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The Masked Tulip

Uk Facing Housing Costs Time Bomb - Millions At The Mercy Of Bank Interest Rates

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The number of families currently spending more than half their disposable income on mortgage repayments could treble by 2018 if interest rates were to rise.

Even the most optimistic scenario, whereby interest rates rise slowly to 3 percent by 2018 and economic growth is strong, puts 1.2 million home owners still spending in excess of 50 percent of their take-home pay on mortgage repayments. This figure is accepted as an indicator of over-indebtedness.

If the Bank of England were to raise interest rates more quickly, to 5 percent by 2018, and growth continues to be slow, up to 2 million homes would face financial difficulties—half with families with children. It is worth noting that the markets believe the base rate (interest) will rise to 5 percent by 2018.

http://www.marketoracle.co.uk/Article44666.html

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Unusual conclusion:

The fact that millions of people are at the mercy of bank interest rates in relation to a basic human need—housing—is socially criminal. The solution to this looming crisis requires a major redistribution of wealth, away from the rich to working people, and the nationalisation of the major construction firms under democratic workers’ control.

Letting house prices fall is a rather neater solution, and buying houses now should carry a governement health warning (rather than a scheme to help people enburden themselves with unrepayable debt).

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Unusual conclusion:

Letting house prices fall is a rather neater solution, and buying houses now should carry a governement health warning (rather than a scheme to help people enburden themselves with unrepayable debt).

Hopefully. However, there is a danger, given the wide differences in wealth, that, if housing became generally affordable, it would be as cheap as chips for the wealthy. Low cost housing = good yield on rentals.

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Quote

The number of families currently spending more than half their disposable income on mortgage repayments could treble by 2018 if interest rates were to rise.

Even the most optimistic scenario, whereby interest rates rise slowly to 3 percent by 2018 and economic growth is strong, puts 1.2 million home owners still spending in excess of 50 percent of their take-home pay on mortgage repayments. This figure is accepted as an indicator of over-indebtedness.

If the Bank of England were to raise interest rates more quickly, to 5 percent by 2018, and growth continues to be slow, up to 2 million homes would face financial difficulties—half with families with children. It is worth noting that the markets believe the base rate (interest) will rise to 5 percent by 2018.

I struggle with all this stuff, not being that bright, but still interested in what is happening in the world around me.

The other day we were hearing

Mortgage Drought Could kill Housing

That the "onerous affordability rules" coupled with moderate interest rates rises would shift mortgage payments to income from 19% to 27% (higher than the level seen before the financial crisis) and :

"Most lenders would be uncomfortable with mortgage payments that high as a share of income. To put it in context, to bring mortgage payments down to their current share of income with a mortgage interest rate of 6pc would require a doubling in the average deposit from 20pc to 40pc."

I asked if lenders were reluctant to lend the 20% currently, not because they expect the market to adjust back to something still unaffordable but closer to affordable or if it was because they did not like to lend if mortgage payments would represent more than 19% income?

Somebody posted

The Halifax mortgage calculator allows a couple both earning £50k before tax to borrow £430k

http://www.halifax.c...c/container.asp

Net monthly income on £50k is £2997 gross is £4,167

http://www.thesalary...o.uk/salary.php

£430k 25 year mortgage at 5% costs £2,514 a month

http://www.drcalcula...om/mortgage/uk/

So mortgage is 42% of net or 30% of gross incomes

(2 x £25k earners can borrow £215k so the same 4.3 x household income, net combined income £3,301, mortgage £1,257 so 38% of net income)

This article now says by 2018 people will be paying 50% of their income on mortgage.

Is it any wonder people get confused by what is being said.

I know it's all lies lies and more lies, but I will NEVER get why an article says that mortgages will dry up because lenders will not want to lend if mortgage payments are more than 19% of gross pay and this will push deposits to 40%. Yet the figures show that mortgage payments are already 30%, so what was it at peak if the other article says that 27% is higher than it was at peak?

So if lenders already do not want to lend the 20% and this is linked to earning mortgage ratio, and they are saying the "onerous" rules and a small interest rises will see people needing a 40% deposit, and last year there was HTB1 and FLS and this year HTB2 to help people buy properties up to £600,000 by lending them the deposit which apparently the lenders are not happy to lend, then what happens when deposits are going to have to be 40%? Or doesn't that matter, because that will be AFTER the election?

And if between 2011-12 and 2014-15 £35bn of housing benefit will be spent on private landlords, £13bn more than the previous three years and rents continue to rise along with house prices, what % of income are people being expected to pay on rents, if lenders SUPPOSEDLY have qualms about people spending more than 19% of their income on a mortgage?

ADD all that together, and what is the ACTUAL situation saying about house prices, rents and wages other than RAMP RAMP RAMP?

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The number of families currently spending more than half their disposable income on mortgage repayments could treble by 2018 if interest rates were to rise.

Even the most optimistic scenario, whereby interest rates rise slowly to 3 percent by 2018 and economic growth is strong, puts 1.2 million home owners still spending in excess of 50 percent of their take-home pay on mortgage repayments. This figure is accepted as an indicator of over-indebtedness.

If the Bank of England were to raise interest rates more quickly, to 5 percent by 2018, and growth continues to be slow, up to 2 million homes would face financial difficulties—half with families with children. It is worth noting that the markets believe the base rate (interest) will rise to 5 percent by 2018.

I struggle with all this stuff, not being that bright, but still interested in what is happening in the world around me.

The other day we were hearing

Mortgage Drought Could kill Housing

That the "onerous affordability rules" coupled with moderate interest rates rises would shift mortgage payments to income from 19% to 27% (higher than the level seen before the financial crisis) and :

"Most lenders would be uncomfortable with mortgage payments that high as a share of income. To put it in context, to bring mortgage payments down to their current share of income with a mortgage interest rate of 6pc would require a doubling in the average deposit from 20pc to 40pc."

I asked if lenders were reluctant to lend the 20% currently, not because they expect the market to adjust back to something still unaffordable but closer to affordable or if it was because they did not like to lend if mortgage payments would represent more than 19% income?

Somebody posted

The Halifax mortgage calculator allows a couple both earning £50k before tax to borrow £430k

http://www.halifax.c...c/container.asp

Net monthly income on £50k is £2997 gross is £4,167

http://www.thesalary...o.uk/salary.php

£430k 25 year mortgage at 5% costs £2,514 a month

http://www.drcalcula...om/mortgage/uk/

So mortgage is 42% of net or 30% of gross incomes

(2 x £25k earners can borrow £215k so the same 4.3 x household income, net combined income £3,301, mortgage £1,257 so 38% of net income)

This article now says by 2018 people will be paying 50% of their income on mortgage.

Is it any wonder people get confused by what is being said.

I know it's all lies lies and more lies, but I will NEVER get why an article says that mortgages will dry up because lenders will not want to lend if mortgage payments are more than 19% of gross pay and this will push deposits to 40%. Yet the figures show that mortgage payments are already 30%, so what was it at peak if the other article says that 27% is higher than it was at peak?

So if lenders already do not want to lend the 20% and this is linked to earning mortgage ratio, and they are saying the "onerous" rules and a small interest rises will see people needing a 40% deposit, and last year there was HTB1 and FLS and this year HTB2 to help people buy properties up to £600,000 by lending them the deposit which apparently the lenders are not happy to lend, then what happens when deposits are going to have to be 40%? Or doesn't that matter, because that will be AFTER the election?

And if between 2011-12 and 2014-15 £35bn of housing benefit will be spent on private landlords, £13bn more than the previous three years and rents continue to rise along with house prices, what % of income are people being expected to pay on rents, if lenders SUPPOSEDLY have qualms about people spending more than 19% of their income on a mortgage?

ADD all that together, and what is the ACTUAL situation saying about house prices, rents and wages other than RAMP RAMP RAMP?

Add in child care costs of £100/week for each kid, council tax, water and fuel and you have an even more questionable situation.

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Add in child care costs of £100/week for each kid, council tax, water and fuel and you have an even more questionable situation.

I take it you don't have kids? Local childcare (nursery, not for profit) is nearly a grand a month for < 2 yr olds. Only slightly less for older. No discount for > 1 child at same place. This is 200-500 cheaper than other nurseries around this same area. 100 quid a week would be fantastic. :)

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I take it you don't have kids? Local childcare (nursery, not for profit) is nearly a grand a month for < 2 yr olds. Only slightly less for older. No discount for > 1 child at same place. This is 200-500 cheaper than other nurseries around this same area. 100 quid a week would be fantastic. :)

Childcare Dearer Than Mortgages

The Family and Childcare Trust's annual report says average fees for one child in part-time nursery and another in an after-school club are £7,549 per year.

The average annual UK mortgage costs an estimated £7,207 last year.

Full-time childcare costs are nearly two-thirds more - at £11,700 a year - than average mortgages, it adds.

Most of us don't stand a hope in hell do we?

I am going to sign up for RB's Revolution

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I take it you don't have kids? Local childcare (nursery, not for profit) is nearly a grand a month for < 2 yr olds. Only slightly less for older. No discount for > 1 child at same place. This is 200-500 cheaper than other nurseries around this same area. 100 quid a week would be fantastic. :)

Its free up north for everyone.At 50 the grandparents take redundancy,retire and go on ESA/DLA etc.They also then claim carers allowance for each other.Then they look after their grandchildren free for their kids.

This is how we do it up here.If there are no grandparents in that situation a friend will register and then claim tax credits as self employed.The person with the child will claim full tax credits for child care and pay the friend who then hands back cash in hand.They both click £400 a month extra.

The above is mostly true as well,it really is what masses of people do up here.

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I really look forward to them whinging about this. What the f**k did you expect when you took out such a big mortgage in the first place?

No no you misunderstand, they are 'getting on with their lives' !

Working from dawn to dusk trapped in a job you hate cos you can't afford to move to a better one trapped in negative equity spending more than you can afford on interest on a loan for the next 30 years… see, thats a life well lived chum ! And you with your free time and life experiences and flexibility to take advantage of opportunities and able to see the world. What sort of a life is that?

Bet you feel silly in a rented place now huh?

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No no you misunderstand, they are 'getting on with their lives' !

Working from dawn to dusk trapped in a job you hate cos you can't afford to move to a better one trapped in negative equity spending more than you can afford on interest on a loan for the next 30 years… see, thats a life well lived chum ! And you with your free time and life experiences and flexibility to take advantage of opportunities and able to see the world. What sort of a life is that?

Bet you feel silly in a rented place now huh?

Are these the people that 'Woke up and smelled the coffee?'

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No no you misunderstand, they are 'getting on with their lives' !

Working from dawn to dusk trapped in a job you hate cos you can't afford to move to a better one trapped in negative equity spending more than you can afford on interest on a loan for the next 30 years… see, thats a life well lived chum ! And you with your free time and life experiences and flexibility to take advantage of opportunities and able to see the world. What sort of a life is that?

Bet you feel silly in a rented place now huh?

The idea that I can just up and leave and live somewhere else if I want is a real millstone around my neck. Having missed the boat on houses I'm just out looking for somewhere I can pay £10 for a pint of beer to drown my sorrows. It's a terrible burden not having much debt (I borrowed a penny off someone yesterday because I was just short of change for my lunch).

Whilst it's true I'm not keen on the job the lack of change their is at least due simply to my laziness (and not being able to think of anything better - it's having to do anything that bothers me, the actualy work can be quite interesting at times; like I said, laziness).

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Unusual conclusion:

Letting house prices fall is a rather neater solution, and buying houses now should carry a governement health warning (rather than a scheme to help people enburden themselves with unrepayable debt).

https://www.google.com/url?q=http://www.youtube.com/watch%3Fv%3DZScn9gWvjrQ&sa=U&ei=p0kWU8StIOTx4gTzqoCQDA&ved=0CDIQtwIwAg&usg=AFQjCNExU7ZCCM7vO7M33iJdDzePyZlKqw

Edited by oracle

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