Jump to content
House Price Crash Forum
interestrateripoff

Rate Rise Threat For 3M Home Owners

Recommended Posts

Can't see this posted anywhere

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8097272/Rate-rise-threat-for-3m-home-owners.html

Almost three million homeowners would struggle to pay their mortgage if interest rates rose by just 2 percentage points, according to new industry figures seen by The Sunday Telegraph. This equates to more than one in three (37pc) of all mortgage holders.

Even if rates rose by less than 2 points, an estimated 1.6 million mortgages would be deemed "unaffordable", according to guidelines set out by the Financial Services Authority.

There are growing concerns that interest rates might rise sooner than previously predicted, given last week's better than expected growth figures. This would cause further misery for many struggling families, already facing rising taxes, higher-than-expected inflation and the prospect of widespread job losses, particularly in the public sector.

According to figures from the Council of Mortgage Lenders (CML), if mortgage rates rose by 2 percentage points from their current rate, about 2.9 million homeowners would have home loans that breached the regulator's affordability guidelines. The usual advice for those whose finances are this precarious is to take out a fixed-rate mortgage: it may cost more in the short term, but should safeguard their income against future rate shocks. However, a significant proportion of these borrowers are unable to afford or gain access to a fixed-rate deal.

Falling house prices and more stringent lending criteria have left tens of thousands of homeowners stuck on their current deal, unable to remortgage elsewhere. For those lucky enough to have a mortgage with C & G or Nationwide, for example, this may not be too bad: both have a standard variable rate (SVR) of just 2.5pc. But the average is significantly higher at 4.75pc, with some lenders, such as Kent Reliance Building Society, charging 6.08pc.

One of the main problems is that people don't have enough equity in their property to move. David Hollingworth of London & Country mortgage brokers said lenders offered their best rates only to customers who have at least 25pc equity in their home, and there are almost no deals available to those with less than 10pc equity.

Looks like the VI's are panicking that if rates rise they will be in trouble being swamped with bad loans.

Probably might have been better if they hadn't been so greedy in the first place.

The BoE are screwed if they do and screwed if they don't. Pity they didn't clamp down on the boom before it was too late then a lot of this might have been avoided.

Luckily the recovery will save the mortgage holders....

Share this post


Link to post
Share on other sites

Can't see this posted anywhere

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8097272/Rate-rise-threat-for-3m-home-owners.html

Looks like the VI's are panicking that if rates rise they will be in trouble being swamped with bad loans.

Probably might have been better if they hadn't been so greedy in the first place.

The BoE are screwed if they do and screwed if they don't. Pity they didn't clamp down on the boom before it was too late then a lot of this might have been avoided.

Luckily the recovery will save the mortgage holders....

I'll wait and see. Believe the figures when I see them.

People find a way to move and banks find a way to help them.

Share this post


Link to post
Share on other sites

The average SVR of 4.75% seems to be quite a bit higher than I remember from say 12 months ago

Is that my memory playing tricks?

Anyone have historic figures or a link to find them?

Share this post


Link to post
Share on other sites

So, about one in 10 mortgages, and about 6 or 7% of households.

The whole country is basically having to pay in inflation to bail out that 6 or 7% of idiots who got on the ladder or traded all their equity after 2003 or so.

Share this post


Link to post
Share on other sites

So, no rate rises for the foreseeable future

Not necessarily. The government have set our their stall to protect business not home owner commercialism. Rate rises in just a few months hopefully. And even if not BoE base rate then banks themselves may do it for all who hold variable rates. They have to make their money some how and it's not through new mortgages.

Share this post


Link to post
Share on other sites

Not necessarily. The government have set our their stall to protect business not home owner commercialism. Rate rises in just a few months hopefully. And even if not BoE base rate then banks themselves may do it for all who hold variable rates. They have to make their money some how and it's not through new mortgages.

yes, this will probably happen. BOE rate will remain 0.5% whilst bank rates rise. Look at loan rates already.

Last generation the lucky ones were home owners.

This generation the lucky ones are those who got onto a tracker mortgage at the right time.

Who or what will be the next "lucky one" - equities? gold? emigrants?

Share this post


Link to post
Share on other sites

Not necessarily. The government have set our their stall to protect business not home owner commercialism. Rate rises in just a few months hopefully. And even if not BoE base rate then banks themselves may do it for all who hold variable rates. They have to make their money some how and it's not through new mortgages.

Only problem is if the householders aren't protected then who will exactly be spending money which will allow business to make money?

Share this post


Link to post
Share on other sites

At least the Telegraph referred to them as "struggling families" and not "hard-working families", I am getting a bit fed-up with the "hard-working" adjective.

Share this post


Link to post
Share on other sites

Only problem is if the householders aren't protected then who will exactly be spending money which will allow business to make money?

If Sadman's correct......

So, about one in 10 mortgages, and about 6 or 7% of households.

The whole country is basically having to pay in inflation to bail out that 6 or 7% of idiots who got on the ladder or traded all their equity after 2003 or so.

That'll be the other 93-94% of thepopulation

Share this post


Link to post
Share on other sites

On the topic of rate rises, I have often wondered if the rise in VAT coming in January is more about covering up inflation than to raise money. After all, the BOE can then say "inflation is running hot this year, but that is due to the rise in VAT in Jan. No need to raise rates, next year it will all be back in line again". The line they trotted out last time VAT went back up. After all, why January. Particularily as retailers will probably slowly increase the cost of goods so as not to pass on the full brunt of the rise in January. The govenment can then drop VAT the year after and wow, inflation is coming down just as the BOE said it would. Seems like creative accounting to me (and will prevent any rate rises for the forseable future).

Share this post


Link to post
Share on other sites

Not necessarily. The government have set our their stall to protect business not home owner commercialism. Rate rises in just a few months hopefully. And even if not BoE base rate then banks themselves may do it for all who hold variable rates. They have to make their money some how and it's not through new mortgages.

Rate rises in a few months. I'd love to see that. I don't think we're going to get it for christmas though. I'm starting to believe that because we are slightly screwed from an economic point of view, they can hold rates down for the foreseable future.

On the topic of rate rises, I have often wondered if the rise in VAT coming in January is more about covering up inflation than to raise money. After all, the BOE can then say "inflation is running hot this year, but that is due to the rise in VAT in Jan. No need to raise rates, next year it will all be back in line again". The line they trotted out last time VAT went back up. After all, why January. Particularily as retailers will probably slowly increase the cost of goods so as not to pass on the full brunt of the rise in January. The govenment can then drop VAT the year after and wow, inflation is coming down just as the BOE said it would. Seems like creative accounting to me (and will prevent any rate rises for the forseable future).

How do they explain it if it is five percent?

How does the bank of England manage to hold rates where they are when inflation is over 3 percent at present?

Share this post


Link to post
Share on other sites

Rate rises in a few months. I'd love to see that. I don't think we're going to get it for christmas though. I'm starting to believe that because we are slightly screwed from an economic point of view, they can hold rates down for the foreseable future.

How do they explain it if it is five percent? How does the bank of England manage to hold rates where they are when inflation is over 3 percent at present?

Just the usual explanations.

They don't really care if it is 5% if it's mostly cost push inflation.

The type of inflation they don't like is wage push which just ain't gonna happen as wages are deflating.

I see high inflation but it may take many years for this to feed through. Perhaps even a generation.

Share this post


Link to post
Share on other sites

Just the usual explanations.

They don't really care if it is 5% if it's mostly cost push inflation.

The type of inflation they don't like is wage push which just ain't gonna happen as wages are deflating.

I see high inflation but it may take many years for this to feed through. Perhaps even a generation.

Well disposable income will be crushed in years to come then.

Share this post


Link to post
Share on other sites

Just the usual explanations.

They don't really care if it is 5% if it's mostly cost push inflation.

It's mostly thanks to the debauching of the currency given that we import so much.

I see high inflation but it may take many years for this to feed through. Perhaps even a generation.

Have you not been to a supermarket in the last year - or even last couple of weeks? You can actually see it in real time week-on-week now.

Share this post


Link to post
Share on other sites
Almost three million homeowners would struggle to pay their mortgage if interest rates rose by just 2 percentage points

Complete and utter love grenades. :rolleyes:

Just research Credit Action Stats the past 3 years and we get the same prediction.

When mortgage rates were 5.50% the same prediction on a rise from 5.50% to 5.75%. would have the same effect so it was claimed. :)

Mortgage holders have been given the gift of free money the past 2 years and if they blew it then the consequences be on their own heads. ;)

Share this post


Link to post
Share on other sites

Rate rises in a few months. I'd love to see that. I don't think we're going to get it for christmas though. I'm starting to believe that because we are slightly screwed from an economic point of view, they can hold rates down for the foreseable future.

How do they explain it if it is five percent?

How does the bank of England manage to hold rates where they are when inflation is over 3 percent at present?

I think keeping the economy growing and not forcing people out of their houses is more important to the Bank and the govenment than inflation. Anyway, inflation reduces debt load and allows house price correction without anyone really feeling like they have "lost" out. After all, what would be better: £1 buys £1 and your £500,000 house is worth £100,000 or £1 buys 20p but your £500,000 house is still worth £500,000. Though a drop in purchasing power like that is likely to start to upset people. Still, better than negative equity and repossesion. Wage rises to match may not be forthcoming, which may cause problems.

However the bank needs an "excuse" not to raise interest rates, seeing as battling inflation is one of its key responsibilities. The govenment is providing them with the perfect excuse. Increase VAT, the bank can then say the rise in inflation is caused by VAT increase. It is only temporary increase in inflation, so we have no need to raise rates. It is also not a "real" increase in inflation (as in the upward pressure on prices is not to do with money supply but an arbitary fixed increase in all VATable goods), so again we should not try to battle it as we can't battle it (it will be there regardless, raising rates will not stop the raise (as the rise is not linked to money supply)). They know they probably need to hold on for a year or two before they raise rates to ensure the economy does not collapse again. This is the perfect way of acheiving it and not losing face (they have a perfectly valid reason for not raising rates).

EDIT - In fact, thinking about it some more, the increase in VAT will have a downward pressure on real inflation (that caused by money supply) as people will not be able to buy as many goods with the same amount of money. So instead of raising rate, VAT has increased to try and have the same effect. Again, more reason for the bank not to raise rates

Edited by Richmond

Share this post


Link to post
Share on other sites

Hey, nobody was forced to pen their names to a big debt.

Yes, it sucks when you take a gamble and lose, but like anything else in life....

Thats the point though, they don't lose. Everyone loses.

In my opinion the BOE and govenment are doing everything they can to prevent putting up interest rates. What do they do? They up VAT. This will probably have similar effects as a rate change, but punishes everyone not just those with large debts. This will be seen as a preferable way to control real inflation than rate rises as it won't pludge borrowers into massive repayments (which a rate raise will do). It also gives the bank an excuse not to raise rates, even if inflation gets to 5%. So we are all paying for their gamble, and the only one winning is the govenment (who get all the extra VAT). Of course the govenment would probably also claim this will hit the richest hardest as they are likely to buy lots of VAT tagged goods.

Edited by Richmond

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.