People just need to cut back & they will be ok

[nameschangg]

Following a discussion on the radio about mortgages/col I made the comment that even for those that can afford the increased mortgage costs it's difficult to get one's head around paying more just to service debt. Colleague replied that's exactly the problem & the media are over egging it. His argument was recent buyers have stress tested & many will still have seen jumps in house value. He said any older buyers will likely have a ton of equity so can just shift to interest only or sell. His main argument was people can afford the rises & they just don't want to give up the nice things they are used too. He said the gov know this & know how much people saved in lockdown. Admittedly everyone in the office did say they saved quite a bit (including myself). I argued that not everyone fits that criteria but he believes the majority do & the media needs to stop scaremongering. Does he have a point?

Is your colleague Liz Truss??

Quite a lot of people worked throughout COVID in quite difficult circumstances, my pay rise goes no where near the increase in mortgage payments alone,let alone supporting a primary aged child as a solo parent. Where on earth does your colleague think we should move to??

And yes I am in a professional role earning a good salary. I am quite squeezed already and feel a bit sick about what is coming over the next few months and years.

Tell your colleague that even the little people have to eat and provide for dependents

He sounds like an absolute moron

The news is designed to petrify us. Everyday I read it and it's like being tazored.

it's makes me panic @Meltingpots

I'm naturally quite cautious & fixed for 5 yrs last yr at a good rate. However I can't afford to do any planned work on the house now due to escalating costs. I also worry about job security.

And for humour purposes..how do you think it effect your colleague? (I suspect not much

Mortgage paid off & a few btls of course

know eventually we will return to an economic boom and things will go good.

this is the bit that panics me, will it be back to a boom? I feel like the country is proper poor.

No. This is true for some but won't be for others. Just shows he's a bit thick.

Hmm.

It’s true to say that some people can cut back, that some people saved money during lockdown, that some recent homebuyers have stress tested and so on.

But there’s also going to be plenty of people who’ve already been cutting back and who are getting to the point where they can’t cut back any more. People who’s financial circumstances changed for the worse as a direct result of lockdown / Covid. People who didn’t go far enough when stress testing.

I mean, stress testing - when DH and I bought our house, we anticipated that we’d have increased outgoings due to potential future DC, we anticipated that interest rates would rise before we’d paid the mortgage off. We didn’t anticipate that there’d also be simultaneous large increases in the cost of energy, food, petrol, etc, alongside salaries being pretty static.

Plus, while we personally can make cut backs to pay the bills, cutting back on non-essentials will also have an effect on the economy if lots of people are doing it.

Let's face it nothing goes down does it? It just stops rising as quickly.

We've already cut out takeaways and clothes buying. Some others are obvious and will be the ones in trouble.

I'm drawing on my very rusty A level economics here, but economies are always cyclical and people only think within a certain time frame so when people are in recession they can't see the boom coming and when we are in a boom people don't envisage a crash....except economists or people who are mindful of this.

This does not let the Government off their terrible governance though. They have made things worse than they could have been.

Some people become millionaires in recessions. Some people get repossessed. It's a intoxic period of flux, opportunity and dread.

After reading the news try to get some nature into your day. Value the things that matter, which are free that can't be bought. It will keep you saner in an insane world.

Even if this was the case (which in my case it is) why should people give up the few treats they have in life. A takeaway/meal out of a weekend, a holiday once a year etc.
This COL crisis is being manufactured by the tories, all starting with glorious Liz Truss and her speech which sent us into this spiral. Why should we pay for their stupidity.

I mean I could give up NOW Tv and my at home gym membership
But I already don't smoke, drink, go out, go to the cinema, haven't had a holiday since I was 13 so...
I would be really fucking miserable without the TV sub and my gym and bored

So, you’ve already tightened your belt many times.

And now, you just need to cut back?

I'm dreading having to sort the mortgage out when our fixed rate ends next July. We have two kids 5 and 2, not a massive mortgage a car but not on finance, some credit card debt. I work part-time and DH full time. We can just about keep our heads above water now. Nursery fees and wrap around school care are crippling us but I can't go back to work full time until our DD turns 3 and we get the 30 free hours in January and maybe not even then since we'd have to factor in additional nursery and wrap around care fees. I'm really worried about how we'll find an extra £300-400 a month for the mortgage. I'm hoping we can go interest only for a bit or extend the term. Otherwise we might have to downsize if we can 😔

IPTV is your friend here if you can the right one

We’re having to cut back after our mortgage going up £300 a month. That’s our luxuries budget though so no takeaways or eating out locally. Not great for the local economy

When we talk anout stress testing and the government "knowing" that some people have savings, I think we should mean that the priviledged bankers and financiers of this wprld, particularly those close to our "dearest" goverment wants to extract every last penny out of hard working people, make them go out less, drink less, eat less, heat their homes less, time their showers and work for what is, in essence, less money (as in it has less value).
Though a finantial stress is to be expected after a pandemic and during and after a war, I also expect the goverment to actually do something for the country, like tighten up the belt for the richest, reducing profits for big corps.

But a lot of people have had 15 years of stagnant pay since the 2008 crash and the austerity of the 2010's. Costs have exploded, wages certainly haven't for most.

I still think your colleagues have a very narrow view. I don't understand his view on homeowners saving, surely they'd be spending more on the house during lockdown (we certainly did), where as renters would be encouraged to save for a deposit?

I'd probably have argued similar points as you have.

Your colleagues remind me of my dad - a boomer in his 60s with no mortgage and minimal debt - where it is very much a case of tightening the belt. Where as in the real world I think the COL crisis is a little bit more complicated

https://www.google.com/amp/s/amp.theguardian.com/money/2023/jun/25/union-fury-as-figures-show-pay-rises-among-top-earners-driving-inflation

If there is any truth in this, surely a bit of less holidaying for two years amongst the high earners would not hurt them?

Lockdown savings may be part of it, especially people who had access to substantial sums because of the various business support provisions. And I agree with you about the money leading to increased house prices.

However, that's not the full explanation either. There are lots of people who just aren't that exposed to higher interest rates, so the increase hasn't incentivised them to spend less. Some don't have debt, or do but it's not much and/or fixed at a low rate. Some actually have more to spend because they're now getting better interest on their savings than before. And some don't necessarily fall into either category but just have a high enough income for it not to matter. In my household, we don't have lockdown savings, but we have a low mortgage on a long fix and a higher income in real terms than pre covid. So while we've noticed lots of stuff go up, food in particular, interest rates don't have enough of an impact for us to curtail spending because of them.

But if everyone cuts out all the ‘nice things’ and only pays for the bare essentials how will the country make money? If everyone stops buying clothes, new cars, treat foods, eating out, going to the cinema, paying for child’s sports clubs etc then businesses will lose customers and close down and so people will be made redundant and the unemployment rate will rise. Deprived areas will become even more deprived and there will be an increase in social issues. It’s very shortsighted to say people should just stop spending money. Not spending causes a host of other issues.

People who saved oodles during lockdown are people whose main spending was discretionary. If you made a venn diagram between "people whose main spending is discretionary" and "people whose mortgage is paid off" it would be a pretty neat overlap. And mostly be populated by pensioners.

And yeah rn they can again cut back on discretionary spending.

But there are a lot of other people in the UK and that's why stagflation and high interest rates are a problem.

But a lot of people have had 15 years of stagnant pay since the 2008 crash and the austerity of the 2010's.

Absolutely but pensioners and owners of multiple assets are unaffected by this. And those groups are pretty much all this government is concerned with. Hence it being a point of discussion at all.

Martin Lewis explained it the other day that the aim of it by the BOE is to stop the nice things/discretionary spending to try and bring down inflation. It’s shit for people with mortgage deals ending now but lots of people are still on long term fixes so I guess it’s not universal

we didn’t save in lockdown as I lost my job (got another one soon enough thankfully) and my husband was in an industry forced to close, so furloughed (for which we were of course grateful).

I went from having 3 full time paying children and 4 school children before lockdown to 20 hours with one child and no government help in lockdown. My mortgage is now £700 a month more for a typical 3 bed semi and children are on funding so paid less than going rate

To this I'd add, even though this group can cut back on discretionary spending, there's no reason to assume they will. A lot of them won't need to.

True. God, that's even more depressing.