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?

I’m struggling with my mortgage going up but no I wouldn’t support this. I mean we all love free money right but at what cost? There is no magic money tree. Every single person in this country is going to suffer the financial effects of lockdown, war, cost of living. We can’t bail everyone out. I guess we just have to hunker down, sacrifice everything that can be sacrificed until things get better.

I've also heard experts saying the only way to deal with inflation is to force a recession.

I don't think we can underestimate the hard times ahead, this is only the beginning IMO. We've really had it very good for a long time, which I'm not sure people have always appreciated. There'll be winners and losers of course, but it's not going to be pleasant for many.

I think downsizing works if your house is still worth more than your mortgage and the place your are down sizing too is obviously cheaper including moving, and you can still get to work.

Mortgage bailing out? Jog right on with that idea.

Echo this entirely. I’ve lived through a house repossession back in the 90s - and it was a modest two bed northern semi, nothing flash - and wouldn’t wish the experience on anyone. It took 12 years to get back on an even keel after that.

It's not a question of what's fair or right or what people want or need. Bail mortgages out and you negate the attempts to reduce inflation and the current crisis goes on forever/ gets worse.

The only bail out I'd be in favour of would be allowing Mortgage Interest equivalent to the Local Housing Rate (for the house size the family would be entitled) to be paid as Housing Benefit to home owners.

Income dependent in the same way as Housing Benefit element of UC, because it's cheaper not to have to re-home families from repossessed properties than to put them in temp accommodation for more than the housing element would have cost. Could even put a charge against the house in the same way that legal aid does...

The only bail out I'd be in favour of would be allowing Mortgage Interest equivalent to the Local Housing Rate (for the house size the family would be entitled) to be paid as Housing Benefit to home owners.

@randomsabreuse interestingly I would be paid about £800 a month if I had to move to rented accommodation. I don't think posters realise how much is saved in the benefits system by many of those who overstretched to buy.

I would be appalled if the government bailed out mortgage holders.

It's simply stupid to have got a mortgage without making sure you could cope with worst case scenarios like interest rates going up.

I understand about rising cost of living catching people out.
I realise that some people have awful unexpected things happen (I've been in an abusive relationship and also had a serious health condition diagnosed, so am no stranger to that)

But it was common knowledge that mortgage interest rates were at an historic low. And mortgage calculators were freely available. So I am somewhat amazed how surprised people are by the impact of rate rises

It’s not just interest rate rises though, is it? It’s combined with a general cost of living crisis, with energy bills more than doubled for many and food prices 20-25% higher than this time last year.

If anyone is going to claim they stress tested 5+ years ago against a rise in interest rates, the impacts of Brexit, a war in Europe having a major impact on fuel prices AND the after-effects of a global pandemic all happening at the same time, I’d like to borrow your crystal ball for next week’s lottery numbers please.

Yeah, anyone who says that is full of shit. DH and I can easily afford our mortgage, and while some of that is decisions and judgement, it certainly isn't because we saw this coming.

I don't see that people can be bailed out, we do need prices to drop in real terms, but we can say that without coming out with a load of shit about surely you should've anticipated all this. It's not the interest rate rises, it's everything else.

I thought the point of this was to force downsizing, flood the market, and create a price correction (crash).
If they increase interest rates and then bail out those impacted, the economy is more fucked.
It's fucked already.

I’m not sure there’s another way to go. Don’t raise them or do but what else would you do for inflation?

I haven’t heard anyone with a different approach but maybe I’ve missed it

And you could say why should our taxes pay for people who have chosen to have six kids and no job/house of their own to be paid for from cradle to grave?

You could and do. There's a two child cap on benefits...

And before anyone says 'yes but houses were so much cheaper then' - Yeap they were but wages were so much lower.

not correct

an average house could be purchased at £57k with 3x average wages of a working couple, average household income was £20k

average household income in 2020 is just shy of £40
average house is £275k so you’d need an average household income to be £91k over double what it actually is.

it pisses me of when people say it was just as hard back then, it wasn’t and I started working in 1985 and purchased a starter home in 1990 - it was much much easier. That was also on 25 year mortgage- not 35 or 40

A generation has got hooked on cheap money and low interest rates

Which generation? There are plenty of people who are older with interest only mortgages who have assumed their house will keep going up in value & plenty of older people who have being relying on equity to fund retirement.

We had no tax credits or family credit.

Not everyone gets this now either. The equivalent to child benefit was only not means tested as it is now.

but life can unravel pretty fucking fast sometimes.

Agree & the notion that if you didn't borrow twice your salary or stress test to double figs you are feckless is nonsense.

The fact that property is so utterly commodified in the UK ‐and that this has been actively encouraged by the current economic model‐ is gross.

Yep there has been no investment in country or its people since 08 hence declining services & stagnant pay. Housing was the economy which is reckless.

I thought the point of this was to force downsizing, flood the market, and create a price correction

Surely it's mainly older people who have the right size property to downsize in the first place. They are ones who will be mortgage free or have a lot of equity so won't be forced to sell.

And you could say why should our taxes pay for people who have chosen to have six kids and no job/house of their own to be paid for from cradle to grave?

or people who didn't save enough or any pension?

average household income in 2020 is just shy of £40

and that 20k in 1990 should be closer to 50k now to keep pace with inflation.

If NMW had kept pace with house inflation then it’d be £24 per hour to give £48k x 2 incomes, meaning £96k household income x3 would cover an average house at £275k over 25 year mortgage

Me too.
And to the posters now saying everyone commenting on the thread is on £100k, and none of us have ever experienced unforseen events....DH lost his job last October. He'd burned through his meager savings trying to make a shit situation better so had nothing yo fall back on. I had to pay for him to retrain, support him financially when he wasn't earning and buy him a van.
We survived because we were massively uncommitted on our bills and mortgage.
We moved an hour away from where we lived previously, and from our friends, to buy our current house, as the house prices in our last location were unacceptable to us.
Interest rates were ALWAYS going to rise. We don't like paying the higher amounts more than anyone else, but we knew it was coming and had prepared.

Absolutely this. People's entitlement baffles me.

It does make me laugh when people talk as if previous generations never faced hardship. It's true today's young people have never really known it but when I left school youth unemployment was c. 12%, whole towns were ruined by the closure of the mining industry, people were handing their keys back to the banks because they couldn't sell their homes for what they needed to clear the mortgage, those who held onto them saw rates go to 15% etc etc.

It's awful but artificially managing it so people don't feel the hardship will just prolong the agony. The market needs the adjustment.

I guess the counter argument is that mortgage owners /payers are a relatively small proportion of the population but are going to make by far the biggest contribution in terms of stemming inflation.

I thought money saving experts Martin spoken some sense in this when he said 'we all bailed the banks out in 2008, now it's time for them to repay that debt'

As a 'squeezed middle' public sector worker with pay all but frozen since 2007 and two negative pension reforms, who would have owned a house outright by now, I do feel somewhat aggrieved at footing the bill, again, for something that was never my fault.

But, if the ballot comes in on Wednesday in favor of strikes and we eventually get our 35% pay rise or somewhere close, that'd go someway to redressing the balance.