What actually happens next? Housing and base rates?

[Lalalalawhitenoise]

renters and people who’ve bought their houses in the past 10 or so years, more so last 5 years, borrowed within affordability etc, all these rises, it will see people who’ve been in a position to save £1000 a month living pay cheque to pay cheque. Downsizing not really an option for most as stamp duty and then the general rise of house prices would mean what you paid for a 3 bed you’d need to spend for a 2 bed. Rental market has always been above mortgages in terms of what you get for your money… so those rises will hit private renters even harder.

what seriously Comes next? Mass defaults on mortgages? Surely that can be good for the banks? We don’t have enough social housing as is… seriously what happens next?

See that’s the opposite way of how the mortgage advisor told us, he said it works out best if you sell and move and pocket the equity after the 5 years

What’s the chances of the government actually doing some sort of mortgage help though? Surely that will just increase our borrowing which is part of the reason we’re in this sorry state

That only works if there is much equity after 5 years.

House prices can go up as well as down.

It will depend on your circumstances. As a PP mentioned, you need to demonstrate why you need the leeway. If it’s just to maintain a lifestyle then that would be wrong. If it’s genuinely because of changes in circumstances then there will be more flexibility.

That only works if house prices are rising sufficiently to cover costs. Houses should be somewhere to live, not a way to make money. It’s why we are in this state.

Or down as well as up even.

Never ever make decision based on the idea that house prices can only ever go up. Friends sold a flat in London last year for the same price they bought it for in 2015. Luckly as they put down a 35% deposit they had some decent equity.

It's like 2008 never happened. 😬

What will happen? Well, most will cut back in other areas and pay their mortgage. Some will default and lose their homes.

There shouldn't be any government handouts here. We shouldn't be propping up the housing market, especially considering there is already masses of demand for housing. And it shouldn't be a market anyway. Buy a house and live in it. The end.

I was barely an adult then but houses fly off the shelves on my estate and the houses are similar plot size, space, design, all say 3 bed are fetching a similar price and same for all 4 beds of the same style, so mine i bought for 300k they are being put on the market for around 400k, selling for between 370/390 depending on little extras, garden done, integrated appliances etc. We get leaflets and door knocks from estate agents constantly asking if we’re looking to sell.

This may change fast forward a year but trussgate didn’t seem to have an impact

Also, take a look at the data. Base interest rates are merely returning to their normal levels after being kept artificially low for the past 15 years in order to overstimulate the housing market and spending in general.

I don't think it's borrowing tbh

we actually need to curb the vast inequality in this country.

I have been wondering the same thing. What is there was mass repossessions? Where do people live? There isn't much social housing.

Stressed tested or not- I feel the combination of food, diesel, childcare, energy is just too much in one go.

And I don't understand why BoE have to keep increasing rates, without even giving it a chance to see whether inflation decreases. Or really understand why they do this at all in all honesty. Plus once again.. it's the everyday people that suffer...

What did people do in the 1980s when interest rates were approx 12%. The banks should be helping their customers with their massive profits - not the government.

I doubt there will be mass repossessions, regulation of lenders is very different now than in the nineties.

People will reign in spending, get second jobs, sell up and dowsize.

The issue has been people thinking that very very low interest rates would last forever and planning lives and purchasing decisions on that not changing.

Interest rates increase to encourage people to save rather than spend, and thus slow down market demand resulting in prices shifting downwards. Typically, its what works to bring things into a more balanced state.

The problem now is that we're seeing the signs of the start of a wage price spiral, so the more people are demanding higher wages, the more the cost of goods and services are increasing which subsequently fuels inflation.

Energy prices are coming down, and fuel prices are stable. But the concern is that core inflation is not coming down. So the BoE will act to get people to put the brakes on spending as much as possible. Higher interest rates mean better return on savings and investments, so there's more motivation to hold onto your money.

I read it’s because our debt is largely linked to inflation and the base rate is one of the tools In the BoE arsenal.

exactly how you said that’s hit us all at once and without being boastful we were in a position of saving over £1k per month and now that’s drastically reduced and then we haven’t even had the mortgage rise yet

Exactly that. The BoE are signallig they want people to stop spending so much.

You have to look at the bigger picture of house ownership though. The majority of house owners don’t have a mortgage so they won’t be affected. Another big group have very small mortgages so rises won’t have as big an effect. Others fixed recently on lower rates so wont need to think about it for a while. Others can afford the mortgage rises will have less luxuries but won’t default. So it’s a relatively small proportion who are at risk of difficulty. Some of those will be able to go onto interest free mortgages temporarily, some may have to get a second job, some may get help from families, a small proportion will default.

Interesting thread btw

https://twitter.com/richardjmurphy/status/1671413701247655936?s=46&t=R4IjbOioATwsveZSPFz0AA

I’m sure repossessions will increase, and prices will fall, even if that’s temporary.

The houses will still be there for people to rent. Repossessions were often bought by BTL landlords in the 80s/90s.

If rates stay under about 9% it shouldn’t be as bad as before, but I recall 15% rates…

Key to remember here though cost of houses was drastically less in proportion to income

If you’ve saved 1k a month for a while can you use the savings to reduce your mortgage?

This should help to cool house prices though as it will impact the mortgages people can get.

But 15% of 60k is drastically less than 9% of 250k. House prices in relation to income are far higher than they were in the 80s

This is only just the beginning.
People will not have discretionary spending money. Nail bars, beauty parlours, fast fashion, many on-line retailers, restaurants, clubs, bars, gyms, etc will go out of business. Domestic cleaning jobs, building trades will be hit hard.

Then a deep recession will really bite.

1979-1981; 1989-1992, 2008-2012.

This will be worse in my opinion. The bubble has burst.

There was absolute braying on here for extended lockdown and more furlough. We reap what we sow. I was shot down, time and time again as a grannie killer on here for daring to suggest the multiple, lengthy lockdowns would have consequences on an already fragile economy.

Those who can't sufficiently tighten their belts will go under. Those in rented now will be able to buy in 3/4 years where previously it seemed possible. It's all cyclical.