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Britain’S Mortgage Prisoners Must Act Now Or Face Financial Meltdown

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On Sunday, Mark Carney said that rising house prices pose the biggest threat to economic recovery. On Tuesday, the official statistics told us what we already knew – that house prices in London are soaring, by 17 per cent year-on-year. Some homeowners are finding that their houses are earning more in a year than they are. And on Wednesday, some members of the Bank of England’s Monetary Policy Committee revealed they think the decision on when to raise rates is becoming “more balanced” – i.e. they’re minded to start voting for increases before the year is out. Take all of these factors together and you might conclude that the cost of borrowing needs to go up sooner rather than later, to deflate what looks increasingly like a housing bubble. And it’s true that we can’t keep rates this low for ever. Persistently low interest rates lead to inefficient investment decisions – 0.5 per cent is an emergency state, not a normal one. But our research this week showed just how serious the implications of moving too soon on rates might be.

It’s a fact that will not come as news to the Bank – its own data show that the one in five households continue to struggle to meet their mortgage payments, largely unchanged since 2009 despite five years of unprecedentedly low borrowing costs. Once rates rise, we might expect that number to head back to where it was in the early 1990s. Our own estimates suggest that the number of households facing an affordability problem will roughly double by 2018 – to 2.3m – if the base rate follows the path that the market expects. Moving any faster is only likely to increase this figure.

But we can’t delay the turning point forever. The tightening of lending criteria since the financial crisis has created a new problem – that of the “mortgage prisoner”. It is right that we learn the lessons of the past, and ensure we don’t again fall into the trap of overly loose lending. But the changing attitudes of lenders mean that some, who entered the market just before the crash, find that they have limited options for re-financing today. Those with little equity in their home, those with interest-only mortgages, and other non-standard customers who want to access today’s best deals, are all too often finding that the computer says no. Among the 2.3m facing affordability pressures in the face of modest interest rate rises, around one in three also display some potential mortgage prisoner characteristics. That leaves one in ten mortgagors – around 0.8m – in the unenviable position of being unable to insulate themselves today against a mortgage squeeze that could push them over the edge. Dealing with the problem requires two steps: releasing prisoners where possible by taking a more personalised approach to re-mortgaging requests; and protecting them where it’s not. http://www.cityam.com/article/1400792687/britain-s-mortgage-prisoners-must-act-now-or-face-financial-meltdown

They know what's the problem is, if continue as it is an affordability problem will double by 2018. Hej but we can't do nothing about it now.

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If they increase interest rates they cripple the "recovery".

No one is going to willingly make people "poorer" by removing the wealth they have stored in their "house" there's no easy out so we'll just carry on. However carrying on makes an exit even more difficult without total economic collapse. As property prices have gone higher instead of the readjustment being tens of billions we are now looking a hundreds of billions and getting higher.

It's one huge economic feck up!

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If they increase interest rates they cripple the "recovery".

No one is going to willingly make people "poorer" by removing the wealth they have stored in their "house" there's no easy out so we'll just carry on. However carrying on makes an exit even more difficult without total economic collapse. As property prices have gone higher instead of the readjustment being tens of billions we are now looking a hundreds of billions and getting higher.

It's one huge economic feck up!

But this wretched government are perfectly happy to make savers poorer to protect the wealth that others have stored in their houses!

Bottom line is that we have an unsustainable housing bubble that they are trying to keep inflated until after the next general election.

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A decade of unaffordable. It would only take another decade before most of the UK is priced out of owning their own home and people take to the streets en mass. It's a bit concerning as I can't see any party volunteering to change the planning system in favour of the free market of those prices out of building their own homes.

If the current trend continues UKIP will be voted in then it will be natzi style foreigner cleansing by the masses who just want somewhere comfortable to live.

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What we had first was the lie to buy (and interest only)....you choose what you want/need you get it.....house price inflation via low interest rates will protect both you and us...win.win........but to carry on in that vein would, and they know it turn into lose.lose.

So what is required now is for people to earn equity through hpi and paying down the debt, together with back to responsible tighter lending....equity and affordability is a buffer for protecting the lenders so that interest rates can then rise. ;)

Edited by winkie

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Bottom line is that we have an unsustainable housing bubble that they are trying to keep inflated until after the next general election.

Exactly and you can clearly see that it's a finance/speculative bubble rather than a real shortage because rents are not rising! Interesting, apart from a few select area worldwide property prices are continuing to deflate which makes me think the although UK prices are near their all time high's they could well be more overvalued than back in 2007.

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But this wretched government are perfectly happy to make savers poorer to protect the wealth that others have stored in their houses!

Bottom line is that we have an unsustainable housing bubble that they are trying to keep inflated until after the next general election.

That's because savers aren't adding value to the country like housing! Look at London what saving product offers a 20% YoY return for little risk.. :ph34r:

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That's because savers aren't adding value to the country like housing! Look at London what saving product offers a 20% YoY return for little risk.. :ph34r:

Little risk? I would dispute that!

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Little risk? I would dispute that!

So would I.....all down to timing.......now is certainly not the time......a place and time for everything. ;)

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But this wretched government are perfectly happy to make savers poorer to protect the wealth that others have stored in their houses!

Bottom line is that we have an unsustainable housing bubble that they are trying to keep inflated until after the next general election.

They are trying to keep it inflated full stop,if they had any intention of letting the the housing market correct they would have let it happen when they first come to power, as they had the best get out they will ever have "it was Gordon's fault"

it`s looking like shit of bust time ,can we really go down the Japanese route with the same time scale ?

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They are trying to keep it inflated full stop,if they had any intention of letting the the housing market correct they would have let it happen when they first come to power, as they had the best get out they will ever have "it was Gordon's fault"

it`s looking like shit of bust time ,can we really go down the Japanese route with the same time scale ?

Yes, I believe we can and will.

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TPTB have really painted themselves into a corner. They're damned if they do or damned if they don't raise IRs.


As speculation mounts over the prospect of an imminent interest rate rise, a new survey claims that more than one in three homeowners fear they will find it more difficult to afford mortgage payments if the base rate increases.

The 2014 Homeowner Survey by conveyancer Myhomemove and pressure group the HomeOwners Alliance - which has recently been critical of estate agents’ fees and practices - says rate rises will reduce volumes of new buyers.

In detail, the survey says:

  • 5.8 million owners fear a rate rise will make it more difficult to service mortgages;
  • 64 per cent of interest-only mortgage holders say they fear rising interest rates will make it more difficult to afford payments, suggesting they could be most financially stretched group of owners;
  • among would-be first time buyers, 54 per cent say they fear a rise in interest rates will make it more difficult to purchase;
  • regionally, homeowners in the east of England are more fearful about a rise in interest rates than anywhere else in the country.

“Interest rates could begin to rise as soon as November. Christmas could be a tough time” warns Doug Crawford, chief executive of Myhomemove.

http://www.estateagenttoday.co.uk/835-bubble-fear-1-rate-rise-concerns

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Yes, I believe we can and will.

Can't see it myself, Japan had one of the highest private savings rate in the world at the beginning of the 90`s and huge manufacturing trade surplus( which it still has to a lesser level) ,its taken 20+ years to erode their savings

Whats the UK private savings looking like now ? and when was the last time the UK had a trade surplus for anything over a year or two ( in the late 90`s)

The UK has been the best looking horse in the glue factory for a while now but at some point there will be a few better looking ones coming througt the door

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But this wretched government are perfectly happy to make savers poorer to protect the wealth that others have stored in their houses!

Bottom line is that we have an unsustainable housing bubble that they are trying to keep inflated until after the next general election.

Not just until after the next election but indefinitely. It's either boom or bust, the proles will not even accept stagnation or the market moving sideways.

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You're gripping the rope under the balloon.

Do you grip tighter, or let go?

Do you grip tighter, or let go?

Do you grip tighter, or let go?

Do you grip tighter, or let go?

Oh,now you've let go anyway....

Shame you didn't let go at 30 feet.

Now you're dead.

Definitely dead.

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If the current trend continues UKIP will be voted in then it will be natzi style foreigner cleansing by the masses who just want somewhere comfortable to live.

I take it this is a joke? I thought people on this site were level headed, individual thinkers.

Get back to the Daily Mail comments section

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That's because savers aren't adding value to the country like housing! Look at London what saving product offers a 20% YoY return for little risk.. :ph34r:

And thats due to the fact that the bankers no longer need capital from Savers...they can get it from the Government.

As for House prices, again, billions in derivatives rely on this one asset to keep value high.

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So would I.....all down to timing.......now is certainly not the time......a place and time for everything. ;)

Two years ago when we bought in London it seemed like a great risk. The banks surveyor even stated in their report that we'd be unlikely to be able to sell for the same price as we paid for quite some time. As it happens, 2 years later and we're at about +30%. Almost nothing on the market because when it appears it is snapped up straight away. So, yes there appears to be risk at first (that was a Birmingham based surveyor btw) but with prices rising the risk soon disappears. Of course, this could be the top but as no one knows its more likely than not that its not the top. And as a long time H P C 'e r I've called the top so many times in the past 10 years that I know not to listen to myself.

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Two years ago when we bought in London it seemed like a great risk. The banks surveyor even stated in their report that we'd be unlikely to be able to sell for the same price as we paid for quite some time. As it happens, 2 years later and we're at about +30%. Almost nothing on the market because when it appears it is snapped up straight away. So, yes there appears to be risk at first (that was a Birmingham based surveyor btw) but with prices rising the risk soon disappears. Of course, this could be the top but as no one knows its more likely than not that its not the top. And as a long time H P C 'e r I've called the top so many times in the past 10 years that I know not to listen to myself.

The market has bubbled, and, being in it, ive made 30%...clever

BTC did the same earlier this year...everyone was a millyonaire.

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TPTB have really painted themselves into a corner. They're damned if they do or damned if they don't raise IRs.

As speculation mounts over the prospect of an imminent interest rate rise, a new survey claims that more than one in three homeowners fear they will find it more difficult to afford mortgage payments if the base rate increases.

The 2014 Homeowner Survey by conveyancer Myhomemove and pressure group the HomeOwners Alliance - which has recently been critical of estate agents’ fees and practices - says rate rises will reduce volumes of new buyers.

In detail, the survey says:

  • 5.8 million owners fear a rate rise will make it more difficult to service mortgages;
  • 64 per cent of interest-only mortgage holders say they fear rising interest rates will make it more difficult to afford payments, suggesting they could be most financially stretched group of owners;
  • among would-be first time buyers, 54 per cent say they fear a rise in interest rates will make it more difficult to purchase;
  • regionally, homeowners in the east of England are more fearful about a rise in interest rates than anywhere else in the country.

“Interest rates could begin to rise as soon as November. Christmas could be a tough time” warns Doug Crawford, chief executive of Myhomemove.

http://www.estateage...e-rise-concerns

If some one rang me up and asked me if I was worried about mortgage rate going up I would say yes and lay it on thick about how much trouble I would be in.

Any body see a good reason for me to lie about my circumstances.

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The market has bubbled, and, being in it, ive made 30%...clever

BTC did the same earlier this year...everyone was a millyonaire.

Nothing clever about it. We were forced out of renting by bad landlords and high rent. Sometimes going against your own instincts can work out well. That's all I'm saying. The 30% bit is just to be clear that the risk has now gone.

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Two years ago when we bought in London it seemed like a great risk. The banks surveyor even stated in their report that we'd be unlikely to be able to sell for the same price as we paid for quite some time. As it happens, 2 years later and we're at about +30%. Almost nothing on the market because when it appears it is snapped up straight away. So, yes there appears to be risk at first (that was a Birmingham based surveyor btw) but with prices rising the risk soon disappears. Of course, this could be the top but as no one knows its more likely than not that its not the top. And as a long time H P C 'e r I've called the top so many times in the past 10 years that I know not to listen to myself.

30% on paper.....do you still have the same amount of debt or have you reduced it......whilst you are living in it it is dead money and your next place may be more expensive or it may not, but the debt you owe will not change unless you make it change......since two years ago and mostly very recently monetary policy has been changing, tighenening of credit, rising pound and warnings of near future interest rate rises......the only figures that matter are the buying price and the selling price.....the other figure is the money it costs to stay living there. ;)

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30% on paper.....do you still have the same amount of debt or have you reduced it......whilst you are living in it it is dead money and your next place may be more expensive or it may not, but the debt you owe will not change unless you make it change......since two years ago and mostly very recently monetary policy has been changing, tighenening of credit, rising pound and warnings of near future interest rate rises......the only figures that matter are the buying price and the selling price.....the other figure is the money it costs to stay living there. ;)

Yes, paper only. I'd rather see a crash and a buyers market.

However, living there is cheap, the mortgage is cheap as its been paid down considerably. The deposit was big in the first place. I'm not a risk taker. Now saving nearly £1200/month compared to my last rent.

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