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UK's mortgage ticking time bomb

I first wrote about my fears of a time bomb in November 2009, and then again in March 2012, and little has changed – the threat is still here alongside the lack of action. The only problem now is we’re closer to the time interest rates will rise, which is when this bomb will explode. So let me lay out the case again…
The paradox is that while mortgage rates have been relatively unresponsive to falling base rates, it’s likely they’ll shoot up, mostly in parallel, when they rise.

Millions are locked into standard rates or high-margin trackers, or are due to be when their current deal ends. So when rates finally turn and start to rise, it’ll be like a smash-and-grab brick through windows.

Martin gets it. How many people receive his newsletter and read his blog? I imagine this message is getting through to a lot more people now (or at least hitting home much more than when he previously made these warnings)...

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UK's mortgage ticking time bomb

Martin gets it. How many people receive his newsletter and read his blog? I imagine this message is getting through to a lot more people now (or at least hitting home much more than when he previously made these warnings)...

Lewis is pretty good on the 'commonsense' aspect of personal finances but sadly ignorant on the bigger picture.

Really, most of what he preaches should be pretty bloody obvious to anyone with the ability to count into double digits and it's more a reflection on just how thick and fiscally ignorant the average punter is that someone like him needs to be there to evangelise basic budget management principles.

Still, fair play to him for doing it and for doing OK for himself with the deal he did selling his website. At least he is trying to do something positive.

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Really, most of what he preaches should be pretty bloody obvious to anyone with the ability to count into double digits and it's more a reflection on just how thick and fiscally ignorant the average punter is that someone like him needs to be there to evangelise basic budget management principles.

Sad, but true.

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UK's mortgage ticking time bomb

Martin gets it. How many people receive his newsletter and read his blog? I imagine this message is getting through to a lot more people now (or at least hitting home much more than when he previously made these warnings)...

This is what I find so shocking about George Osbourne and Conservative government policy. They must be fully aware of what they are doing and the potential results of their schemes like Help To Buy. In my opinion this level of irresponsibility is completely criminal. Especially so because they know what the Labour government did. And there are no punishments for these people.

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This is what I find so shocking about George Osbourne and Conservative government policy. They must be fully aware of what they are doing and the potential results of their schemes like Help To Buy. In my opinion this level of irresponsibility is completely criminal. Especially so because they know what the Labour government did. And there are no punishments for these people.

I agree 100%. I was so pleased when they introduced the benefit cap that I stopped planning to emigrate from the UK.

However help to buy and banning the brilliant author Robert Spencer from the UK are great disappointments.

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This is what I find so shocking about George Osbourne and Conservative government policy. They must be fully aware of what they are doing and the potential results of their schemes like Help To Buy. In my opinion this level of irresponsibility is completely criminal. Especially so because they know what the Labour government did. And there are no punishments for these people.

At least Brown could blame the bankers. What's Osborne's excuse? It's not as if the benefits bill has even come down.

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This is what I find so shocking about George Osbourne and Conservative government policy. They must be fully aware of what they are doing and the potential results of their schemes like Help To Buy. In my opinion this level of irresponsibility is completely criminal. Especially so because they know what the Labour government did. And there are no punishments for these people.

I think to begrudge them a 2 year housing boom when Labour spent 13 years blowing up the mother of all credit bubbles is probably a bit harsh, even though it works against my personal interests.

Politicians are going to try to buy off sections of the electorate by blowing bubbles as sure as the sun rises every day. To expect them not to is ... ambitious.

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I agree 100%. I was so pleased when they introduced the benefit cap that I stopped planning to emigrate from the UK.

However help to buy and banning the brilliant author Robert Spencer from the UK are great disappointments.

The other two things you mentioned are fairly normal government decisions though, whether you are for or against them. Help To Buy is deliberately encouraging people to go into very risky levels of debt. The motivation behind it is politically self-serving and it is a completely intentional act with serious consequences for many people.

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I agree 100%. I was so pleased when they introduced the benefit cap that I stopped planning to emigrate from the UK.

However help to buy and banning the brilliant author Robert Spencer from the UK are great disappointments.

Wouldn't he agree to buy a London house? :P

All sounds "the government must dooo something..." Heaven forbid market forces or that ho mownerz should conduct their own due diligence, and define their own risk.

Edited by aSecureTenant

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The other two things you mentioned are fairly normal government decisions though, whether you are for or against them. Help To Buy is deliberately encouraging people to go into very risky levels of debt. The motivation behind it is politically self-serving and it is a completely intentional act with serious consequences for many people.

So how is a Labour government that creates a non job (in order to get another public sector voter) that has serious consequences for the person in that job when it disappears any different ?

You are looking at the problem through political bias. All political parties do this sort of stuff. To pretend otherwise is a fallacy.

The only choice when you pick a party is where the money is shovelled to (and normally people pick a party that shovels money to them).

Some of the scams are more obvious than others of course ...

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The bloke only gets what his advertisers want him to get.

Had a twitter spat with him over a couple of days when he recommended student fees as good value. At the time he couldnt see that young people get a really shit deal in terms of paying for uni, low paid jobs, high housing costs all coupled with huge public debt which should mean (if govt ever has any sense) higher taxes than would have been the case if public debt was lower.

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So how is a Labour government that creates a non job (in order to get another public sector voter) that has serious consequences for the person in that job when it disappears any different ?

You are looking at the problem through political bias. All political parties do this sort of stuff. To pretend otherwise is a fallacy.

The only choice when you pick a party is where the money is shovelled to (and normally people pick a party that shovels money to them).

Some of the scams are more obvious than others of course ...

No political bias here in that sense. I promise you I'm not pitching one against the other. I could argue exactly the same against Labour. But here you have the current Conservative government, knowing full-well the destruction that the Labour government inflicted on people, intentionally extending it, and being fully aware of the seriousness of the consequences on people's lives.

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I first wrote about my fears of a time bomb in November 2009, and then again in March 2012, and little has changed – the threat is still here alongside the lack of action. The only problem now is we’re closer to the time interest rates will rise, which is when this bomb will explode. So let me lay out the case again…

So 5 years ago.

He's still wrong and will continue to be.

Whatever might be a 'trigger' for the London market, it most probably won't be rate rises.

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So 5 years ago.

He's still wrong and will continue to be.

Whatever might be a 'trigger' for the London market, it most probably won't be rate rises.

Can you explain more ?

Is it because you believe the London market is driven mostly by foreign investors looking for a place to park cash and therefore is immune to mortgage rate changes ?

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Hi

wrt Mse Martin's blog. I've been here some years but still wince when I read:

"Imagine the base rate returns to 2008′s historically normal 5% (not a prediction – just a possibility). Someone with a £200,000 interest-only mortgage tracker would see their payment explode from £350 to £1,100 a month."

That is, a £200k I/O mortgage is used as a "normal" example.

Probably is, too, but I'm still taken aback...

Edited by dryrot

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At least Brown could blame the bankers. What's Osborne's excuse? It's not as if the benefits bill has even come down.

The benefits bill will never come down and even if it did your taxes won't. They will always find something else to spend the money on! Interesting point on benefits, can't remember where I read it though otherwise I would inset a link, if all the wrongful benefits were stopped but all the all the people entitled to benefits which they weren't claiming were paid, the benefits bill would go up! The benefit debate is really just a tool to keep the sheepie fighting each other.

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Hi

wrt Mse Martin's blog. I've been here some years but still wince when I read:

"Imagine the base rate returns to 2008′s historically normal 5% (not a prediction – just a possibility). Someone with a £200,000 interest-only mortgage tracker would see their payment explode from £350 to £1,100 a month. "

That is, a £200k I/O mortgage is used as a "normal" example.

Probably is, too, but I'm still taken aback...

Ditto. I had a former colleague with an I/O mortgage - she didn't seem to have a clue how to pay it off.

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"Imagine the base rate returns to 2008′s historically normal 5% (not a prediction – just a possibility). Someone with a £200,000 interest-only mortgage tracker would see their payment whole world explode from £350 to £1,100 a month. "

Corrected.

EDIT: Which is why we probably won't see 5% again in our lifetimes.

Edited by LC1

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He was a bit late with that one wasn't he? Anyone who hadn't seen the problem by 2005/6 probably wants their head testing. I'd agree with others on here, whilst many are simply wishing for interest rates to go up (they will eventually), it could be any number of things that starts the domino run going and at that point the BoE will wish that it had the kind of control and influence that members of the public seem to think they have.

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Hi

wrt Mse Martin's blog. I've been here some years but still wince when I read:

"Imagine the base rate returns to 2008′s historically normal 5% (not a prediction – just a possibility). Someone with a £200,000 interest-only mortgage tracker would see their payment explode from £350 to £1,100 a month. "

That is, a £200k I/O mortgage is used as a "normal" example.

Probably is, too, but I'm still taken aback...

'Average' mortgage is estimated at £113.5k for the 11.2 million housholds carrying a mortgage

http://themoneycharity.org.uk/media/Debt-Stats-Full-January-2014.pdf

When you think that lots of people will be in the run down period of their mortgage debt, I think £200,000 might be a common figure for many who have bought/re-bought post 2005.

BBA currently saying the average loan for a house purchase is £158.5k. Their mortages covering just under half of transaction. Cash buyers and Building Societies the rest.

Edited by 7 Year Itch

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So 5 years ago.

He's still wrong and will continue to be.

Whatever might be a 'trigger' for the London market, it most probably won't be rate rises.

You're wrong.

[Edit: Oops - I'm wrong too :lol: ..he's not talking about the IO SNAFU, he's talking about the increase in the spread between the base rate and SVRs, and he's assuming that when rates normalise the spread will remain. An argument that is a little dubious. He's definitely not talking about rate hikes as a trigger for house prices movements, he's focussed on how rate hike without a contraction of spread will leave some people with big monthly mortgage payment hikes]

The time-bomb that he is talking about is this...

io%2Bredemptions.png

...and not the London market.

A collapse in market prices would merely exacerbate the underlying problem he is attempting to draw attention to which is a cohort with big IO mortgages, limited equity and no repayment vehicle.

The graph is from the MMR. A more detailed and up to date review was produced by Experian for the FCA and is available here.

Edited by ChairmanOfTheBored

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