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?

Tbh, I'm wondering if we will be better off selling up and just either living in a different country. Not sure what's so Great about Great Britain atm. I feel very disillusioned and concerned about my children's futures here.

Society seemed apathetic about those who sunk during austerity, nobody seemed to do much but mumble about those who got screwed by the changes to disability benefits, people were joyous about those who were unraveled by the third child changes with tax credits, but now the rising tide of shit is coming for people whose savings are being eroded, holidays are being skipped and financial advantages bestowed upon supported adult children are rather slimmer and they see the quality of life look rather more like the people who they ignored who came before them...and now it's untenable - something needs to be done - someone needs to step in?

I'm sure our family falls comfortably within any definition of squeezed middle, but I can see why the idea pisses off a whole swathe of society that saw their life subsumed and then watched it be chalked up to collateral damage for the greater good.

Agree.

I also agree with @groupery's point. You can quietly thank your lucky stars if you are in a more fortunate position. But doing the I'm alright Jack routine in response to posters who are now panicking seems a bit off. For every person that's lived beyond their means and is moaning about not being able to go on foreign holidays, there will be several others who are just trying to keep their heads above water and who are facing really shitty times through no fault of their own.

Any scheme would need to be properly worked out and means tested. But it would still be unfair to retired long term rented who can't afford to buy.

I think there is also a very good point about the impact to the next generation.

In the past you could graft and with a fair wind and a bit of luck, you'd have a reasonable job with some sort of pension and security to it, the opportunity to buy your own home, and hard work usually offered the chance to improve your prospects.

Pensions have been hollowed out, working T&C have been eroded, job security is almost non-existent, rents are sky high and house prices are crackers, the environment is fucked, healthcare and social security is on its knees...

Who can blame them for looking at all of this and wondering why the hell they should work themselves into the ground when there is no discernible reward for doing so.

I worry for the future. I have 3 kids/ young adults living at home with no prospect of getting on the housing ladder or renting anytime soon and stuck in low paid jobs despite doing the right thing/ going to Uni/ working hard. We fortunately do have a house big enough for them ( and one of ds's gf) to live with us but it feels overcrowded and they need their own space. I've taken on a better paid job myself ( with more stress) in my late fifties to try to help them a bit as well as desperately trying to save something for my retirement.

This is what happens when all the money is siphoned off by the people at the top, high levels of inequality are damaging for society as a whole.

@Babyroobs instead of allowing all these student flats designed for mainly well off international students, universities that can do so should be using their own grounds etc- it's been a real problem here in Bath and yet the Uni has acres and acres of grounds and there are vast amounts of HMOs in town too .

This would mean that more social rented and shared ownership places could be given priority to be built (should be funded) and should be a priority so that people like your kids could at least get a 1 or 2 bedder at an affordable level and decide then whether to stick with it or save up to buy. My son is in London in a nice area private renting with 1 other- it's a lovely place but even on £35k at 25 it's tough going and he spends 60% of his earnings on rent and bills. Even the cheaper areas it would still be 50% at best. I often end up having to help out near pay day and he's showed me his bank statements and it's not because he's out every night- 1 night a week if he's lucky!

It's not right, these young adults should be able to afford proper homes for themselves where they can start a family if they want to.
Government failure to properly regulate the housing market has made it difficult for young people to 'fledge', this is a big part of the reason why birth rates are dropping.
Governments are panicking, trying to incentivise young people to have children, but nothing is working and they won't tackle the real causes because that would mean they would take a hit.
The people who make the rules make them to benefit themselves, the people at the top who have have got their money tied up in property won't want prices to come down to affordable levels because that would reduce their personal wealth.

Completely agree. There is no future in this country and no hope if the young can’t make their way into their own accommodation and move their lives forward naturally in their own space. The housing costs in many parts of this country are disaster out for its young 😞

@lifeissweet
i agree with you.

I don’t think it’s ok. I wasn’t looking for applause, simply stating fact. It’s not ok that I had to do that to survive. No one should have to. Wages have stagnated in the past decade, so maybe addressing that would be an option for the government. And no, I have no idea whether I could have afforded a house 12 years later, but looking at house.prices locally, possibly yes.

Luck? Divorced twice, first time for him cheating, the second because I was living abroad with a husband who turned out to be psychopathic violent abuser. I fled for my life with very little back to the UK. Started again from less than nothing, in a refuge. No children, biology decided that for me. No car, can’t afford it. Energy costs-had to turn off or down, like most people did. I have to live poor, as do many people. Care for my elderly parents, when I’m not working.

No one should have to live poor, but many of us have had to to survive, and many still do. I do not accept that people should have to work 3 jobs to survive. But, in the short term, that might be what’s required.

This is what happens when all the money is siphoned off by the people at the top, high levels of inequality are damaging for society as a whole.

It's also because we have high intergenerational inequality & there has been little investment in young people.

@Whenisitsummer where do you live? In what year did you buy?
I'm in London (born and raised) with a combined family income of +£150k pa and there are no family homes for £300-£330k so this 2x statement is baffling to me.

@SweetSakura the banks stress tested at 3-4% so these +6% rises in such a short space of time with the current costs of housing is uncharted territory

Thankfully we have savings and worse case my PIL would help so not too worried but we bought did all the things mn said to do

• we are married with professional jobs
• we both owned before meeting and sold our flats (not stockpiling housing stock) and bought a family home
• we moved to a cheaper area than where we rented or owned flats so as to get better value
• made sure we could afford childcare (it's 1/2 of our current mortgage payments)

What we couldn't plan for was COL crisis. We are in our 30s so were still in university when the last crash happened. Our entire adult life has been very high housing costs and low interest rates.
I think the government should help because if I were a business impacted by unforeseen global factors they would support me through it like they did with the banks in 2008 and the country during Covid. If I said everyone who received furlough should pay back into the pot to help I'd rightly be slaughtered but as with them this is an unprecedented state of events and people need help.

@TrudyProud I don't think the 2x rule of thumb is so relevant as you get higher incomes because the fixed costs elsewhere are pretty similar so are just a lower percentage. For instance, my childcare bill is about £3k a month which would be the same whether I earnt £80k or £160k. At £80k I've got maybe £1.5k-£2k a month for mortgage, food, insurance, clothing, birthdays, etc. so a mortgage of £1k a month (around about 2x income give or take) would feel tight. At £160k I've got probably £5k leftover so £2k a month mortgage is absolutely fine as it still leaves £3k a month for everything else and actually 3x income to get a £3k per month mortgage would probably be fine too.

Obviously I'd not pay the childcare if I earnt less as it wouldn't be worth working but if you replace childcare with other fixed costs at a lower income you get the same flat-ish fixed costs profile that makes the 2x income multiplier make sense for an average person on an average wage (For average use the type of average used in the standard calculator for an average wage which i think is mean).

And, building on your comments, I agree the COL was a huge shock to people our age. But why should I be subsidising you choosing to stay in London to be near family when I couldn't afford to? Obviously it's not fair but maybe you can't actually afford to stay there either?

£80k - is that house hold income? Even that's really high! @Newname47

Perhaps I do just need to retrain and get out of the Construction industry

2x household income? I'm not sure I can find a property within commuting distance of my Suffolk job that would come in at £120k

So best to move to where?

@Kalodin agreed but anyone on less than that probably isn't paying so much in childcare because at that point you're almost certainly better off not working or not working full time. The same principle applies with other fixed costs like food, heating, car insurance , etc. which can be a big or small percentage of your household outgoing but probably won't vary that much in actual numbers because obviously there's a minimum amount people can survive on.

And it's £120k mortgage which is different to £120k property prices because you'd also need a deposit. Until you have a big enough deposit to afford the house with that mortgage you're more exposed in some ways having a house than having rent which at least is capped on increases and would be covered by housing benefit if you lost your job.

@Newname47 I think 2x rule is ridiculous and was simply pointing out that if I as a higher earner can't buy a house at that ratio it's a silly thing for people to work to/mention on a thread like this.

Thankfully as I said in my post I CAN afford to live in my house, send my DD to nursery FT and save but I'm a higher earner so how so the majority lower earners live?

I don't agree with a race to the bottom of move to the middle of nowhere because let's face it when "Londoners" do move to cheaper places they get piled on for increasing the cost of housing in cheaper areas. It's a lose lose situation.

Also, £3k for childcare? Guessing you have lots of kids if you live in a low housing cost area and pay that much because mine is only £1k per month per child for FT childcare.

It's Victorian thinking. Anyone struggling must be feckless and have brought it on themselves. No one below the upper middle class is entitled to decent housing and enough to eat? Is that what we are aiming for?

@lifeissweet I totally agree.

It's actually really fucking irritating that the first thing some people can say about someone else losing their home off the back of massive global changes is 'it's their own fault'.

I think it's a self-soothing thing. To think someone else must have brought bad luck on themselves and that you've somehow being super clever smart to avoid it, must be reassurring. When the reality is, we are all an unlucky roll of the dice away from one disaster or another.

I wouldn't vote for a government bail out but you don't have to be a saint too empathise that many, many, many people made the best decision they could with the information they had at the time. That they don't 'deserve' to lose thier home and that a little bit of empathy might not be too amiss.

I agree that the 'move to a cheaper area' thing is not always the solution people think it is. I mean, yes, a cheaper street or less desirable estate, maybe, but that doesn't always make enough of a difference.

People need to live where the jobs are. London needs unskilled workers, public sector workers, retail staff...etc the same as anywhere else. A mass exodus out of expensive areas would be a big problem - especially given that the cheap enough areas are likely not the next borough or the next county, but actually hundreds of miles North.

And then many people would be having to move away from grandparents who may do the bulk of childcare - so people have to offset the gains in a lower mortgage against paying for higher childcare costs.

Might work for some. It certainly isn't a good blanket solution.

And I'll say something else - as someone who has worked and paid for herself all her life and 'got nothing' from her parents. That line itself is often bullshit.

It's bullshit from me because here's what I did get from my parents:

1. A stable childhood in which moving between schools happened infrequently
2. Parents who cared enough to select the best state school they could
3. A bedroom to myself so I had peace and quiet to study
4. Love. Untold amounts of love.
5. Encouragement to read so that my written communication had a good head start.
6. Good home conversations so that my verbal communication had a head start.
7. Emotional support
8. Knowing someone was 'on my side'

And probably a whole lot more I am not counting. They never gave me money, but I'd have to be an absolute idiot not to recognise they gave me advantages, like the ones above, that not everyone gets. Sadly.

That is such an excellent point, @StGuffersOfTheVillage. 👏

I am so stretched that my children won't get a lot of financial support from me either. I would give them the shirt off my back, but I am a single parent with a small 2 bed terrace and my pay has stagnated. Unless there is a miracle, I will just about get by myself.

What they do have is huge support for their ambitions, high expectations of what they can achieve, scrimping and saving to give them experiences and opportunities.

I have a DS with SEN and he needs a lot of support, but I have fought for it and he is on a path to a good career now.

They are going to need to be independent and it scares me that things will be worse for them than they have for me - and practically no one in their generation will be getting a lot of help from their parents. So few have anything to give after all this.

We need a huge re-set. We can't keep living in a situation where the best and the brightest can take on necessary and important careers that benefit the whole of society - and yet struggle through life and end up with nothing to show for it.

@TrudyProud I don't live in a low cost area, it's the same price as parts of London if not more expensive, hence the astronomical cost of nursery. It's just not as expensive as the part of London I grew up in.

I do think there needs to be a recognition though that in some cases, with things as they are, moving to a cheaper area is required as it's not actually a right to live near family. As I said previously I would personally rather have loads of social housing to drive secure rents and lower housing costs but I don't know how we can afford it quick enough as a country and I don't think it's fair for our grandchildren to be paying to bail us out now before we do everything that we can do ourselves.