Wednesday, November 3, 2010

Consequences of low IR

Millions in cheap home loans trap

Again an article on housing is the most commented on. Some interesting personal circumstances in the comments section. Eg. Anne who, when buying a house in the eighties budgeted carefully to manage a rate of 8% found that on completion it had soared to 15%. Interesting stat from FSA that they class mortgages as unaffordable if repayments come to more than 35% of take home pay.

Posted by nomad @ 11:55 AM (2296 views)
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20 thoughts on “Consequences of low IR

  • The FSA are quite happy to endorse 4 x salary (pre-tax), mortgages but they “class mortgages as unaffordable if repayments come to more than 35% of take home pay”. Somebody needs to hand them a calculator

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  • I’m assuming this is a message for Thursday’s MPC not to increase the BoE base rate form the homeownerist centric Daily Moan.

    3 million out of approx 25 million dwellings in UK is about 12%. So is the Daily Moan actually suggesting yet another minority rule ?

    Kind of goes against itself then.

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  • Interesting stat from FSA that they class mortgages as unaffordable if repayments come to more than 35% of take home pay.

    And yet they said nothing, and actively encouraged 125% mortgages under Labour………

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  • Yes, doom. This article is lobbying for low interest rates.

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  • sibley's b'stard child says:

    “Leading economist Danny Gabay warned that a full-scale recovery will not take place until banks tackle the problem of the families who took out loans far beyond their means.”

    Good idea, let’s keep IRs at 0.5% for 25 years until the last of the suckers have paid off their principal. F*ck everyone else.

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  • dont go giving them ideas sibley

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  • sibley's b'stard child says:

    You’re right Inbreda; I forgot about the numpties on the IO never-never. Best make it 50 years in which case.

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  • mark wadsworth says:

    As fully paid up Home-Owner-Ists, they never mention the millions of (usually younger people) caught in another kind of low-interest-rate trap, i.e. those who are paying full whack rent to a landlord who is benefitting from these low interest rates, or who can’t buy a house because prices are inflated by these low interest rates etc.

    Flash, good maths.

    Gross salary £100 less 31% = take home pay £69
    Gross salary x 4 = mortgage £400
    £400 x interest and repayments (say) 6% = £24
    £24 divided by £69 = 35%.

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  • Excellent point Flashman.

    Avg person with £25k salary, take home pay £1597.80 PCM.

    X4 repayment mortgage of £100k @4.50% over 25 yrs, 15% deposit, monthly cost £561.99.

    Mortgage cost of 35.2% of salary.

    Utter bonkers!

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  • cheap home loans = trap
    cheap home prices = good

    glad we cleared that one up. Maybe we can have some of the latter then please.

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  • If we want to give the BoE ideas, how about negative IR’s? That way they could actually charge savers and use the income to pay for these numpties mortgages.

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  • sibley's b'stard child says:

    Good idea Timmy; there’s a Facebook campaign going begging there.

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  • Sibley – good shout – we could call it the Facebook Base Fu** campaign!!

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  • sibley's b'stard child says:

    Now that, sir, is very very witty.

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  • sibley's b'stard child says:

    “As fully paid up Home-Owner-Ists, they never mention the millions of (usually younger people) caught in another kind of low-interest-rate trap, i.e. those who are paying full whack rent to a landlord who is benefitting from these low interest rates, or who can’t buy a house because prices are inflated by these low interest rates etc.”

    Good point MW although that should be “…[i]and[i] can’t buy a house because prices are inflated…”

    My rent is almost 45% of my take home pay – can I have a subsidy please?

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  • mark wadsworth says:

    SBC, yes, “and” works for me. It’s part of a long list and those were just examples.

    Believe it or not, your rent is subsidised, as all the HB payments for people out of work tend to push up rents, including yours! Mug that you are, you are the one doing the subsidising – you are paying tax to fund other landlord’s rental income and simultaneously pushing up the rent you have to pay yourself! (same goes for me, of course)

    Now, why don’t you just stop whining and be a good boy and take a step onto the housing ladder..? There’s room for plenty more in the ‘low interest rate trap’!

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  • I am posting this here for the people who insult me on a regular basis, please read it.

    it amazes me how the people who insult others on this site never post anything of real interest.

    It is a real shame this website has become home to the idiots who thrive in life from insulting others.

    So far it appears at least 5 people probably the same person loves to insult my posts and libel me, any further insults to me personally will be passed to my lawyers, after all the evidence is on here

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  • Affordability is of course key… a hard and fast percentage of one’s take home pay (pay – tax – current debt obligations) is not really the correct measure however, there is more to take into account – do they have dependants and what is their accustomed lifestyle? If I take home £x/month and spend everything but £150 every month, which I currently spend on rent then, without changing my lifestyle, I can only afford a mortgage of £150/month. This is why the financial institution doing the lending needs to be the same institution taking on the risk, since they are best placed to be able to understand individual circumstance (maybe they ask me to show for three months that I am able to stop spending £1000 on shoes each month?!) – the Bank Manager meeting and jumping through hoops. This all breaks down when there are willing, immediate buyers for these risks. We should ask why. It’s because there was an implied, inherent crutch ready and waiting – the Government(s) of course this implied crutch will still be there in the future…

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  • mark – don’t feed the trolls mate.

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  • Trolls?
    Streuth you guys are retards.
    Try more self-aware, less self-absorbed.

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