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To paraphrase a post of mine from several months ago...
MMT is heterodoxy and unless/until it is accepted by Gov/BoE as orthodox it will remain a relatively fringe theory - Richard Murphy's views notwithstanding.
Getting all shouty about it won't change anything - and don't forget that this is an internet forum which has absolutely no impact on what happens in the real world.
Back on topic - I'm mortgage free so my focus is (probably) different to most posters in that my objective is maximising returns from savings/investments andhelping my children secure the best possible
re-mortgage deals.
MMT is heterodoxy and unless/until it is accepted by Gov/BoE as orthodox it will remain a relatively fringe theory – Richard Murphy’s views notwithstanding.
Still doesn't not make it the current model - still let's pretend that they didn't spend 350Bn of new money then during covid! Lol.
Nothing I have put forward or MMT proponents put forward - Murphy would not disagree with. His own work shows all the stuff we're discussing.
Maybe not a popular view, but some additional taxation would affect peoples spending power in a similar way to increased mortgage payments and allow a reduction in government deficit. Drop the additional rate to say 60k.
Rone
I refer the right honourable gentleman to the answer I gave before.
Rone
I refer the right honourable gentleman to the answer I gave before.
Shrug. Can't help with that one. Just simply ignore the pandemic spending as if it didn't happen then.
if you put it from 20-25% most prices would rise by 5%, causing upward pressure on wages (I think) driving another cycle of inflation
I don't understand why this argument doesn't apply to mortgage costs though. Do they think people are looking at £1000's increase in mortgage and not thinking "man I need a payrise". All it's doing in my mind is transferring money from normal people into the hands of the banks. Money trickles upwards as ever with this gov.
Maybe not a popular view, but some additional taxation would affect peoples spending power in a similar way to increased mortgage payments and allow a reduction in government deficit. Drop the additional rate to say 60k.
I think that some added taxation, not least a re-valuation of all houses for Council Tax and an extending of Council Tax Bands is a good start.
We have a neighbour in a 5-bedroom detached and extended bungalow with large garden - on same Council Tax banding as our 3-bed semi of about half the floor area and value. And both of us are two council tax bands lower than the brand new 'social housing' in the next village, which of course have been valued on 2023 valuation.... We need Council Tax bands to take house values up to £2m into consideration - and an evening out of many other people, while also leveraging some more tax and slowing spending. Plus of course this would go into council coffers, where I think the money is more needed.
All it’s doing in my mind is transferring money from normal people into the hands of the banks. Money trickles upwards as ever with this gov.
That's exactly what is happening.
But the government set in the minds of people at one point this was driven by demand - you've only got to look at growth over the last few years. Sure there has been demand in some sectors but mostly supply chain / energy driven inflation - which is why raising rates is the last kill for this lot.
Income interest gets paid to someone. So that money has to go somewhere.
. Plus of course this would go into council coffers, where I think the money is more needed.
Absolutely - local council's are fiscally constrained.
All it’s doing in my mind is transferring money from normal people into the hands of the banks. Money trickles upwards as ever with this gov.
That’s pretty much what Martin Lewis has been saying today. The banks are repeatedly raising rates for loans and mortgages but not doing so for savers rates.
It’s just flagrant profiteering. Expect banks to post vast profits on the back of this, same as the energy companies
We don’t have a mortgage. We rent and our landlord has just put our rent up significantly as his mortgage has massively increased. All other rents in the area will have been hiked by the same rate, I’m sure.
Hey - so let's all push back against this economic bullshit then Binners?
The banks are repeatedly raising rates for loans and mortgages but not doing so for savers rates.
Well yeah! And then the government want to blame the workers for too much spending. PMSL.
So perhaps - just perhaps raising interest rates doesn't serve most of us!
It will be interesting to see what effects the rent freeze and better protection for tenants has in Scotland on the rental market. Can't put the rent up and can't evict without fault unless you are selling and then its 6 month notice
There is some get out clause for landlords in serious financil trouble I think.
Will rentals go down in resale value ?
Rone - I can’t imagine it serves anyone other than bank shareholders
I’ve not said anything otherwise so no need to get shouty with me
I get it that it’s just your default to just wade into everyone with your usual tiresomely condescending and hectoring tone, but maybe reign it in a bit eh?
But you’d have to hope the house you sell has increased enough in value to be able to afford to buy a smaller home as you may have very little (if any) equity.
Well hard to imagine no equity built up over a 35 year period, or whatever, even with just matching inflation; but yeah, worth building up savings as well just maybe don't worry about not having enough to pay off the mortgage. I haven't needed to take this approach, helped by buying in '96, but perhaps it's an approach for some younger people.
As always, yet another initially interesting thread gets derailed...
I’ve not said anything otherwise so no need to get shouty with me
I wasn't at all. Just having a bit of comradeship! Touchy as - dude.
I get it that it’s just your default to just wade into everyone with your usual tiresomely condescending and hectoring tone, but maybe reign it in a bit eh?
And here's me thinking that's exactly how you conduct your business in plenty of threads too. But yeah I let it wash mostly.
Nice one.
I also think there should be some regulation on how much banks can make from mortgages. It should be cost to serve + margin. When interest rates are super low I can see how banks can't make much money on the debt (though the scale of lending means its would still be profitable). A flat +XX% over base for an SVR seems like profiterring - as the numbers loaned get bigger and the rates increase the amount of profit for the bank increase to on an upward curve. SVR numbers now are ridiculous compared to the past and shouldn't be allowed.
(I maybe being super daft and picked up the wrong end of the stick, which is entirely possible!)
Great. Another thread to avoid as one of the usual suspects does his usual thing
*sigh*
Fine crack on.
It will be interesting to see what effects the rent freeze and better protection for tenants has in Scotland on the rental market. Can’t put the rent up and can’t evict without fault unless you are selling and then its 6 month notice
Indeed.
Guess why I bailed out a year ago - the writing was on the wall.
I agree that interest rates cannot be the only tool that BofE and Government has to partially control our economy. Taxes have to be considered.
Nor do I think we should base big decisions on how to run the economy based on the size of mortgage increases for a wealthier that most minority.
Both the above doesn't mean I don't have huge compassion for people faced with these rises.
Inheritance taxes look like a tool that's underused when it comes to inflation in the housing market.
The banks are repeatedly raising rates for loans and mortgages but not doing so for savers rates.
Sure? Two emails today Chip raised to 4% and Marcus to 3.75%. My ISA are running at 3.5% with Nationwide.
Tony Effectively negative interest when inflation is running so high. Your investment buys less each year
Inheritance taxes look like a tool that’s underused when it comes to inflation in the housing market.
And CGT, I suspect that there are plenty of accidental landlords that would offload their rental properties if it wasn't for a CGT liability.
I’ve not said anything otherwise so no need to get shouty with me
I don't think he was. I don't read any malice at all in * that* reply
I wasn’t at all. Just having a bit of comradeship! Touchy as – dude.
This
Just wondered why you made the decision to rent. This is not a loaded question and please feel free not to answer!
Its interesting to me as you are clearly financially literate and (probably) have a good salary. I’ve been told all my life that buying is best but these days with end of life care basically destroying middle class savings and clearly the current soon to be a lot lot worse mortgage crisis, I’m interested in people who choose different
@winston - sometimes you don’t really have that many choices
I lost my business in the banking crisis and along with it, pretty much everything. Around the same time (and obviously not entirely unconnected) I was going through a divorce and basically just signed over anything regarding the house to my (soon to be ex) wife so her and my daughters at least had somewhere nice to live and grow up and didn’t have to worry about that
So getting back on the housing ladder after that was just a non-starter really.
I’m not moaning though. That’s life. There’s people far worse off than me.
We’ve been lucky and have rented the same (really nice) property for 12 years now. Our landlord is a lovely bloke and is happy to have someone in long-term who treat his place as if they owned it, so he’s nothing to worry about.
I think nowadays it’s swings and roundabouts. I’ll never own a property but then I didn’t have to shell out thousands when there was subsidence outside the front of the house and the supporting front walls to the garden had to be shorn up, or the boiler packs in
We’re happy enough renting, but then our landlord is an accidental landlord and a nice bloke. I’m sure many renters experience is very different.
We’ve had a rent increase with all this, but it’s manageable. I don’t envy any home owner coming to the end of a fixed term mortgage and having to deal with that at the moment. Some of the increases I’ve heard are terrifying
And as you’ve noted, things that were regarded as certainties in the past really aren’t any more, are they?
If we had better protection for renters in the uk it would make a lot of sense for many to rent. Even Scotlands better deal for renters is still rubbish compared to many european countries where many more folk are lifetime renters
Agreed.
I do wonder if some landlords will greedflate over inflation of costs - and what the costs will look like compared to buying.
My experience of living on the continent was everyone, bar the super rich, rented. If you lived in a place for 25 years you'd be paying the same rent as you agreed in 1998. You pour the excess into a pension. Plenty of properties for over 60s at reduced rent.
I think that one thing everyone can agree on, whether you’re mortgaged or you rent is that the entire housing situation in the UK is completely and utterly ****ed!
The whole ridiculous thing couldn’t possibly be more dysfunctional!
binners - no argument with that!
Latecomer to the thread, and not wishing to gloat (my household finances has been one of very few things that has gone well for me over the last few years!) but I took advantage of the cheap rates when they were still available 2yrs ago, when all the financial experts were staggered that mortgage rates were still so low and were saying they were going to go up anytime soon...
I fixed just over 2yrs ago @ 1.7% on a 75% LTV deal for 5yrs... Given that was what they were offering us, and we had been paying 4.2% previously (had been self employed previously, and 1st mortgage was at 90% LTV), I took the opportunity to bring the term down from 25yrs to 16 and still keep the monthly payment under £1k per month (easily affordable with 2 decent wages in the house), so we have been massively overpaying @ the low 1.7% interest rate too and now have more than 35% equity in the property already despite having only been there for 4 1/2yrs and only putting a 10% deposit down.
I do feel for those who for whatever reason, are suffering real financial hardship right now, just paying to keep the roof over their heads... But the signs were there... There was far too much cheap, easy low rate credit for far too long, and the tides were always going to turn. It was just a case of when and not if. My only regret might be not fixing for 10yrs rather than 5, but I suspect when remortgage time does finally come in 2026 I'll have saved enough on the 5yr deal compared to a 10 (10 was 2.2% interest, so 0.5% more) that it won't be such an issue if rates are still high in 2026, i'll just sign a 2yr deal and extend the terms to 25yrs again to keep the payments low(er) in the meantime.
The one thing I will say to those suffering right now... People will repeat all sorts of mistakes in their lifetimes, but they tend not to repeat financial ones! I've learnt some very hard financial lessons in my 20's and early 30's, it's only now that I'm in my 40's that everything is starting to pay off... Of course, my personal health has taken an uncontrollable nosedive, but that's another story!
Too true.
I got my first mortgage in tbe 80s when interest rates were high and volatile. The financial environment of the time meant that we were advised tonot just do our sums on interest rates as they were but also if they doubled.
It seems to me like that lesson has been forgotten. However we also had a lot less need to overextend given the much lower house prices then.
I feel very sorry for young folk now. No secure lets. No council houses and no affordable property to buy. It stinks to high heaven.
The housing market in the uk transfers money from poor to rich
Whats needed is a massive house price crash so folk can afford to buy and proper secure tenancies with controlled rents. Both are political suicide tho
Council house buikding would help as well
I feel very sorry for young folk now
sister in law in her early 40's never got on property ladder and has rented since. She's now bailed out of the UK due to costs and moved to Prague on a long term contract, she's a teacher.
looks like labour are suggesting allowing people to go interest only
https://www.bbc.co.uk/news/uk-politics-65973977
whilst this could help those in distress, it may result in requiring the rates to go even higher as the cost of money is having less of an impact (and thus pulling more people into distress). Its a really tricky situation, no easy answers
Dunno why everyone is having a go at rone. He’s probably the most knowledgeable and researched person here on about monetary and economic matters.
Also don’t understand anyone defending the economic orthodoxy. Ask yourselves a couple of simple questions. Are you better or worse off than you were a couple of years ago? Who is gaining (or at least not suffering) from the current situation?
Are you happy being a lot poorer in order to defend the status quo?
I know I’m not.
Dazh
You are conflating 2 things. Rones vehement adherence to a theory that is not universally accepted and the incompetence and veniality of our current government. There is a lot in between those two positions
Here's an alternative as far as mortgages and housing.
Stop people having 2nd and 3rd amd 4th houses. That would force the sale of lots of houses, reducing the PRICE - which will ease life for anyone who buys another house, or 1st time buyers. And force landlords to not be so greedy.
Part of the reason for the massively distorted unsustainable housing situation is that so many are sold to let, that the supply to people who want to buy is throttled - heating up the market.
Those forced to sell (and lets face it are wealthier than the masses and average in the population) ...just don't make as much mega profit as they would otherwise have done c/o year on year inflation-busting house price rises.
.
That would be tough on me and i would be left on benefits. Hard to argue against tho
I am an accidental landlord. I let my rental below market rent and its mortgage free less than 15years rental will payback most of what i spent to buy it. Its not right at all
I wouldn't ban private rentals which is effectivly what you would be doing. Forsome fplk its a good option
However i would regulate them tightly with secure tenancies and controlled rents. That would take some of the inflationary pressures out as buy to let would be much less profitable
Edit
Silly me . I would have the capital to spend now. So would not be on benefits. If i had never owned it would tho
Build many many more affordable houses where people work. But they won't due to the power of nimbyism.
Heard on 5live this morning that even during Macmillan's time some 300,000 a year were built.
Did anyone else get their £100 bonus from Nationwide ? It's better than nowt but hardly a compensation for mortgage increase.
More evidence that the Banks have got the cash to splash.
I'm on a tracker and will stick until February when I I think things will be very different to now. I've always been on a tracker but do have funds to pay off most of mortgage. But would rather not I prefer to spread capital over time at low rates. (Capital comes in handy for ticking my business over in tough times.)
Today's rate decision will be interesting. Just taking a guess at BoE pause given that's what the Fed did last week and sentiment is awful currently.
Tight to call this one, the pressure either way is immense. Everyone expecting a rate increase though.
We fundamentally need housing costs to come down to a sensible multiple of peoples earnings, something like 3 to 4 times, not 7 or 8 or more.
There are a number of ways it can be done but it will cause the housing market to crash and some will lose out. The unintended consequence might be a lot more private landlords again. Personally id make it a lot harder to be a deliberate landlord, if you are renting more than 1 or 2 houses you have to registered and undergo financial stres tests so you dont just mortgage your tits off and expect the tenant to pick uo the pieces.
The four key mechanisms to reduce house prices are:
1. Restrict what people can borrow to a more reasonable multiple of their provable base income.
2. 25 year max term, anything beyond that is ridiculous.
3. Build more houses.
4. Restrict planning permission, can only be applied to the person who applied for it and expiremit after a couple of years if building hasnt started. Too many people sitting on building land watching the price appreciate. The difference in land cost with and without planning consent is bonkers.
The price of a house has little to do with the real cost of building it.
Well the press certainly seem to be hyping up a rise after 'shock' inflation. and reporting hunt and rishi seem to think a recession is a good idea. and it's all the fault of naughty people getting below inflation pay rises causing it to 'stick'
that said we normally just copy the fed so I also think they will hold and raise it next month, because they have set the expectation
lots of rich people will be hedging and make money either way
split decision between 0.25 and 0.5% I think.
building materials and contractor rates have gone through the roof though. construction is not as 'cheap' as once was.
large constructor currently building the bagatelle quarter southampton has just gone bust. its claimed due to inflation making the project unviable
I do agree landlords should be taxed more and rents protected. when we sold our starter home more than half of those viewing were buy to let landlords who were offering cash for a quick buy. clearly some were reinvesting their pension lump sum. First time buyers somehow have to fight through that competition and that then pushes the whole market upwards
a housing crash is not needed and needs to be avoided. the fallout will it be equivalent of a economic war it will screw millions of families, for life. what is needed is a strategy that will reduce the gap between earnings and housing over the next decade or longer. not something politicians are really capable of it seems. or maybe that is the grand plan with inflation all along?!
that said we normally just copy the fed so I also think they will hold and raise it next month, because they have set the expectation
Yeah worth a guess on this.
Tories desperately need some good news going into Summer. You can imagine the back room conversations.
There is proper monetarist blood running through them though saying not hiking hard enough.
They only need to look at Fed data to see how interest rates are driving money into the economy.
We are obviously different and have not bounced like the US but part of inflation will be income interest.
I think it was Turkey who reversed their interest rate rises and inflation came down. They were ridiculously high though. Although I think there about to start putting them up again.
Just some collected thoughts, but it’s mostly bad news. Compared with previous inflationary periods, historical precedent suggests unless inflation falls to under 4% pretty swiftly we’re in for a long slog (a decade?) until it does. And historical precedent also points to a need to get real interest rates up to 4%, c12% on yesterdays number. Wealth created by the housing boom means jacking up interest rates may be less be less effective than previously because only c30% of households have a mortgage; rising rates will help more people than it hinders. In real terms, we’re already having a bit of a housing price crash - there’s quite a few houses at the upper end now showing reductions of c10% from the peak of last summer. Add in inflation of 10% plus and that is a 20% correction . Still a long way to go. There is a pretty well established 18 year cycle in property prices consisting of 14 years of growth and 4 years of falls. Guess what….2008-2022 was a good period…..
Is there any good news out there…? Well, employment remains high and looks set to remain so; as someone who turned 18 in 1981, tough times are one thing, tough times without a job and no prospect of one is a whole new ball game. The employment bit is actually one of the clues as to why the UK inflation remains stickier than other countries. I’m surprised it gets less airtime, but our economy has probably the highest percentage of activity of any classified as “services” - the selling of our time (often to ourselves) - rather than “industry “ - using machinery etc to leverage our time to sell to other countries, so wage growth impacts prices so much more immediately and persistently.
what is needed is a strategy that will reduce the gap between earnings and housing over the next decade or longer.
You have to look at the "total cost" of the house vs average earnings.
Back in the past you would usually have paid 100% of the value of a house in interest across the term of the mortgage, so a £100k house would have cost you £200k over the term.
With interest rate having been lower you're still paying £200k for the same house, its just the balance which has changed, say £150k for the house and £50k in interest.
Most people only look at the monthly payment and if that is affordable.
If you want to correct the multiple between house prices and earnings to only way you can do that is by "normalising" interest rates (in the 3-5% range).
I think 0.5%. I’d actually prefer that they went higher maybe 0.75-1% now and that the government would step in to force lenders to commit to offers already made. That way this might hammer inflation as we move into the slower periods for house buying in Aug-Dec and they can reduce rates in the new year ready for the next house buying peaks in jan-june. A short sharp hit which most people could temporarily cover with debt/savings/negotiation to get them through 6m of turmoil.
A short sharp hit which most people could temporarily cover with debt/savings/negotiation to get them through 6m of turmoil.
And what about people who don't fit into that "most" category? Just hope they're not evicted?
This is still the wrong tool, at the wrong time. Looking to past patterns of inflation and attempting to apply the good old hammer of interest rates to the current quite different situation will just cause more damage. It won't fix supply chains, it won't fix productivity, it won't do anything about cost driven price inflation... in fact it'll add to it as companies look to increase borrowing at a higher cost to get through this difficult period. Unless the plan is to push more companies into administration...? **** business? Again?
How would this 'mortgage help' be pushed out if it ever was, support people who have absolutely maxed out all available cheap credit to live well beyond their means, with the people who have been sensible just getting by as usual?
If you mean should any measures be targeted at the younger generation, forced to either have a huge mortgage or pay high rents... rather than the older generations with smaller or no mortgages... then yes. But what's the point... if you don't squeeze the already squeezed, how are you going to stop them having any money to spend? The whole logic of these interest rates rises is to make people poorer and spend less on other things. It's rubbish logic... but if you honestly believe that increasing the cost of living is the way to solve the cost of living crisis... then why ameliorate your plans by helping people with their mortgage or rent that you have deliberately pushed up?
I’d actually prefer that they went higher maybe 0.75-1% now and that the government would step in to force lenders to commit to offers already made.
FWIW Nationwide honoured the rate given in the original offer last year. I applied for a five year fix at 1%, but completed when the BoE rate had risen to 2.25%. I was sweating a bit as the offer approached its time limit but no issues in the end.
They also asked me to demonstrate the ability to repay at 12%, which would be an unpleasant experience. 4 years to worry about that though.
Seems to me that the biggest impact here seems to be on the buy-to-let market, and I am flabbergasted that political parties are calling for handouts for people with mortgages. They have been utterly silent for those who've seen their rents go up by 50% or more over the last few years.
There are definitely people who have chosen to 'live beyond their means' but they will be the minority of people impacted and focusing on them just smacks of envy. The vast majority of people bit by this will just be normal families that had little choice to mortgage to the hilt to buy a home or to pay the equivalent (if not more) in rent
‘live beyond their means’
Your occasional reminder that the pattern of the last 12 or so years is that it costs more to live here, and means haven't kept pace with those rising costs. Younger people are looking at hugely expensive housing, heating, food, water... all the staples of life... without corresponding increases in income. They are poorer people living in a more expensive country. The result of a series of decisions... mostly made on their behalf by older generations. The political fallout of a demographic shift. Yes, many people are living beyond their means. It isn't always their choice.
'live beyond your means' - is engineered in this system mostly I would say.
In other words encourage to suck up private debt and tolerate low wages whilst houses inflate.
The government has the power to control much of the economy - it chooses not to.
They have been utterly silent for those who’ve seen their rents go up by 50% or more over the last few years.
Us renters have long since just acknowledged that as far as the government is concerned, we simply don't exist. The financial interests of buy-to-let landlords however? Thats very, very important. There were some stats published not long back about what percentage of Tory MPs who owned a portfolio of rental property. The majority of them. Jeremy Hunt has loads of them. Didn't he buy a whole street?
So if any relief is coming (and I very much doubt it is), I think we all know where it'll be going.
People suffering from massive hikes in already enormous rents - latest stats published (before the latest rises) are that rent generally accounts for 28 - 40% of a renters income - don't figure as they're mainly young and don't vote Tory, whereas landlords are usually 60+ and do
It's more overall fairness than envy, how do you manage supporting the people who need it most, or does that also mean supporting people who have just hugely gambled a lifestyle on previous rates and come unstuck?
There seems a huge disparity between the two, Just interested in the available levers.
When mortgage companies make an offer they do so from an already identified and "costed" pool of money, so they will stand by the interest rate but also have a "use by" date. My first mortgage experience was going through the buying process with a live mortgage offer over the course of Black Wednesday - interest only endowment backed at 15% base rates - and it needed a call to the mortgage company to re-assure that their original terms still stood.
Rather than providing more help to all mortgage payers, the government should stop interest costs being tax deductible to all business borrowers.
Rather than providing more help to all mortgage payers, the government should stop interest costs being tax deductible to all business borrowers.
That's one way of killing investment in new equipment.
The government has the power to control much of the economy – it chooses not to.
That's a Straw Man argument. When every choice is significantly constrained by outside factors and ultimately results in potentially substantial negative consequences - there's not much of a choice.
It’s more overall fairness than envy, how do you manage supporting the people who need it most, or does that also mean supporting people who have just hugely gambled a lifestyle on previous rates and come unstuck?
There seems a huge disparity between the two, Just interested in the available levers.
Start with better wages to those that are working to run the country for the rest of us. Because they keep the roads going that the private sector operates on for example. You have to have your infrastructure/services tip-top and then the private sector benefits from this. That's how the money flows. State - Private.
Simply pay better wages in the state targetting those areas where you need a work force to fix things that are unequestionably broken.
That's called trickle up. Basically do it the opposite way around. This is the start of a better economy, and create jobs whilst looking at the green side of things.
That’s a Straw Man argument. When every choice is significantly constrained by outside factors and ultimately results in potentially substantial negative consequences – there’s not much of a choice.
So why have we followed a path which has dealt so many bad results to so many people? Why do we keep doing it over and over?
Yes it's priorities - but can't you see a million things that the government could fix or begin to fix ? How would that not benefit the biggest group of people?
It's been the other way around for long enough - it's pretty easy to see how you can re-orientate the way we do things.
(I'm defintely not saying there aren't downsides - but switch the downsides to the billionaires for once.)
Here’s an alternative as far as mortgages and housing.
Stop people having 2nd and 3rd amd 4th houses. That would force the sale of lots of houses, reducing the PRICE – which will ease life for anyone who buys another house, or 1st time buyers. And force landlords to not be so greed
What happens with ideas like this is it punishes accidental landlords or people with one property,any of whom yes may be above average but are quite often no out of the ordinary mega earners but does nothing for all the companies that own residential properties. All these extra sale will quite possibly be bought by these companies.
Unfortunately lots of these ideas end up penalising people are a little better off quite often just PAYE workers or maybe small one two man bands but help the larger companies. With respect to a large amount of the changes that have happened to private rentals over the past few years that is exactly what has happened.
In addition a collapse in house prices will hurt many who have recently got on the housing ladder or just moved, quite often trapping them in. Their house if they need to move. Property prices are too expensive but a collapse would cause big issue the safest way is prolonged stagnation of the market.
Regarding rent there obviously needs to be more social housing and probably some form or rent control/ omnibusman but it would need to be take into account the location
And what about people who don’t fit into that “most” category? Just hope they’re not evicted?
That's why i said negotiation. Most mortgage lenders allowed negotiation, holidays, etc during the pandemic. they could do so again now. This means additional debt, but short term relief. Allow people to switch to interest only for 6m, a year, etc. Allow people to take a 3 month payment holiday - that then gives them 9 months of reduced payments if the save the 3 months and split over the next 6m. All of these options were available during the pandemic. The banks are going to be raking in money over the next 12-36m - get the government to state that a windfall tax WILL be levied against them if they break certain thresholds - this will incentivise negotiation on debt.
Simple fact is that the Bank MPC has a target - even a sole target at this time - to get inflation down to <2%. The way they think seems to be that interest rates is the lever to do that.
Arguments over whether it does in this situation or whether other approaches would be better on this and wider monetary policy are all valid and true, but not as far as i can see part of their discussion today.
Hence it'll be up, just by how much.
Edit - and just how shit was Cleverly on R4 earlier.
USA style long-term fixed rates?
Simple fact is that the Bank MPC has a target – even a sole target at this time – to get inflation down to <2%. The way they think seems to be that interest rates is the lever to do that.
Our government sets that target of course.
Little is said about that. We have become attuned to hate inflation but everyone's inflation is actually different. So the whole thing is a bit of a mess as a concept.
Wages not keeping up with inflation is more of a problem than the inflation itself.
Part of the reason for the massively distorted unsustainable housing situation
Most of the reason is that we're not building enough [publicly or privately owned] affordable housing, and the reason for that is simple. Housebuilders operate in the free market and like everything else, the scarcer their products the more valuable it is and the higher their profits. There's a reason they donate massively to political parties. While on an individual level, transferring ownership of housing stock from the public to the private sector (Right to Buy) may have benefitted people, on the national level it's been an utter failure of policy for the last 40 years, with successive govts unwilling to release councils from the bits of law that don't allow them to build more, and obviously the revenues from those original sales long gone to fund other things. I doubt any correction in the short term will be popular, too much of the public wealth is tied to the price of their house, but it's the only way we're going to do anything to correct what we have now.
Invest heavily in more state owned property (like to post-war house building boom levels)
Build more private to drive down the price
re-align the council tax bands to more up-to date valuation to generate income to replace lost from council home rent
Probably something tax wise about passing housing stock as inheritance
Renting reform to offer more security
Mortgage reform (fixed interests rates for the duration of the term)
It's just another nail in the coffin marked "The Market will correct" If Brexit gives us one thing, it allows future govts to intervene heavily with long term policies. We should at least take advantage of it. (I doubt the next Labour govt will)
Reading with interest and horror at the same time.
My 5-year fix comes to an end in December so I am looking at a hike of around 4-4.5% if I fix for another 2 years. (about 250Pcm)
I started again at 37 after a clean break up and brought a standard 3-bed terraced that's big enough for me and my son nothing fancy usual run-of-the-mill family home.
I have been fortunate enough with work to have been overpaying the Morgage by 100% for the last 2 years and standard repayments would be circa 20% of my take home and have a chunk put away for a rainy day.
I was hoping to move up and had a MIP in place but was gazumped on an offer in Jan this year.
I think now I will be riding it out continuing to overpay as much as I can and banking cash.
I am very fortunate with my income I know, its not a humble brag - what with energy and food pricing my monthly costs will go up by around 500 pcm -- Thats madness
Our government sets that target of course.
Agreed, but as i said the discussion today isn't on setting Gov policy or whatever - the Gov has told BoE to keep / get inflation under 2%, the MPC seems to think interest rates is the lever at their disposal, ergo they will increase rates.
To do otherwise - 'we made a decision to not try to get interest rates down because we don't think that's where the problem really lies' - just goes beyond their remit, so they won't.
It's easy to point at the MPC and they need to be discussing alternatives with Gov, but unless/until Gov decides to change tack, rates rises will keep coming.
[edit] and as one of the key pledges - to halve inflation this year - Gov won't change tack.
It’s easy to point at the MPC and they need to be discussing alternatives with Gov, but unless/until Gov decides to change tack, rates rises will keep coming.
It's f****** idiotic. The govt are running the country on the basis of outdated GCSE economics, and the BoE are saying 'sorry we're only allowed to change interest rates, there's nothing more we can do'. Total abdication of responsbility on both sides, and they're completely comfortable with that because it benefits the one sector of the economy which must be protected at all costs - the banks.
As I've said before, it's daylight robbery, plain and simple.
and they’re completely comfortable with that because it benefits the one sector of the economy which must be protected at all costs – the banks.
Not really what you expect from the former Goldman Sachs banker Rishi Sunak, is it?
As for the chancellor, I asked before if he had bought a whole street, as I seem to recall something like that in the press. I've just had a google and found this from the Evening Standard
Hunt and his wife Lucia Geo own seven flats in the waterside Ocean Village development in Southampton through their Mare Pond Properties vehicle.
Although it isn’t known how much Mare Pond paid for the seven high-end apartments, one flat in the Ocean Village complex sold for £925,000 this summer according to Rightmove
Back to the OPs question. We now owe about £75k on our house that we bought for £174k 12ish years back. Fixed for 3 years just before rates spiked at about 1.6%ish. One of the neighbours sold in a week recently it went on for £300k, but had lots of people in to view so not sure of the final sale price, their house is tider than ours, but we also have a garage plus small storage room/office out back of it.
We are very lucky in that my salary easily covers our mortgage and when we re-mortgaged last time I set the repayment rate to an amount that reflects an increase in rates so we get used to it, as it stands it's just a regular overpayment. My wife was made redundant at the end of May and as yet has no new job, the markets ok but not great around Cambridge for someone in her position. However, her salary was 50% of mine anyway so the impact is lessened.
If I lose my job, it's going to get serious.
When every choice is significantly constrained by outside factors and ultimately results in potentially substantial negative consequences – there’s not much of a choice.
Contrlled rents and secure tenancies have minor downsides for rich folk. Huge benefits for the rest.
Increasing wages fir the lower paid and taxes on the higher paid is a win for society
Much of the issues are down to deliberate givernment choices
Contrlled rents and secure tenancies have minor downsides for rich folk. Huge benefits for the rest.
There are downside for folks living in controlled rent areas as well, Berlin and some other major cities for instance experienced (to a greater or lesser degree) an almost total stop of new "for let" building within the controlled area, reluctance of landlords to maintain existing building, sharp increase in rent outside the controlled area. None of these are not insurmountable, but like any mitigation, they do bring their own issues that need to be tackled.
A bit off topic but.....Another way to free up housing for renters (and maybe buyers if landlords sell up) is somehow control Air b'Nb. This has taken huge amounts of properties out the market. There was a radio report on this the other day and it mentioned a town that had zero properties to rent but over 50 listed on Air bnb. Lots of landlords are shifting away from private rentals and all the regulation that comes with it into this short term lease model and making more money.