Bailing out the squeezed middle's mortgage repayments?

[EveSix]

Listening to Any Answers and feeling frustrated, but wondering if I'm missing some nuance.

A caller is advocating for government bail-outs to cover mortgage payments for home owners impacted by recent hikes in interest rates.

I feel a sort of existential exasperation at this idea.

I absolutely understand that times are tough, and that we form strong attachments to the buildings we live in and the choices and advantages that a certain income affords us: holidays, the ability to have savings and university funds for our DC, as were mentioned in the programme.

I understand that there is, what some would argue, a precedence for such a bail out in terms of recent quantitative easing, furlough payments and schemes to support businesses following the pandemic.

But home ownership is a massive privilege in itself, in a skewed growth economy that encourages profiteering from the basic human need for shelter.

Home 'owners' don't own their mortgaged houses; they owe money to the financial corporations which will be the ultimate beneficiaries of such bail outs.

Does the squeezed middle need bailing out? It seems ludicrous to me. People have been permitted to overreach financially. Surely, the remedy is to spend our own assets first; use our savings; the rainy day did come. Move in order to downsize or relocate to a cheaper area; we're not tethered to the building we currently call 'home' if we no longer can afford it.

The caller asserted that "...life is for living!" by way of explanation why scrimping and cutting back feels like deprivation.

What am I missing?

At least the squeezed middle can downsize their property, trade their fancy cars in for cheap runabouts, and cut other expenses if they have to. The great unwashed poor don't have that luxury.

I wouldn't support it. We've been cautious, bought a sensible house, didn't overstretch, took a long fix, overpaid. Why should we bailout people stupid enough to live the high life while interest rates were low

My sympathy rests with renter's and those who have actual unexpected things happen (health issues /job loss). Interest rates were always going to go up

I think it should be an absolute last resort but there does need to be some sort of plan. It doesn't benefit anyone if there are mass repossessions and the only people able to be homeowners are very wealthy or were lucky enough to buy before prices got silly.
Its also a massive generalisation to assume homeowners are all driving fancy cars and living the high life. I finally managed to buy last year at the grand old age of 45 and there's currently a mechanic on my drive replacing the brakes on my 11 year old car!

My concern would be not necessarily for the individuals who may lose their homes without intervention (though of course I do have sympathy for them) but more for the consequences of potentially thousands of people defaulting on their mortgages and the impact that will have on the lenders. And in turn what lenders in trouble may impact more widely on the economy. I’m not an economist though so hopefully someone more knowledgeable can answer whether or not there is any wider risk to the rest of us if suddenly repossessions are happening at a high rate.

Exactly this

I do sympathise with people struggling with their mortgage, but no to this! I have a big mortgage but I seem to remember when we signed the mortgage deal, there was a clause that asked if we could still afford to pay it if rates went up to a historical high (can’t remember exactly how much). Rates were really really low for ages, so people should have factored this in and been cautious when getting a mortgage. I do agree with banks offering help in circumstances outside their control, redundancy, illness etc. but not just because someone overstretched themselves on a mortgage…

I was confused by this.
Yes, the possibility of loosing your mortgaged house due to increased interest rates is terrifying.
BUT, I thought the whole point of the sustained interest rate rises was to curtail spending, and hence inflation by causing financial pain.
If those with over extended finances are bailed out, does that mean inflation will take longer to fall as they will continue to have the money to spend?

I listened to that caller.

I kind of have mixed feelings about it.

On the one hand (at the risk of sounding like an old gimmer) we lived through this in the late 1980s/1990s and for many of us it just meant getting extra work- evening or weekend jobs on top of full time professional roles. There were no bail outs, and no tax credits or support like that. And before anyone says 'yes but houses were so much cheaper then' - Yeap they were but wages were so much lower. It felt like very similar to the times we're going through now. And I was surprised when the caller mentioned getting a job nearer home to save on fuel and therefore being able to put money into the holiday fund, because as the OP says, that in itself shows an expectation that holidays, savings etc are a kind of entitlement. When things were grim back in the 90s, we just couldn't entertain the thought of a holiday and never had any savings. So I do think expectations have shot up and people feel an entitlement to much more than in the past

On the other hand, how does it help anyone if homeowners en masse are seeing their homes repossessed? I remember seeing that all around me in the early 90s and it was grim. People have to live somewhere. So on balance there should be some support and to be fair the banks are on board these days with the idea of payment holidays or going interest only for a period. The real answer of course is for the housing market to correct itself and for the vastly inflated prices we've seen to come down.

Yes I don’t see the point in trying to stop the effect, the rates will just go higher

I don't understand the whole "curtail spending thing" though. Why are we being curtailed from spending on basics like energy and food?

We have a modest house and didn't stretch ourselves on the mortgage but our mortgage payments will be increasing by 50% , and that's along with nursery and Pre/Post school clubs having both increased by 40%

Our (70s) boiler has just been condemned and that's happened same bloody time as our washing machine and fridge packing in too (things come in 3s, so hoping that's it).

We could sell but move to where? A 1bed flat? I suppose some people do have to do that, looks like we will too. But ofc 1 bed flats aren't cheap and are rare in this area. So may have to move out of area to afford, but then we will loose our support network, kids will be displaced and commuting will increase

I know I'm not alone in this and that's what terrifies me!

Agree. If there is an epidemic of potential foreclosures the banks will renegotiate the mortgages before they will evict.
The exception to this is where there isn't a cats change in hell of being able to repay. Ever.

On the one hand (at the risk of sounding like an old gimmer) we lived through this in the late 1980s/1990s and for many of us it just meant getting extra work- evening or weekend jobs on top of full time professional roles. There were no bail outs, and no tax credits or support like that. And before anyone says 'yes but houses were so much cheaper then' - Yeap they were but wages were so much lower.

There was MIRAS & more social housing. And wages to prices ratio was better.

I see the usual bitterness is evident on this thread.

People could not have anticipated a huge increase in COL. The government could legislate to make banks put people on long term fixes not connected to interest rates. Like happens in some other countries. Or they could stop the BOE increasing rates which hasn’t been at all helpful for this type of inflation.

Same, it’s the same when they were talking about credit scores not being affected if you missed a mortgage payment. The whole point of a credit score is your risk and someone who misses a mortgage repayment is a higher risk than someone who hasn’t.

I don't think that caller was necessarily typical.

I and my colleagues who have mortgages can just about afford our mortgage repayments. I am what you would consider overstretched and would not be able to afford the increase to my repayments if I were to remortgage now.

However.... my mortgage is lower than my rent would be so it made sense to take a chance/stretch myself. I am in a small three bed house - affordable because the area isn't fancy. The nearest houses to rent are £1700, 2 bed flats for rent at £1500.

Ultimately if I had to sell I would in time be entitled to help with the rent and would cost the state money.

I think that's a lot of the issue too @Abitofadventure , just how rent is more expensive than mortgages

Why should we bailout people stupid enough to live the high life while interest rates were low

I can only assume those who think it's all about being cautious, making sensible decisions live somewhere where income and housing costs allow such mortgage/home choices. I live in quite literally the cheapest house on the market when I bought.

I live in the SE. I too bought the cheapest and rented a tiny grotty studio for a long time to save the deposit

Imagine having to bail out some on here for their forever home with large new kitchen and fancy doors, it's a joke

The rate rises were always going to happen, and could easily have gone higher, sooner, and faster.

THIS surely? Interest rates go up to cause pain. If you remove the pain, it just postpones the pain until … well until Labour get in and the Tories can blame them.

Whoever is in government is going to have to say: house prices have got to come down. It’s going to be painful. The only other solution is that the government will take on people’s houses.

What other solution is there, long term?

@Kalodin have just had similar childcare increases and only one cycle on my washing machine works. Its not feeling like the high life!

Hopefully any help will be sensibly managed.

It's only the Lib Dem's that wanted this and they won't be in government anyway, Labour and Tories were going the lengthening mortgage and interest only route. I guess what will happen is there will be something like there was in Covid times with the mortgage holidays.

Quite