Thursday, May 13, 2010
To be forewarned is to be forearmed
Yahoo: Five million home owners unable to afford interest rate rise
More than five million home owners will be unable to afford a rise in interest rates and will be in danger of being evicted from their homes, charities have warned.
Posted by happy mondays @ 07:45 PM (1706 views) Add Comment
21 Comments
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1. paul said...
But can the country seriously afford to keep on throwing money at them since it has been doing since 2007?
I'm all for civil unrest if they do try to. Enough really is enough of supporting the overborrowed.
2. Mrmagooisagovteconomist said...
Hear hear Paul, far too much has been made of the ridiculous situation of high housing costs its bad for the economy full stop.
3. tyrellcorporation said...
Tyrell pops his local property paper in the bin!
4. taffee said...
makes a total mockery of a market economy...government intervention didn't help in japan or during tulips from amsterdam
They need to build council houses.....in late 80's there were 6.1 million now just 1.1 million
5. Crunchy said...
3. taffee said...They need to build council houses.....'in late 80's there were 6.1 million now just 1.1 million'
Do banks and government make fat profits from this rather boring, static practice?
6. alan said...
Sorry, I can't believe so many people are unable to pay an interest rate rise. SURELY they didn't budget for <5% interest rates for the duration of their mortgages? Add to that, They've had 2 years since the crash to pay back some of the capital as rates have been stupidly low.
Do they have brains? Or did they spend all their spare cash in the tanning booth (Essex girls).
I suspect Myra Butterworth who wrote the article has a string of BtLs and wants to keep rates low.
7. mr g said...
@Alan "Sorry, I can't believe so many people are unable to pay an interest rate rise. SURELY they didn't budget for <5% interest rates for the duration of their mortgages? Add to that, They've had 2 years since the crash to pay back some of the capital as rates have been stupidly low."
"Do they have brains? Or did they spend all their spare cash in the tanning booth (Essex girls)."
The answer is, their brains are addled and attuned to XFactor, Eastenders and as you say, tanning booths and not just in Essex.
A large section of the population have no idea about their finances and are only capable of seeing as far as the next weekend and continuing their hedonistic, debt fuelled life styles.
8. mr g said...
Paul@1 " Enough really is enough of supporting the overborrowed."
Agree 100% but do you think the ConDem coalition has the guts stop the support?
9. jack c said...
Alan - I met with a potential new client autumn 2009 who's tracker rate with Halifax was coming to an end (0.49 above bank base = 0.79%) reverting to Halifax SVR of 3.5%. The couple in question were whining like a 747 jet engine caught up in a flock of birds at the increase in monthly payments ! - I very politely explained that the original rate was much higher than this and they had benefited greatly from the BOE decision to reduce rates to 0.5%. I then explained where rates were likely to head in future etc... and the potential merits of securing a decent fixed rate, however they wouldnt pay an arrangement or valuation fee etc.. and baulked at the idea of paying 4.79% fixed for 5 years. They could not comprehend that Halifax SVR of 3.5% is roughly 50% of the long term average rate for mortgages in the UK and consequently I left them to moan amongst themselves.
Essence of the tale - lots of people do not factor in a rise in interest rates and think rates will (or should) stay at historic lows indefinitely. Do they have brains - yes - but not ones that take to sensible financial planning (tanning, nails, cinema, X-factor, Strictly, the cat or the dog etc... are all far more important). Always reminds me of the line from the Queen song "I want it all I want it all I want it all and I want it now"
10. novice pete said...
Cameron was emphasizing the importance of keeping interest rates low before the election, will he do a U turn?
11. Blinktoofast said...
Um, in some perverse way, if 5 million of all the homeowners in the country default on their mortgages simultaneously (e.g. because the bank rates go back up to a nice sensible 6%), then enough houses will be put back on the market that the market crashes and the same 5 million people can buy those houses back at 2x salary.
Everyone's happy. Even the EAs from commission on those 5 million sales.
Well, OK, the banks might not be so happy, but they've already had their payoff, so it'll still be evens for them.
12. markj69 str05 said...
House prices over-inflated.
House prices amazingly increased through 2009. Dispite the dip in 2008.
Interest rates stupidly low.
FTB's with no hope of entering the market.
Inflation eroding earnings and savings.
Who's going to take the 'bull by the horns' (Literally!), and start to manage the property industry?
What controlling mechanisms are available? INTEREST RATES!!!
13. Alan Lubin said...
Howard Archer, an economist at Global Insight, said: "Any rise in interest rates would be liable to send a significant number of financially stretched homeowners over the edge."
My my, what on earth is that tinny, tuneless noise? Why i believe it must be me attempting to play the smallest violin in the world for the overstretched "home owners". Boo hoo.
**the CAPTCHA just made me type PENETRATED WEASEL which seems oddly apt.
14. enuii said...
His hand will be forced, politicians thinking they can control the economy is the same as King Canute thinking he could stop the tide coming in. Trouble is Tony Blair was sitting on the beach as the tide was going out and scarpered when it was halfway back up the beach, then Gordon eagerly jumped into the chair and was forced out by the concerned serfs as the water reached his knees!
15. quiet guy said...
@Jack C
That was a very interesting little tale. I think Myra Butterworth's article is a bit sensational but I'm sure that there will be siginficant numbers of people in stretched finances next year.
After reflecting on your tale, I wondered what the couple paid before the rates were cut to 0.5% Human nature is that the pain of being forced to make do with less cash can be very much worse than the enjoyment of extra free money, which is what some people with no collar trackers have enjoyed. It's easy to get used to more cash but not the other way around. To be absolutely honest, I think I'd react the same way, at least a bit, in the same cirumstances.
The lesson is beware of politicians offering free money; there's bound to be a catch.
16. markj69 str05 said...
'The Bank of England has kept interest rates at 0.5 per cent for more than a year, but they are widely predicted to rise next year.'
What about this year?
Slow and steady. 2% by the end of the year wouldn't be unreasonable. And not too much of a strain on the avg house-hold, I would have thought. Might squeeze the BTL's a bit, but that's OK with me.
17. Yoss said...
BOE rate will rise, and will be passed on to customers, avg Rate over base in the good years was 1%, now it's 3% so if we hit normal rates of 6% that's a 9% mortgage rate(for safe customers)...With falling wages, rising inflation and higher unemployment/taxes?
18. nubbers said...
Alan @4: 'I suspect Myra Butterworth who wrote the article has a string of BtLs and wants to keep rates low.'
That sort of comment always gets me wondering. Guess what, your'e not wrong. The best reference seems to have been an avert in the Telegraph on 28 March 2008 and is not in their archive, but there is a reference to it in the HPC blog and one or two other places: http://www.housepricecrash.co.uk/forum/index.php?showtopic=72323
To quote from a quote:
My name's Myra and I am a property tycoon, in my head. Actually, I am a buy-to-let landlady, but as I am only in my early thirties and already own two properties - while most of my friends still live in tiny, rented shoeboxes - I think I'm doing pretty well.
19. Simon said...
@7. jack c
Completely agree .
Savers and the responsible being shafted to help the extravagant continue their indebted lifestyle .
And that is the level of gratitude they show .
Sick of being penalised for doing the right thing .
20. This comment has been removed as it was found to be in breach of our Blog Policies.
21. mark wadsworth said...
@ Taffee - of course they should build more council houses (they should build more houses, more power stations, more factories, full stop) but where do you get those stats from?
AFAIAA, the peak of council housing was in the 1950s, it was about 30% of households were in council housing - but a smaller population and bigger households so maybe five or six million council homes.
They have flogged off the nicer ones over the last twenty or twenty five years, but Housing Associations have bought some up or built a few more and there are at present about four million households in social housing (= council house or housing association, there is no fundamental difference between the two, they are both state owned), i..e about a third were sold off.