbearance measures all this year, if they are struggling to meet payments.

Not sure what is so different that Rachel Reeves is saying here with 1 and 2? 4 and 5 are fair enough.

 

[Nobby Cybergoat]

I the answer just to be less upset about inflation?

Yes, yes, I know some basic economics of why it's deemed bad.

But set against, the prospect of creating recessions, of the possibility of waves of repossessions? I reckon there might be a bit of economic group think going on here.

In a globalised world and in a globalised country there are more checks of the remote chance of runaway inflation. It's not like 100 years ago where economies were much more self contained.

If I were in charge i'd remove the laughable target of 2% from the BoE

 

[RandyWanger]

 

[beefypigeon]

I've picked my time well to be needing to move out haven't I