Andrew Neil has written a good article asking how this government, and no other, has managed to enrage buyers and renters. Usually, governments only upset one or the other.
If, as predicted, interest rates rise to 6% by next January, both lots will be affected. LHA doesn't cover the full rents now, let alone with more rises.
"Nationwide, the country’s biggest building society, raised its mortgage rates this week for the third time in under a month. With the rise in interest rates still fast and furious, major lenders are having to pay more for the funds they raise.
So, with rapid fire, they’re passing on the cost to borrowers. HSBC, Britain’s biggest bank, was so bewildered by the dizzy rise in rates it simply took its mortgage products off the market until it got a better idea of where rates were going.
These are scary times for homeowners with a mortgage and those struggling to get on the housing ladder. Not all homeowners are affected equally. The eight million who’ve paid off their mortgages are insulated from the rises, at least when it comes to their homes. Of the seven million with a mortgage, many are on low fixed rates that won’t come up for renewal for a year or two.
But for those whose fixed term is coming to an end and those first-time buyers trying to scrape together the purchase price, the prospects are daunting. Almost 120,000 homeowners will come off cheap fixed rates this month alone.
Two years ago, they were able to borrow at 2.59 per cent over two years. They are being forced to renew at 5.83 per cent, which means twice as much a year in interest payments on a £200,000 25-year mortgage — and that’s before mortgage providers push through this week’s increases. Some families will now see mortgage payments devouring 50-60 per cent of their income.
But because UK inflation is falling at a snail’s pace (so far), the Bank is expected to raise rates again next week, to 4.75 per cent: a harbinger of even more mortgage misery to come. Indeed, the financial markets now expect the Bank base rate to peak at between 5.75 per cent and 6 per cent, which would be excruciating for mortgage holders, many of whom could simply not afford the monthly interest payments of 6 per cent-plus.
Tens of thousands would lose their homes because they couldn’t keep up the payments. The buy-to-let market, on which so many renters now depend (and which is already in serious trouble), would collapse. So would house prices, tilting Britain into the recession it has so far avoided. The stakes could not be higher.
Our predicament is not helped by the fact that the Bank’s reputation for dealing with inflation is somewhat shot to shreds. Public confidence in it has collapsed, even in its own opinion poll surveys. Who can blame people for losing trust in what is meant to be one of the great institutions of the nation?
Not so long ago, as inflation started to grip, the Bank assured us it would be transient. In reality it’s turned out to be rather long lasting. In 2021 it confidently forecast inflation would be back to its target 2 per cent within two years. It’s currently more than four times that. Quite an overshoot, even for a central bank with a well-honed track record for wrongly forecasting inflation. Now it predicts 2 per cent inflation some time next year. Why should folks believe it?
The financial markets don’t. They’re demanding higher returns to finance the Government’s mounting debts. The UK is now having to pay 4.9 per cent annual interest on two-year debt, the highest of any major economy and pretty much back to where we were in the aftermath of last September’s shambles of a mini-Budget. But this time Rishi Sunak and Jeremy Hunt don’t have Liz Truss to blame.
The politics of all this are horrendous for the Government so close to an election. But it needs to hold its nerve. All sorts of siren voices are urging ministers to prop up the mortgage market with a multi-billion-pound intervention to bail out homeowners in trouble. But we are in danger of creating a political culture in which the solution to every adversity is for the Government to open its chequebook (which is really our chequebook).
That’s what happened during the Great Crash of 2008 and its aftermath. It happened again during the pandemic, above all with the furlough scheme costing hundreds of billions. Those rattling the begging bowl yet again might not have noticed, but previous multi-billion bailouts have already stretched the Government’s fiscal position to the limit, with more than £1trillion in national debt (100 per cent of our GDP) and continuing annual budget deficits still in the tens of billions.
Does it really make sense to sanction yet another spending splurge, especially at a time when even governments can no longer borrow cheaply?
Is government to become the automatic provider of safety nets whenever anything goes wrong, in any sphere?
I think not."
https://www.dailymail.co.uk/debate/article-12204401/ANDREW-NEIL-Tories-managed-enrage-Generation-Rent-Generation-Mortgage.html