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?

Prices going down is deflation. Slowing inflation is prices increasing at a slower rate and zero inflation is staying the same.

No but pointing out that you like me are not really suffering as it's only luxuries were cutting down on not the necessities. I don't have any savings after Covid but I'm managing so I'm ok many are not.

Agree and it's not only mortgages.

We've just had to move from a rented shoe box costing £1300 to another costing £1800 as previous landlord wanted to sell. This more expensive property is not an upgrade and the only one we could find under £2k in our area. Both landlords had/have no mortgages on the properties so it's not like their mortgages had increased. How we're going to manage I don't know but there's not much outrage about increased rental prices just mortgages!

This is what happened in the late eighties. People took on loads of debt and when the interest rates began to rise they were in serious trouble

We managed but did not have any luxuries and all my wages went on the mortgage . It felt like we were working for the bank . We delayed starting a family for two years and waited until the rates came down .

A friend that worked in a building society told me that if people had come to them straight away when they got into trouble most could have saved their houses from repossession as they would have worked something out .

I think it will be landlords in trouble if the interest rate goes up again as they will pass it onto the tenant. A lot of tenants simply won't be able to pay .

Which is ridiculous considering that the number of private renters affected is likely to be higher. I know not all landlords will increase rent, but there's not a comparable bloc of private renters who are completely immune to housing cost variation like there are with those who own outright.

But private renters get in the way of the foolish overspenders did this to themselves narrative.

That is literally the point of the rise to interest base rates. Literally the whole point is to reduce disposable income and spending.

So your colleague is obviously right.

It not nice though

Many will struggle .We are not too bad ,but are going for days out and a weekend away instead of trips here and abroad.Plenty worse as my Nan used to say,however its not supposed to be a race to the bottom! The Govt said the other day that people need to spend or we will be in a recession! Well I never.Many people have taken on big mortgages on favourable rates in recent years Now expected to find 2 or 3 times that figure! Its morally wrong .I also think the general mood of things is depressing people.We live in a fairly affluent area and several cars were set alight .Unheard of! Our local cafe has been robbed 3 times,the general mood of people is they are pissed off.Driving seems more hooting /accidents /near misses

I'm still paying the debt back that I ran up during covid.

I was shielding but declined furlough and SSP, so I claimed ESA which was about £70 a week instead of a full time wage, plus the child benefit.

That wasn't enough to pay my mortgage, essential bills and food, so I had to keep taking out loans just to keep a roof over my child's head and feed her.

I've cut back as much as I can, but we have few treats now and I'm basically just working to survive.

The CPI rate I quoted would still be above zero in answer to the initial poster above but prices would be coming down

what point did you want to actually make?

"He said very few would be forced to sell as most would have equity."

You can't spend "equity" unless you sell the house or remortgage against it/take on debt to release it.

Loo roll is definitely coming down. My mortgage will jump up by about £450 per month in November when we’re due to fix again but at least I can continue to wipe my ass. Every cloud has a silver lining

Your colleague is an idiot

No some prices may come down but the typical total value of the shopping basket of basic goods used to measure inflation will not be going down if we have any inflation or zero inflation.

He does have a point, yes.

The CPI was running at 8.7percent in April 23 compared with 10.1percent in March. So prices are still rising just not as much. Inflation is still high and has serious implications for many people.

I think your colleague is being pretty smug. Some people will be pretty unaffected sure but others are facing rising cost of living, wages falling in real terms and mortgage rates going up. Sure they should consider taking a payment holiday or extending the terms of their mortgage but that is just kicking the can down the road. At some point it will have to be paid off by either paying more later or working longer. That might be easier for those with a larger proportion of equity I suppose - but many people cannot capitalise on their equity in any meaningful way. And the cost of moving is prohibitive if you're working within tight margins.

You can't spend "equity" unless you sell the house or remortgage against it/take on debt to release it.

I assumed it meant less chance of being in negative equity so will have more options when it comes to remortgaging eg moving to interest only?

Can't be bothered to find bank of England definitions but these explain it...

I do think people should have realised that those historically tiny interest rates wouldn't last, and set their sights accordingly. I understand the difficulties: I fell foul of a bait-and-switch type "sub prime" mortgage in the early noughties, and had to give up my lovely flat.

But I blame myself for getting carried away with the potentials, letting optimism override the scepticism everyone should employ when making big financial decisions, doing only best-case projections and hoping worst-case wouldn't happen. I should have bought a much smaller place and/or further out of town, or even not bought at that time.

This doesn't help anyone now facing a non-balancing budget. Drastic lifestyle downgrades will be needed, maybe temporary repayment compromises, and some will face the misery I did if they can't keep it up. But, on the whole, and despite being the opposite of your smug pal, I agree with him.

i see this said and it’s not necessarily true. It’s about how the measure of inflation is calculated. It’s price vs 1yr ago

so take an example where things cost 100 a year ago. Last month they went up to 110, so 10% inflation right.

this month they come down to 105. Inflation is still measured against last year, which was 100, so inflation is 5%.

without seeing the detail you can’t say if a fall in the headline rate of inflation means prices falling, or going up slower.

You beat me to it. I’ve been meaning to say this as people don’t really understand (when they’re calling others innumerate)

It would in 12 months time. Given it’s annual. As per my first post

taking one item for simplicity:

Loo roll, 12 months ago, £1
Loo roll today, £1.20

annual rate of inflation 20pc

Loo roll nine months ago, £1.20.
Loo roll in three months time £1.10.

CPI would be negative in three months time given it is the annual return

Prices would’ve come down in the last three months.

Sorry who and how and where are these people who managed to save during covid??
many of us weren’t allowed to work but weren’t financially supported either!
we had to shut our whole business down but not a penny did we see, no grants or loans for us.
these people must be living in cloud cuckoo land.

Are you kidding me? I literally saved another house deposit during Covid. My income went up exponentially and I had literally zero outgoings.
I know other people who saved tens of thousands of pounds

The only people who managed to ‘save’ enough during Covid to withstand the current inflation are those who got millions in fraudulent PPE contracts! 😭

How do you apply a percentage inflation rate of 20% and get a negative inflation of 8.333% did you read anything have you studied even basic economics?