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?

In the 90's I had to get a 2nd job to pay the mortgage, food etc. In kater years I stopped at 1 child due to cost of living etc, it's nothing particularly new. It will settle down again, but everyone knew the low rates wouldn't last.

We were actually advised against it due to the erc and by a mortgage advisor at L&C - shout out to them!

our savings will be on the htb so can’t actually reduce the balance of mortgage

@mummymeister but some people can't go into anything cheaper. My mortgage is £400pm
To rent where I live would be £600
It's a 2 bed apartment that's worth about 125k

@Lalalalawhitenoise So as I understand htb you have to pay the government 20% of the value after 5 years or start paying interest on it.
2 things come to mind.

1. if house prices are going to fall as a result of high interest rates/recession then your 20% payment will cost you less (obviously it’s an IF but might be worthwhile saving the 40k in a high interest savings until you know how house prices are going)
2. what is the interest on the equity loan if you start paying interest on it? If it’s at a lesser rate than you can remortgage for then you’d be better paying off the 40k off the mortgage and paying the interest to the government on the equity loan. You could always increase the mortgage later to pay off the government or do so when you next move.

Interest for the first year is low, on 50% of the balance it’s about £75 a month, so the plan was to pay 50% off and then pay interest on the other part for 1 year because after that the interest on the scheme sharply rises

I listen to financial news and am on random forums, some of which have more useful links than MN, so I tend to do my own research.

Anyway just heard the markets are pricing in an interest rate of 5.5% but you need to DYOR.

At last a true Tory budget.

@Lalalalawhitenoise
am I reading this wrong from the government website
From year 6:

• you pay the £1 monthly management fee, and
• you pay monthly interest of 1.75% of the equity loan.

You will continue to pay interest until you pay off your loan in full. The interest rate will rise in April each year based on the rate of inflation at the time (according to the Consumer Price Index), plus 2%. If the rate of inflation is 0% or less, the interest rate will rise by 2%.

so if the consumer price index is 9% say for year 7 then the interest rate will rise by 11% so 1.75% +11% equals 1.95% which is miles less than the new mortgage fixed rates.
I don’t read it that the interest rate in year 7 would be the 1.75 plus the 9 plus the 2% totalling 12.75%, maybe it’s the way I’m reading it that’s wrong but would be worth while getting clarity.

This

But the whole basis of Thatcherism/capitalism is getting people to buy things they don't need and 'growth growth growth'. You don't do that without people spending.

Rental market has always been above mortgages in terms of what you get for your money That's not true. Back in the 70s and 80s, it was cheaper to rent. So you either paid a moderate amount in rent, or you paid the same amount and then a good sum on top, and got a house at the end of it. It just seems topsy turvy at the moment, that you either rent, or you buy, pay less on your mortgage than you paid when you were renting , AND you get a house thrown in.

It'll affect landlords. They'll no longer be able to cover their mortgage by the income from rents, and a good number will drop out. That will make it crap for renters as the supply diminishes, better for first time buyers. When my son was buying, all the properties in his price range were being advertised as "suit FTB or buy to let"

It's never their fault though is it?

This kind of insensitivity from those is in charge never changes.

In the late 80s when were were all cacking ourselves about how we were going to pay our mortgages that Tory knobhead John Major said, “if it isn’t hurting, it isn’t working.”

They just doing care about the ordinary person, so long as they're all right jack.

There are so many similarities in 2023 with the economic and political background in the early 1990’s. The only difference is fuller employment (which is fuelling inflation) though that may change and a fairly solid guarantee there will be no quantitative easing for the next 25 years. Quite the reverse as it’s payback time.

Landlords can almost certainly expect rent controls, regardless of who is in power.

That’s interesting and I’ll seek clarity on that as we’ve read it opposite ways!

but you’ve got me thinking, I’ve got 40k right it’s probably better to bring down my mortgage balance go £160k or thereabouts and pay the interest rates and wait til the inevitable for property slump to pay of the equity loan with additional borrowing and then port it at a later date. Plus all predictions I’ve read have said 2025 is predicted to be a calmer year and prices to return to normal (likely a new normal) but not as high

Rishi says it’s going to be ok and we’ll get through this. So there you are. 🤔

If anyone was going to do that, you'd probably see it on Mumsnet!

Selling up is all very well in theory, @mummymeister , but if things do get as bad as they did at the end of the '80s, it will be very, very hard to find buyers, and for those with big mortgages, it might well be impossible to find a buyer at a price that will clear the mortgage.

That was certainly the case for a friend who bought in 1988. Her parents paid off a big chunk of the arrears for her, and subsidised her mortgage payments for a couple of years until she could afford to pay it herself.

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?

banks reposes homes, thats what happened last time. then they sell the home under market value sometimes and any remaining debt is still there to be paid.....

@Lalalalawhitenoise I don’t know which of us is reading it right, but it is definitely worth getting clarity on it.

I would definitely weigh up all options .

if you find out the exact answer re the equity loan interest rate will you put it on here. My son has htb and intended selling to pay off the equity loan, but the way things are going that might not happen

will do! X

A lot of people will be like me, able to afford this, but left with a big chunk less disposable cash to spend, which is exactly what is the intention.

I'll have to stop paying for private healthcare for my two children who need it but aren't eligible under NHS.

The government should be ashamed of what's about to happen. A LOT of families will lose their homes. If not but the mortgage increase, but then losing their jobs as people spend less to cope. The shops, construction and trades, they just won't survive if they're having to pay rents, mortgages, increased salaries, increased bills. Businesses will struggle and when they struggle, so do their staff :(

It is going to hit those coming out of 5 year fixed this year or early next year because they have been on less than 2 percent their increase will now go up to over 5 percent. So a 3 Percent + increase for them. On TV they were looking at the effect today's 0.5 percent had on a mortgage.

You can lock into a 5 year fix from June, so get an offer, and if it drops before December just don't take up the offer.