5% mortgage rates

[SaturdayGiraffe]

Just read this article saying to expect 5%+ rates shortly.

https://www.theguardian.com/business/2023/may/25/uk-homeowners-and-first-time-buyers-warned-to-brace-for-5-plus-mortgage-rates

UK homeowners and first-time buyers warned to brace for 5%-plus mortgage rates

I just don’t know how people are going to cope, and it could go even higher.

I knew someone would be along to say this. It’s a completely different financial climate. People are already pushed to breaking point.

so I think you paid the lender less probably only against your lower rate of tax at source
@Xenia
No, the 'at source' element meant that you paid less tax on your salary every month . Please don't guess.

@NewNovember

Some people just can't help making everything about themselves can they.

Spot on @GasPanic especially the bit about deliberately inflating damaging bubbles and not providing essential housing. What sort of a country is the UK if people can't have a stable place to live?

I've been droning on about how bad things were going to get for ages on here. Lots of people didn't want to hear it.
It is going to get a lot worse, unfortunately, and lots of people are going to struggle, especially those who have taken on lots of debt and, over time, those who work in discretionary industries (a lot of people). The thing that makes me really angry is that the government and the central banks have encouraged this situation and will therefore cause misery to many, many thousands if not a lot more.

@rainingsnoring What do you mean we can’t get rich selling coffee to each other and using UberEats?
Successive governments are too short sighted, and don’t have core infrastructure policies that should have 25 year visions, that are not interrupted by changes in power.
And the people are more concerned, at least according to the media, with trans issues, Schofield, immigration.
The country needs proportion representation, and a home building program ( which basically pays for itself!!! ) in law with guaranteed funding.
If that’s a penny on tax and a pound off benefits, then so be it.

I still don’t think there’s been enough coverage/warnings (and explanation) about this. I’m hoping Martin Lewis manages to spread the word. No one else seems to care.

@SaturdayGiraffe it’s all over the news, and now every day on every talk radio show.

Maybe this is what that national alert was tested for?
It’s not a nuclear strike, it’s 6% interest rates!!

It has been in the news a lot, I've seen lots of articles about this.
It's not impossible that they might bring back MIRAS but I think this and other bail out mortgage schemes are very unlikely. Firstly because it will be politically unpopular with the Tory voters and secondly, and chiefly, because we cannot afford to borrow even more money. What is more likely (imo) and what they have already been doing is encouraging lenders to show forbearance. Those who need to and can downsize may well try to do this too, especially if they can arrange it in advance.

@C4tastrophe totally agree about the woeful lack of long term strategy. It's partly a fault of our political system and also a fault of those who choose to be high profile politicians (over many decades) who are more interested in their bank balance and political soundbites than in making sensible, long term decisions.

Maybe they could lower stamp duty for people downsizing.

Why? Feck ‘em! They already have a massive amount of untaxed capital gains from the existing property.
If they downsize, that usually results in buying a smaller, cheaper property, so they have the money to pay the tax.

One of our friend is due to remortgage in Jan from 1.2% fix and she/husband did outstretch on the mortgage, we are good friends so I do know.. I texted her yesterday about the news suggesting they may want to look up rates now but she brushed it off. Made me wonder if I was panicking unnecessarily and rates start falling next month or something.

Jeremy Hunt is proposing to remove all current stamp duty incentives in March 2025.

At least you tried. You’re a good friend.
Everything I’m reading and learning sounds so dire, I can see why people would bury their heads in the sand about it.
I’d never even heard of MIRAS until yesterday.

That will be because it was abolished back in the year 2000 & no plans to reintroduce it.

On MIRAS, yes, I don't think I said otherwise - it was done via PAYE (as part of pension payments are in a sense today - private pensions are paid after deduction of tax).

MIRAS etc is one reason taxes today are just as bad as in the 70s albeit there were higher rates then because my father had things like child benefit, single person allowance, MIRAS, could covenant money to me at university and have tax relief on that. All that went and although upper rate of tax is now 45% (and 2% NI on top and 9% student loan etc on top of that) thigns ilke university child benefit disappeared as did no student fees etc. So we now have the highest tax burden in 70 years.

My link above about the position before MIRAS and during it sets out some of that system (and in the USA I think you can set your mortgage interest against tax). MIRAS was gradually reduced over time so I never really had much benefit from it.

The Guardian has a bit of a summary of it from 1999 article here

"Miras has been eroded over the last few years. Tax relief is now restricted to 10 per cent on mortgage interest payments for the first £30,000 of a loan. It is currently worth £17.37 a month for the typical borrower with a mortgage over £30,000 - up to £208 a year.
Tax relief was originally allowed on interest paid on any loan. In 1974 it was restricted to mortgage loans and limited to £25,000, and the scheme as we know it now was introduced in 1983."
https://www.theguardian.com/uk/1999/mar/10/budget1999.budget3
So that suggests the tax relief by 1999 was only 10% on the first 30k of a loan. (In 1999 we had a mortgage of about £500k). I presume that means limited to a tax set off of 10% so if you were a 40% tax payer for example you were not by then getting the 40% set off.

He’ll have sucked a few billion more out of this country just before they lose power. They’ll be gone in late 2024.

Messing with stamp duty short term was foolish. To repeat the same mistake, is unforgivable.

Either reform permanently, or leave it alone.

It’s only a matter of time before a government brings in a wealth tax where the property is included.

In a sense IHT i s that. I "only" have a £325k IHT allowance as am single and the new property thing of £500k does not apply to me so the state will take 40% of the rest of the house when I die and as a single parent leave my children homeless because I had to move to London from NE England for work so had to pay a lot more stamp duty and council tax (over £4k a year council tax) and other costs just to buy a house here.

Aren’t your children all adults? Why would they be homeless?

If you don't get the £175k RNRB and you pay £4k a year council tax, you must be rich and have a massive house.

RNRB starts to be lost for estates worth over £2m and is removed completely at £2.35m, leaving only the £325k NRB.

Do you mean to encourage older people to free up larger homes for families?
Very unlikely. It would be politically unpopular.
A property tax (replacing council tax and based on current values) would be a better option if they wanted to encourage the above. The Tories won't do that though and it's doubtful that Labour will.

The Tories are apparently considering Help to Buy (Help to Sell) @Twiglets1. I wouldn't put it past them to reintroduce this or some other support the housing market/ developers scheme.

Did you mean to quote me? 😕

I think what is worrying as well is that although lots of people will cope, it's at the expense of being able to take that extra money (they're now paying in more interest) and use it in the wider economy.
As someone mentioned upthread, a lot of people make their living from the more enjoyable side of life, the treats and fun. These are often the first thing to go when belts have to be tightened. The odd person scaling back can be absorbed, but when it's thousands of people, it will cause people to lose their livelihoods.

You only have to spend some time on the cost of living board to see how much some people are already struggling.

"you must be rich and have a massive house". I have a large house which is in the SE so yes that's true. I am not sure I would say I am rich as I don't have savings, pension etc. Yes I house 2 children who ceased to be students last year which is not particularly unusual and yes it is not as if they are 4 and homeless if I die and have IHT to pay - they could probably find a room to rent etc. However the basic principle remains -there is a massive wealth tax on houses - in my case every penny of my equity has been taxed at at least 40% already and then the state takes 40% on my death i.e. in a sense the state confiscates almost all .... so you can see why people are not to keen on Labour's likely £20k a year tax (if that happens) on their houses on top of all that.

Sorry. It wasn't very clear. I tagged you because you mentioned no plans for MIRAS a few posts back. I did hear 'on the grapevine' that MIRAS has been discussed. Help to Buy being discussed was in the media a few weeks back, ie some help the market initiatives are being discussed.