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[Finance] What should the government do about the coming base rate mortgage hike time bomb?



Mustafa II

Well-known member
Oct 14, 2022
1,811
Hove
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?
 




Nobby Cybergoat

Well-known member
Jul 19, 2021
8,617
OK, I see things differently.
Interest rate rises will reduce spending, and has been doing so for a while. You and I can revisit this in a year and see where we are.
In your VAT increase scenario, all that will happen is it'll transfer money from certain participants within the economy (individuals, families, businesses, etc) to the government. That would be good if the aim is to reduce government debt or to increase government spending, but can't see it being anti-inflationary in the slightest.
But don't you also have to look at what is causing the inflation.

We're in a cost of living crisis. And as ever, these things hit very unevenly. The majority of people hit by these rate rises are not spending lavishly. Granted some are, but many of their number won't have a mortgage debt to pay, (or are doing very well, because they are landlords in some cases).

All the rate rises so far haven't slowed inflation, because inflation isn't being caused by ordinary people buying sports cars and rolexs. It's being caused by brexit induced lack of workers and war induced lack of raw materials and energy.

All that's happening is a further fracturing of our society and deepening inequality.
 








The Antikythera Mechanism

The oldest known computer
NSC Patron
Aug 7, 2003
8,073
Its irrelevant without showing mortgage cost against income and value of the property though isn't it
Very true, I had a flat, in 1990, which probably had a value of £60k with a £50k mortgage but was earning £25.5k pa with a company car. My wife was earning about £18k pa. The 15% mortgage rate then would’ve generated interest of £7.5k pa which would’ve been approx 15% of our gross income. Nothing like what people are having to contend with today.
 


Berty23

Well-known member
Jun 26, 2012
3,636
Very true, I had a flat, in 1990, which probably had a value of £60k with a £50k mortgage but was earning £25.5k pa with a company car. My wife was earning about £18k pa. The 15% mortgage rate then would’ve generated interest of £7.5k pa which would’ve been approx 15% of our gross income. Nothing like what people are having to contend with today.
My folks bought my home for childhood in 1980. They told me about internet rate spike. When the rates reduced they realised it was easy to afford so kept overpaying and got rid of mortgage quickly. They were not big earners and it was a five bedroom house that cost them sod all and sold it for something like half a million quid when the got divorced in the late 90s.
 




WATFORD zero

Well-known member
NSC Patron
Jul 10, 2003
27,693
If I've understood the last few pages of this thread correctly, the answer to what the Government should do about the 'base rate mortgage hike time bomb', is to divide people into groups, by arbitrary dates of birth and then get them all to blame and argue with each other, totally ignoring the actual reasons for the soaring interest rate and subsequent mortgage rate hike ?

Well, it seems to be working far better than any other plan they have had in the last few years :facepalm:
 


The Antikythera Mechanism

The oldest known computer
NSC Patron
Aug 7, 2003
8,073
My folks bought my home for childhood in 1980. They told me about internet rate spike. When the rates reduced they realised it was easy to afford so kept overpaying and got rid of mortgage quickly. They were not big earners and it was a five bedroom house that cost them sod all and sold it for something like half a million quid when the got divorced in the late 90s.
Clever parents, different days.
 


crookie

Well-known member
Jun 14, 2013
3,378
Back in Sussex
Clever parents, different days.
Indeed, I remember my Mum, in her 80's now so mortgage long ago paid off, telling me a while back that whenever they had any spare money they overpaid on their mortgage. Friends used to tell them they were mad. Obviously now, people are worried about whether they can even meet the repayments, let alone overpay.

What a car crash this is. The Bank of England trying to force a recession to bring down interest rates, which are nothing to do with a booming economy. Thus inevitably driving thousands of businesses to the wall, who were on their last legs anyway after COVID and the subsequent huge increase in energy bills.
 




East Staffs Gull

Well-known member
Jan 16, 2004
1,421
Birmingham and Austria
In my opinion the government needs to temporarily suspend its mandate to the BoE to control inflation at around 2.0%. Base rate should have been left at around 2-3%, to bring to an end the era of cheap borrowing, but, beyond that, people should have been left to manage the effects of high inflation themselves. By increasing base rate to the current levels, certain cohorts of the population are being massively impacted by high mortgage costs, savers are benefiting from higher interest rates and businesses are being hit. The effect of this policy does not appear to be impacting the inflation rate at all. Continuing to allow the BoE to make decisions on the base rate that so profoundly impact different cohorts in different and opposite ways, but that has no success in reducing inflation, is simply wrong.
 


Herr Tubthumper

Well-known member
NSC Patron
Jul 11, 2003
62,607
The Fatherland
Indeed, I remember my Mum, in her 80's now so mortgage long ago paid off, telling me a while back that whenever they had any spare money they overpaid on their mortgage. Friends used to tell them they were mad. Obviously now, people are worried about whether they can even meet the repayments, let alone overpay.

What a car crash this is. The Bank of England trying to force a recession to bring down interest rates, which are nothing to do with a booming economy. Thus inevitably driving thousands of businesses to the wall, who were on their last legs anyway after COVID and the subsequent huge increase in energy bills.
Rejoin the customs union and the single market, things will improve overnight especially with food inflation due to the removal of costly red-tape and a stronger pound on the tons of food you import from the EU.

It really is this simple.
 


The Antikythera Mechanism

The oldest known computer
NSC Patron
Aug 7, 2003
8,073
In my opinion the government needs to temporarily suspend its mandate to the BoE to control inflation at around 2.0%. Base rate should have been left at around 2-3%, to bring to an end the era of cheap borrowing, but, beyond that, people should have been left to manage the effects of high inflation themselves. By increasing base rate to the current levels, certain cohorts of the population are being massively impacted by high mortgage costs, savers are benefiting from higher interest rates and businesses are being hit. The effect of this policy does not appear to be impacting the inflation rate at all. Continuing to allow the BoE to make decisions on the base rate that so profoundly impact different cohorts in different and opposite ways, but that has no success in reducing inflation, is simply wrong.
Higher savings rates? Instant access accounts are 1%. The banks are are the only ones benefiting from this, it’s obscene.
 




East Staffs Gull

Well-known member
Jan 16, 2004
1,421
Birmingham and Austria
Higher savings rates? Instant access accounts are 1%. The banks are are the only ones benefiting from this, it’s obscene.
Instant access savings accounts are giving up to 3.5%. Two year saving rates were up to 5.5%, before today’s increase. Current accounts are never going to pay much interest. Take a look at Hargreaves Lansdown’s website to verify these rates.
 


East Staffs Gull

Well-known member
Jan 16, 2004
1,421
Birmingham and Austria
Rejoin the customs union and the single market, things will improve overnight especially with food inflation due to the removal of costly red-tape and a stronger pound on the tons of food you import from the EU.

It really is this simple.
And the rate of inflation in Germany is? 6.0% I believe. I’d rejoin tomorrow, but UK inflation wouldn’t immediately tumble.
 






The Antikythera Mechanism

The oldest known computer
NSC Patron
Aug 7, 2003
8,073
Instant access savings accounts are giving up to 3.5%. Two year saving rates were up to 5.5%, before today’s increase. Current accounts are never going to pay much interest. Take a look at Hargreaves Lansdown’s website to verify these rates.
Thanks, I had no idea they were paying that. My savings are tied up in stocks & shares ISA’s, Bonds and Sipp's, so I’ll just have to ride the storm. Swings and roundabouts.
 




Paulie Gualtieri

Bada Bing
NSC Patron
May 8, 2018
10,587
If I've understood the last few pages of this thread correctly, the answer to what the Government should do about the 'base rate mortgage hike time bomb', is to divide people into groups, by arbitrary dates of birth and then get them all to blame and argue with each other, totally ignoring the actual reasons for the soaring interest rate and subsequent mortgage rate hike ?

Well, it seems to be working far better than any other plan they have had in the last few years :facepalm:
To be fair people in arguments are not spending money
 






nicko31

Well-known member
Jan 7, 2010
18,524
Gods country fortnightly

Spreadsheet Phil reckons we have two choices.

“The labour market in the UK is very tight. So, inflation is being driven by rising wages.

“And there are two ways we can tackle this, you can either dampen down the economy as a whole by raising interest rates and reducing economic activity [and] slowing growth. Or you could try to soften the labour market, which of course, in the days when we were in the single market would have happened automatically, more labour would have come in, attracted by higher wage rates here.

“That's not happening now. And I think the government has regarded any relaxation of migration rules as being politically toxic.

But rising mortgage rates on the scale we're seeing is also politically toxic.”


Self harm seems the only game in town from Labour or the Tories.
 


Herr Tubthumper

Well-known member
NSC Patron
Jul 11, 2003
62,607
The Fatherland

Spreadsheet Phil reckons we have two choices.

“The labour market in the UK is very tight. So, inflation is being driven by rising wages.

“And there are two ways we can tackle this, you can either dampen down the economy as a whole by raising interest rates and reducing economic activity [and] slowing growth. Or you could try to soften the labour market, which of course, in the days when we were in the single market would have happened automatically, more labour would have come in, attracted by higher wage rates here.

“That's not happening now. And I think the government has regarded any relaxation of migration rules as being politically toxic.

But rising mortgage rates on the scale we're seeing is also politically toxic.”


Self harm seems the only game in town from Labour or the Tories.
At least (some) people are now starting to publicly talk about Brexit as a significant cause to the financial mess the U.K. is in. It’s a start I guess.
 


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