mitre101

Just read back and seen this after my other post above. If you own a house already and only need to borrow a small amount to finance the new one, just get on with it!!

It's your belief, not mine, that all people are borrowing to the maximum allowed by a lender, whether it be a few years ago or today & now at the mercy of current interest rate rises. I said the opposite - most folks who took out a new mortgage or renewed in the last 3 years are OK as they did not overstretch in the first place. A different viewpoint: Around 23million properties total in the UK. Of those, c. 35% are rented, social housing etc. c. 65% are owner-occupied. Of the 65% / 15million owner-occupied properties; 42% are owned outright. That leaves around 8.5million properties with outstanding mortgages / loans. If the average mortgage term is 25 years, then statistical assumption would be that c. 1million of the 8.5million above were taken out or renewed in the last 3 years. Likely half of the 1million would be first time buyers with lower deposits. Even in 2020, a FTB would only be offered an initial rate of 2.50- 3.00%, not those 1.00-1.50% deals given to those with 50%+ equity at the time. If they originally borrowed £200K over 25 years at 3%, that would be £950/month If now 5%, that increases to £1,170/month - but if not overstretched £220/month extra easily affordable between two people. The non-FTB & those renewing deals in that period likely had the benefit of increased equity over Covid to reduce loan rates. Going forward, in the next couple of years, 2-3 million other households will have to face up to the end of their previous 1.00-1.50% 5-year fix. Many will have accrued equity so be considered for lower rates; if not - go interest-only, extend the term etc. There will be people who cannot now afford repayments but they are a tiny fraction of current mortgage-holders. Even though interest rates have increased substantially, the above is my opinion as to why the housing market has not decreased commensurately - a rate rise only affects a small percentage of the property market, not the whole.

The idea that "assuming people were paying the most they can afford 18 months ago" is where your logic falls down. The vast majority of folks taking out a new mortgage or renewing an existing loan a couple of years ago were not borrowing the maximum allowed by the lender. My wife and I bought a house in this period, a large part of our decision was the repayment cost. We went for a place which would still be affordable on one of our salaries (albeit at a stretch) should either be unemployed for a period. This was based on the rates at the time & although these have subsequently increased, the revised repayment is still easily affordable as a couple due to our buying considerations. Even if we had borrowed to the max at the time & were now struggling with increased interest rates, there are several options available the most obvious being switching to interest only for a period, extending the original term etc.

Long time reader of this forum but never posted. Think you are wrong in your prediction, there are still several mechanisms the Govt could use to further support house prices: Cutting stamp duty or raising payment thresholds Underwriting bank's risk on high LTV mortgages Forward guidance on interest rates (that they will stay lower for longer), therefore supporting greater loan to income multiples 40, 50 or even 100 year inter-generational mortgage products as seen in Japan Tax deductibility of principal home mortgage interest and/or capital repayment etc etc