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?

Yeah

We had similar.
Btl.
Luckily the cladding got downgraded a little.
So we could sell. Sold it ASAP.

My previous house was valued at £87.5k in 1987, and it went up for a year or two after that. Then the crash came, and when I relocated for work at the end of 1992, I sold it for just under £50k. It must have fallen in value by nearly 50%.

Thankfully, I'd bought it 9 years earlier for £24k, so had plenty of headroom, and I bought at around the same price. Anyone who bought with a big mortgage (and 100% mortgages were a thing then) at the top of the must have been in negative equity for years.

It was still a shock, because the perception at the time was that house prices only ever went up.

My daughter and her boyfriend were both looking to buy in Central London. They're both 23. Combined income of £100k. Even if we gave them a deposit of £60k to buy a one bed for £600k, their mortgage payments would be £3,400 a month. Their rent for a similar property is £1,800. Crazy. You'd be insane to buy in central.

You can get a flat in London for much less than £600k. They just need to be less picky about location.

Well.... the government helped people out in the 80s. It was called MIRAS, ran for nearly 20 years(!), and seems to have been conveniently forgotten about by a lot of the people who benefited from it, people who have now paid their mortgages off, people who are adamantly against other people benefiting from it as they did

You're right, you can!

Same for me, the increases will see an extra £750 for month aka double, loan is just over 200k

I do think there's some hyperbole in the media around the rates and the specific effect on individuals' mortgages.

Undoubtedly it's going to hit some people very hard but the raw numbers in mortgage payment increase aren't as drastic as some of the 'personal stories' being shown on, for example, the BBC news would have us think.

A 2% rate increase on a £150k mortgage is ~£160 per month, for example, so even a fairly hefty hike in rates shouldn't be catastrophic if it wasn't for the fact people are on their arse bones already, with zero wiggle room left.

I really get the impression that the government are suddenly very keen for us to think the banks are the issue here and not that people are already broke due to the Tory's utter incompetence and corruption.

After all, that £160 mortgage increase could easily be offset by £160 lower energy and/or food bills - just taking us even part way back to where we were a year or so ago - if it wasn't for the utter shit show running the country.

People have to pay more, get another job, tighten their belts, and carry on. As happened in the 70's, 80's and 90's.🙄

I read somewhere that when interest rate go up then house prices will eventually drop when they drop by 10% or more that is when people have serious negative equity and we start seeing defaults and repossessions and all the fall out from that.

I don't know if it's true but some expert said that is what will start happening in the next year or so.

They wouldn’t be able to get a mortgage for £540k with a combined income of £100k, so wouldn’t be buying a £600k property anyway.

They can get a starter flat in parts of zone 3 for ~£300k. That’s where they should look. Good luck to them, age 23 & living in London = the dream, honestly. 😊

@Madcats We bought a repossession a few years ago. The previous owners had taken all the PIPES with them!! And I mean all of them.. radiator, water, sink u bends - the lot

They'd also removed all the plug sockets by cutting them away from their wires.

We got it for quite a good price but it needed a huge amount of work to get it liveable.

Don't people who plan to have babies do financial planning? I know we did before we bought our house and started a family. We bought our house 7 years ago and factored in that we wanted 3 children pretty much straight away. We had 3 in 5 years. We didn't stretch ourselves, in fact we borrowed way below what we could afford and what we were offered by the lender. I've often thought we should have borrowed way more and missed out a house step but I'm risk averse when it comes to money so we were sensible. Fast forward 7 years, I've had 3 maternity leaves and my career is now back on track. Our fixed deal ends in Dec but I'm not remotely worried, I'm annoyed we'll be paying more for the same thing but we planned and we were cautious. In some cases it's just people not forward planning, they see they can borrow 300k, so borrow 300k rather than thinking ok we want kids, what if rates shoot up, what if one of us loses our jobs. We can actually afford our mortgage on just one of our wages. I have sympathy for hard working people who may lose their homes but if you just max out your borrowing without really thinking about potential consequences you can't really complain or go to the media with sad compo faces.

They had an AIP actually, but this was about 6 months ago. They've since decided that they are happy to live in Zone 1 and then invest the difference between rent and a mortgage. It gives them the flexibility to move if they need to. They are living the dream indeed.. minus the long work hours!

Situation isn’t comparable with CoL and proportion of salary spent and house prices. My parents for instance, house was £70 and they earned 35k combined, rates were 11%

The problem with increasing interest rates and reducing peoples spare cash is that we’re a service enonomy rather than a manufacturing and export economy.

So first people have to get so skint they can’t buy stuff, no clothes, no meals out, less food, no beauty treatments, stop the gym membership, no books, no DIY, no new cars, no extensions. But then those businesses go bust. The people employed in those businesses lose their jobs and have even less money to spend. Suddenly we’re free falling into a recession.

If we were still manufacturing and exporting then businesses might keep going and people keep their jobs. Because at some point somehow the economy needs to be recovered so people start spending again. But how do you do that if the jobs are gone?

My husband and I took out our mortgage in 2020 before we had our daughter (now 2). On our salaries then, rates of 6-8% would have been no problem to us. Add in childcare and increased costs of everything else now, our salaries would only just cover our essential spends, with nothing left over for days out, clothes, emergencies, Christmas or anything else if we had to re fix at today’s rates.
Luckily, we are only 1 year into a 5 year fix so we should be in a better position to afford the increase with pay rises and no childcare costs. Still really annoying that we won’t feel any better off though.

@traytablestowed MIRAS was not the great help you seem to think. It was like low interest rates, encouraged people to borrow more by making it more affordable. Basic rate tax was 30% or 33% then, it's 20% now.

I don't understand anyone who takes out a mortgage with no room for an increase in interest rates. It was always going to happen - they were never going to stay low for 25 years.

I remember I took a mortgage out way under what I could have as I think life experiences etc are way more important than an extra bedroom but everyone said get the best house you can afford. Luckily I never listened to them and am not feeling any of the pain that lots of other people are feeling now.

So MIRAS didn't help anybody who had bought a house at lower interest rates which then rose? Because from what I understand, that is exactly what it did.

You (deliberately?) forgot to include NI at 12% when you stated that today's basic tax is 20%. Income tax + NI = 32% taxation. So, the same basically.
For anyone with a student loan you can also add on that 9% if you're feeling generous. So, 41%. Not technically a tax I know, but is really. Obviously nobody in the 80s had this burden because higher education was fully funded by, ironically, taxes.
Oh! And don't forget VAT - which was 15% in the 80s and is now 20%.

Well personally we took it out being able to pay it on one salary, but then kids came, still very comfortable and the CoL and that has put our bills up £300 a month as is at least ( cost of living) at the point of taking out the mortgage, an extra £500 per month on it wouldn’t have been pleasant (because who wants to pay more) but now it’s looking like an extra 750, 40k in savings gone and then the extra 300 In CoL.

I don't understand anyone who takes out a mortgage with no room for an increase in interest rates.

I'm sure most people do leave room for an increase but what about a big increase, coupled with massive inflation in food, energy and other prices at the same time?

It's pretty much unprecedented.

There's going to be a recession. Even if house prices don't fall (I think we are due a 10% correction, at least), any surplus in the household budget is being spent on food, warmth, shelter and transport.

I don't know what the answer is for people who default or are struggling with rent. There's going to be more homelessness for a start.

£800 is more than my mortgage so it must be some mortgage to have that level of increase.

Like PP when choosing how much to borrow I factored in kids and interest rate rises/COL increases. I know not everyone does but that is why people are struggling now. I literally worked out if we could pay it on one salary and with an interest increase but yet have friends on same salary with double my mortgage and in a far less secure industry, which seems madness to me.

Genuinely curious as to what people would do if they were me.

one child in child care one on school hrs, help to buy loan at around £80k, have 50% in savings. Current fix is 2% due to expire this December, so still in erc but 6 months before is lower I think. House is 4 bed, both dh and I wfh so need an office space. What we bought 4 bed for is what a 2/3 bed goes for now so if we downsized in a similar area (this includes moving further out) for the most part the cost of the house will be the same so the loan would be the same, then stamp duty and cost of moving. No family to move in with. Rental properties are comparable to what we’d pay mortgage wise.

would you try and fix in now in the face of further rises this year? Or just hold fire? Would you be kicking yourself for not taking 3.5% and 4k erc last year?